Republic of Türkiye
MINISTRY OF TREASURY AND FINANCE
………TAX OFFICE
(Municipal Tax Office of Income Taxes Group)
Date: 25.09.2024
Number: E-64597866-125-
Subject: Regarding whether the late interest paid according to the court decision can be deducted as an expense.
As a result of examining the special request form and the petition and its attachments,
- Your company declared and paid a 15% deduction on payments for advertising services received online from firms based abroad in the withholding tax declaration.
- It was stated that the relevant declarations were submitted with a provisional registration.
- Some lawsuits filed in tax courts regarding this matter concluded in favor of your company, and the tax office refunded the taxes and interest calculated based on the principal tax amount and the date of collection. The refunded tax deductions and interest amounts were recorded as income during the period in which the court decision was made and were taken into account in determining the corporate profit.
- During the ongoing litigation process, the appeals made by the administration were accepted this time, and the principal tax amounts and interest were refunded to the tax office. The previously recognized income interest was also considered an expense in determining corporate profit.
- It was stated that according to the upper court decisions that resulted against your company, the tax office also calculated and paid late interest at the deferral interest rate for the period from the tax refund date until the notification date of the appeal court decision under Article 112 of the Tax Procedure Law No. 213.
It is requested to seek our opinion on whether the late interest paid under the relevant article can be considered an expense in determining corporate profit.
According to Article 6 of the Corporate Tax Law No. 5520, corporate tax is calculated on the net corporate profit obtained by taxpayers within an accounting period, and it is stated that the provisions of the Income Tax Law regarding commercial profit will apply in determining the net corporate profit. In determining the net corporate profit, expenses under Article 8 of the Corporate Tax Law and Article 40 of the Income Tax Law can be deducted from revenue.
Article 40 of the Income Tax Law No. 193 lists the deductible expenses, and in clause (3) of the same paragraph, it is stated that losses, damages, and compensations paid based on contracts, court decisions, or legal provisions can be written off as expenses, provided they are related to the business.
In the first paragraph (d) of Article 11 titled “Non-Deductible Expenses” of the Corporate Tax Law, it is stipulated that corporate taxes calculated according to this Law, any fines, tax penalties, penalties paid under the Law No. 6183 on the Collection Procedure of Public Receivables dated 21/7/1953, late fees and interests, as well as late interests paid under the Tax Procedure Law provisions cannot be deducted in determining corporate profit.
Furthermore, in the sixth paragraph of Article 112 titled “Special Payment Times” of the Tax Procedure Law No. 213, it is stated that “For taxes refunded after being declared with a provisional record and paid, and for taxes required to be collected again based on a court decision, late interest will be calculated for the period from the date of refund until the notification date of the court decision to the tax office according to the principles specified in this article, at the deferral interest rate determined according to the Law No. 6183 on the Collection Procedure of Public Receivables.”
Based on this provision and explanations, it is not possible for the interest calculated under Article 112’s sixth paragraph of the Tax Procedure Law regarding the late interest paid to the tax office after the payment of taxes for advertising services obtained from foreign firms online, declared with a provisional registration, to be considered as an expense in determining corporate profit under the first paragraph (d) of Article 11 of the Corporate Tax Law No. 5520.
Source: Revenue Administration
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