Tax Procedure Law Circular No. 165
5. Correction of Stocks
5.1. Businesses may apply the real method in the correction process regarding their stocks that reach significant amounts in terms of variety and quantity, or they may prefer one of the aggregated methods foreseen in the balance sheet to be corrected in the Tax Procedure Law General Communiqué No. 555.
Taxpayers who use the real method in the correction of stocks will perform the correction process by going down to as many sub-divisions as possible. Those who choose aggregated methods are free to use the aggregated method they wish for each group of goods and each sub-division they can go down to as much as possible.
The aggregated method preference made as of the first provisional tax period of the 2024 accounting period cannot be changed in subsequent periods, and those who prefer the aggregated method cannot give up the aggregated method they have chosen for each group of goods and sub-division for three accounting periods. However, the real method preference made as of the first provisional tax period of the 2024 accounting period can be changed in the following accounting period.
For example, (J) Inc., whose accounting period is the calendar year, trades in white goods, telephones and bicycles. When the taxpayer adjusts its stocks dated 31/12/2023, it can choose the aggregated method for white goods and use the actual method for telephones and bicycles.
In addition, when using aggregated methods for white goods in the said period, the taxpayer can adjust the refrigerator according to the simple average method and the washing machine according to the stock turnover method.
In 2024, (J) Inc. will be able to use any stock adjustment method it wants independently, regardless of which stock adjustment method it used in 2023, and in 2024, it will be able to choose the actual method for white goods and telephones and the aggregated method for bicycles. In this context, while using the aggregated method for bicycles in 2024, it will be possible to prefer the simple average method for electric bicycles, which are a sub-division of this group of goods, and the moving weighted average method for other bicycle groups, but it will not be possible to reverse its preference until the end of the third accounting period (including this period), including the following provisional tax periods and the current accounting period.
On the other hand, if the taxpayers prefer the real method as of the first provisional tax period of the 2024 accounting period (including the following provisional tax periods), this preference cannot be abandoned for the relevant stock group at the end of the current accounting period, but this preference can be changed starting from the 2025 accounting period. In this case, the taxpayer who prefers the aggregated method for the stock group in the 2025 accounting period will not be able to reverse this method until the end of the third accounting period (including this period), including the following provisional tax periods and the current accounting period.
5.2. In subparagraph (3/b) of paragraph (A) of Article 298 of the aforementioned Law, it is stipulated that the elements included in the cost of raw materials and materials, commercial goods, semi-finished products and finished products will be corrected as of the date of registration in the books.
In this respect, the date of registration in the semi-finished products and products will not be the dates on which they are produced and recorded as assets, but the dates of registration in the books of the elements such as raw materials, materials, labor and general production expenses included in the cost of these products.
5.3. In accordance with Article 18 of the General Communiqué of the Tax Procedure Law No. 555, within the scope of the inflation adjustment of the balance sheet at the end of the 2023 accounting period, it has been allowed to use two aggregated methods, namely the “Simple Average Method” and the “Stock Turnover Rate Method”, as an alternative to the real method for the correction of stocks appearing in the balance sheet.
If aggregated methods are preferred, taxpayers will perform the correction process by multiplying the amounts of the stocks that are the basis for adjustment by the period average correction coefficient or by the correction coefficient found according to the stock turnover rate, regardless of the dates to be taken as basis for the correction.
In the “Stock Turnover Method”, taxpayers will first calculate the stock turnover rate, then the average stock retention time, and finally find the month from which the stocks appearing in the balance sheet at the end of the 2023 accounting period remain. After finding the month from which the stocks remain, the correction coefficient will be found as of the date of the adjustment and the amount of stocks appearing in the balance sheet at the end of the 2023 accounting period will be multiplied by this coefficient.
In this context, in the calculation of the correction coefficient according to the “Stock Turnover Method” in the aforementioned Communiqué, the stock turnover rate that must be determined first;
Although it is foreseen to be determined within the formula “Stock Turnover Rate = Cost of Goods Sold During the Period / [(Stock Amount at the Beginning of the Period + Stock Amount at the End of the Period) / 2]”, in production/manufacturing enterprises, it is possible to take into account the “Cost of Goods Sold During the Period” data in the formula in question as the “Cost of Goods Sent to Production and Sold During the Period” data in the correction of raw materials, materials and semi-finished products appearing in the balance sheet of the end of the 2023 accounting period according to the “Stock Turnover Rate Method”.
Source: Tax Procedure Law Circular No. 165
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