Statements in the General Application Communiqué of the Corporate Tax Law Regarding Entry into Liquidation and the Liquidation Process:
17. Liquidation
17.1. Liquidation Period
For any reason, the period of liquidation will be valid instead of the accounting period for the taxation of institutions that enter liquidation.
Liquidation begins on the date the general assembly decision regarding the institution’s entry into liquidation is registered and ends on the date the liquidation decision is registered.
The period from the start date until the end of the same calendar year, as well as each subsequent calendar year and the period when the liquidation ends, will be considered an independent liquidation period from the beginning of the relevant calendar year until the end date of the liquidation.
If the liquidation ends within the same calendar year, the liquidation period will start on the date the institution enters liquidation and continue until the date the liquidation is completed.
Example 1:
Case of Liquidation Concluding in the Same Year:
Institution’s entry into liquidation date: 18/1/2006
Date of liquidation completion: 12/12/2006
Liquidation period: 18/1/2006 – 12/12/2006
Example 2:
Case of Liquidation Continuing for More Than a Year:
Institution’s entry into liquidation date: 15/4/2006
Date of liquidation completion: 4/6/2008
I. Liquidation period: 15/4/2006 – 31/12/2006
II. Liquidation period: 1/1/2007 – 31/12/2007
III. Liquidation period: 1/1/2008 – 4/6/2008
17.1.1. Correction in Case of Liquidation Resulting in Loss
If the liquidation concludes with a loss, the liquidation results will be corrected in accordance with previous liquidation periods, and taxes overpaid in previous periods will be refunded to the taxpayer. If a tax base is declared at the end of the final liquidation, corrections for previous liquidation periods will not be made.
Changes in the tax rate occurring during the liquidation process will not necessitate the correction of the transactions. Corrections will only be made if the last liquidation period results in a loss.
Example 3:
In an institution that entered liquidation on 3/6/2006 and completed liquidation on 15/4/2009, the period between 3/6/2006 – 31/12/2006 constitutes the first liquidation period, the years 2007 and 2008 constitute the second and third liquidation periods, and the period between 1/1/2009 – 15/4/2009 constitutes the fourth and final liquidation period.
The institution declared;
I. Profit in the first liquidation period: 20,000 TL
II. Profit in the second liquidation period: 150,000 TL
III. Loss in the third liquidation period: 50,000 TL
Loss in the final liquidation period: 25,000 TL
According to these declarations, corporate tax of 34,000 TL was paid in the first two periods (4,000 + 30,000 =).
However, according to the final and definitive result of the liquidation, the profit is; [(20,000 + 150,000) – (50,000 + 25,000) =] 95,000 TL. The corporate tax to be paid on this base will be 19,000 TL.
In this case, 15,000 TL (34,000 – 19,000) will be refunded to the institution.
17.1.2. Statute of Limitations in Liquidation
In liquidations lasting more than a year, the statute of limitations for assessment starts from the year following the period in which the liquidation concludes.
Example 4:
If an institution entered liquidation on 11/2/2002 and the liquidation was concluded on 4/6/2006, the statute of limitations will begin on 1/1/2007, and assessments can be made until 31/12/2011 for the liquidation periods covering 11/2/2002 – 4/6/2006.
17.2. Withdrawal from Liquidation
If the institution withdraws from liquidation, the provisions regarding liquidation will not be applied to it. In this case, the decision to withdraw from liquidation will be effective from the beginning of the liquidation period in which this decision is made, and the tax returns submitted up to the date of this decision will replace the normal operational tax returns.
The obligations related to provisional taxes of the institution that has withdrawn from liquidation will also begin from the start of the provisional taxation period that includes the date of the decision to withdraw from liquidation.
Example 5:
Institution’s entry into liquidation date: 14/2/2006
Date of withdrawal from liquidation: 15/4/2008
I. Liquidation period: 14/2/2006 – 31/12/2006
II. Liquidation period: 1/1/2007 – 31/12/2007
Normal declaration period: 1/1/2008 – 31/12/2008
As can be understood from the example, the year in which the decision to withdraw from liquidation is made will transition to the normal declaration period at the beginning of the year, and the provisional tax obligation will commence from the beginning of the three-month provisional tax period that includes the date of the withdrawal decision (15/4/2008) starting from 1/4/2008.
17.3. Liquidation Tax Returns
If the liquidation begins and ends within the same calendar year, the liquidation tax return will be submitted to the tax office where the institution is registered within thirty days from the date of liquidation completion.
In cases where the entry into liquidation and the completion of liquidation occur in different calendar years, the liquidation tax return for each liquidation period will be submitted by the liquidation officer to the tax office where the taxpayer is registered until the evening of the twenty-fifth day of the fourth month following the month in which the liquidation period ends. The liquidation tax return for the period when the liquidation ends will also be submitted to the tax office where the institution is registered within thirty days from the date of liquidation completion.
Example 6:
Institution’s entry into liquidation date: 4/6/2006
Date of liquidation completion: 15/4/2008
Deadline for filing returns for the short period (1/1/2006 – 3/6/2006): 1-25/10/2006
Deadline for filing returns for the first liquidation period (4/6/2006 – 31/12/2006): 1-25/4/2007
Deadline for filing returns for the second liquidation period (1/1/2007 – 31/12/2007): 1-25/4/2008
Deadline for filing returns for the third liquidation period (1/1/2008 – 15/4/2008): 15/5/2008
Along with the returns to be submitted, a detailed list of the money and other values distributed to shareholders based on the balance sheet and income statement will also be attached.
17.4. Liquidation Profit
The tax base for institutions in liquidation is the liquidation profit. Liquidation profit is the positive difference between the asset value at the end of the liquidation period and the asset value at the beginning of the liquidation period.
In calculating the liquidation profit;
– Any payments made to partners or owners as advances or in other forms during the liquidation will be added to the asset value at the end of the liquidation,
– Payments made by partners or owners in addition to the existing capital and gains and revenues obtained during liquidation that have been exempted from tax will also be added to the asset value at the beginning of the liquidation period.
Moreover, the values of economic assets distributed, sold, transferred, or returned to the institution owner in return for their shares will be determined based on the provisions of the Corporate Tax Law regarding concealed profit distribution through transfer pricing, as of the day of distribution, sale, transfer, or return.
Additionally, while calculating the liquidation profit, the provisions of the Law regarding deductible expenses, loss offsets, other deductions, and non-acceptable deductions will also be taken into account.
Economic public institutions and businesses of associations or foundations without any provisions regarding liquidation processes in their special laws will terminate their tax liability upon cessation of operations, as in the case of sole proprietorships. In such businesses, liquidation will be completed either by selling existing economic assets or withdrawing them by invoicing to the institution, association, or foundation to which they are affiliated. In this context, the corporate tax returns of taxpayers who cease operations will be submitted within the period specified in Article 14 of the Corporate Tax Law.
17.5. Asset Value
The asset value at the beginning and end of the liquidation period is the equity seen in the balance sheet of the institution at the beginning and end of the liquidation period. In liquidations lasting more than a year, the asset value at the beginning of the following liquidation periods is the asset value seen in the last balance sheet of the previous period.
All kinds of provisions and undistributed profits not specified below are included in this capital:
– Any kind of amortizations and provisions allocated according to tax laws and technical provisions of insurance companies,
– The portion of profits to be distributed to individuals who are neither shareholders nor owners.
17.6. Liability of Liquidation Officers
Liquidation officers cannot make payments to creditors written in the fourth paragraph of Article 206 of the Law without setting aside a provision in accordance with Article 207 of the Enforcement and Bankruptcy Law for accrued taxes and taxes calculated according to the liquidation tax return.
In case the provisions specified above are not set aside and if the debts are not paid, the liquidators will be personally responsible for this tax liability.
Source: VAT Law General Application Communiqué
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