It is possible to add the amounts owed to shareholders, recorded in accounts 331, 431, and other relevant accounts in the uniform chart of accounts, as capital, provided that the shareholders have deposited these amounts as cash into the company. For this process, a report by a Certified Public Accountant (SMMM) or a Sworn-in Certified Public Accountant (YMM) must be prepared, and other procedures outlined below must be followed.

General Information on the Subject:

Adding the Receivables of Shareholders in Turkey to the Company’s Capital

In companies operating in Turkey, adding the receivables of shareholders to the company’s capital is a frequently used method, especially to strengthen the company’s financial structure and benefit from tax advantages. This process plays an important role in both improving financial statements and supporting long-term growth by increasing the company’s equity. Companies can increase their capital in accordance with Turkey’s tax legislation and commercial laws under certain conditions and procedures.

What Does Adding Receivables to Capital Mean?

Adding the cash receivables of shareholders to the company’s capital means that the shareholders’ receivables are permanently injected into the company as capital through a capital increase. This process reduces the company’s debt burden and allows the receivables of shareholders to be settled through a capital increase without an actual cash outflow. This method can be particularly beneficial for companies with weak capital structures or high levels of debt, as it helps maintain financial balance.

Adding Receivables to Capital and Tax Advantages

Adding receivables to the capital also has benefits in terms of inflation adjustment. While the amounts of shareholders’ receivables are not subject to inflation adjustment, the capital account is adjusted for inflation.

By increasing the capital, the company’s debts decrease, and its equity increases, resulting in a financially healthier structure.

Process and Considerations

To add shareholders’ cash receivables to the capital, an SMMM or YMM report must be prepared, a general assembly must be held, and a decision on capital increase must be made. Subsequently, an application must be made to the trade registry office, and the process must be announced in the trade registry gazette. After these steps, notifications must be made to the tax office, social security institution, banks, and other relevant parties.

Sample Journal Entry:

_________________________ / _________________________

501 UNPAID CAPITAL

       500 CAPITAL

Capital Commitment

_________________________ / _________________________

331 PAYABLES TO SHAREHOLDERS

         501 UNPAID CAPITAL

Transfer of shareholder receivables to capital commitment

_________________________ / _________________________

Source: Istanbul Chamber of Certified Public Accountants
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

In the actual situation, there is a practice such as transferring the financial expense restriction amount from the 7-fold accounts to the account numbered 689. However, we would like to state that this is not correct. Account numbered 689 in the uniform account plan is not the KKEG account. It is an account where the unforeseen expenses and losses of the enterprise are tracked. Unforeseen expenses and losses may include expenses that are KKEG in terms of tax legislation, as well as expenses that can be taken into account in whole or in part in determining the tax base. The uniform account plan should not be designed only for the legislation related to taxation, but also for accounting standards.

Accordingly, the tracking of financial expenses should be done in the account numbered 780 FINANCIAL EXPENSES, the financial expense restriction amount should be followed in the sub-accounts to be opened in the 900-fold off-balance accounts, and the KKEG table in the declaration; According to the provisions of Article 11 of the Corporate Tax Law, deductions that are not accepted must be reported in the line (Corporate Tax Law Article 11/1-i financial expense restriction).

Example Calculation

1. Data1- Equity: 5,000,000 TL

   2- Total Liabilities (Assets – Equity): 18,000,000 TL

   3- Liabilities Exceeding Equity (2-1): 13,000,000 TL

   4- Ratio of Excess to Liabilities: (3/2)

   5- Financing Expense Amount (accounts like 780, 660, 656, etc.): 1,000,000 TL

   6- Financing Expense Related to Disguised Capital (KKEG) (if disguised capital exists)/Financing Income Obtained Due to the Same Liability (KVKGT 11.13.8.): NONE

   7- Financing Expense to be Considered in the Calculation (5-6): 1,000,000 TL

   8- Financing Expense Attributable to the Excess Portion (4*7): 722,222.22 TL

   9- Financing Expenses to be KKEG (8*10%): 72,222.22 TL

1_______________________ 30.06.2024 _________________________

900 OFF-BALANCE SHEET ACCOUNTS (DEBIT) 72,222.22 TL

… Account 780 Financing Expense Limitation

                 950 OFF-BALANCE SHEET ACCOUNTS (CREDIT) 72,222.22 TL

… 780 Account – Financing Expense Limitation

__________________________ / _________________________

Financing Expenses: These consist of any expenses and cost elements incurred under names such as interest, commission, maturity difference, profit share, exchange difference, discount amounts paid to factoring institutions, etc., arising due to the use of foreign liabilities. The amounts in accounts like 780, 660, 656, and similar accounts where these amounts are recorded will be subject to limitation.

Equity: This is the equity in the balance sheet drawn up as of the period in which the expense limitation will be made, and a balance sheet must be drawn up at the end of each period. For example, the equity in the balance sheet dated 30.06.2024 will be taken into account for 2024/2. Temporary.

Liabilities: Refers to the total of short-term liabilities and long-term liabilities in the balance sheet. (Assets – Equity)

Expenses Not Subject to Financing Expense Limitation: Expenses not related to the use of any foreign liabilities, such as guarantee letter commissions, printing and similar expenses related to bond issuance, and mortgage expenses, are not subject to expense limitation. Similarly, early payment discounts or cash payment discounts, which are not financing expenses but are in the nature of reducing financing income, are also excluded from the scope of expense deduction limitation.

Expenses that Do Not Arise Due to the Duration of the Use of Foreign Liabilities: Expenses and cost elements such as stamp duty paid in relation to loan agreements or banking and insurance transaction taxes paid in relation to bank transfer fees, which do not arise due to the duration of the use of foreign liabilities, will not be subject to expense deduction limitation.

Financing Expenses Related to Ongoing Investments: All depreciable economic assets, including the amounts tracked in the “Investments in Progress” account until the relevant fixed asset is ready for use, whether with or without an incentive certificate, will not be subject to financing expense limitation.

Application in Long-Term Construction Works: Since the financing expenses related to the foreign liabilities used by those engaged in these works should be taken into account as an expense or cost element in the calculation of the final profit or loss of the work, the expense limitation application will also be made in the same period. If multiple construction and repair works are carried out together or if there are other jobs in addition to long-term construction and repair works, the financing expenses will be subject to expense deduction limitation in the year in which they are taken into account in determining the profit or loss.

Direct Financing Expenses in the Income Statement: These will be subject to limitation. If an amount from these expenses is transferred to the investment cost, the transferred amount will not be subject to limitation, and the remaining amount will be considered in the limitation.

Source: UNION OF CHAMBERS OF CERTIFIED PUBLIC ACCOUNTANTS AND CERTIFIED PUBLIC ACCOUNTANTS OF Türkiye
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

ARTICLE 54- (1) If the inflation difference accounts of passive items are transferred to another account or withdrawn from the entity in any way, they will be subject to tax in this period, without being associated with the earnings of the periods in which these transactions are made.

However, in the event that accounts such as advances, deposits, progress payments and fixed asset renewal fund, which can be closed by transferring to the accounts to which they are related due to their functioning, are closed, the inflation difference accounts belonging to them are not considered to be withdrawn from the business.

Pursuant to subparagraphs (5) and (7) of paragraph (A) of Article 298(A) of the duplicate Article of Law No. 213, inflation differences of equity items may be offset against prior year losses arising from the correction or may be added to the capital by corporate taxpayers; these transactions are not considered as profit distribution.

(2) While keeping books on the balance sheet basis, an income taxpayer who started to keep books on the business account basis within the framework of Article 180 of the Law No. 213, will not be considered as the withdrawal of the inflation differences from the business, since there is a change in bookkeeping arising from the provision of the law due to the transition to the business account basis.

Source: Communiqué No. 555 of the Tax Procedure Law
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

According to temporary data reported by banks to our Agency, as of February 2020 total assets of Turkish Banking Sector realized as TRY 4.712.688 million. Total assets of the banking sector increased by TRY 221.870 million (4.9%) compared to 2019 year-end. As of February 2020, loans, the largest item in assets amounted to TRY 2.772.411 million and securities amounted to TRY 711.310 million. Compared to the end of 2019, total assets increased by 4.9%, total loans increased by 4.4% and the securities portfolio increased by 7.6%. The share of nonperforming loans in total loans realized as 5.20%.

Deposits, the biggest fund resource of the banks, increased by 4.7% compared to the previous year-end to TRY 2.687.886 million.

While the total shareholders’ equity increased by 3.9% to TRY 511.346 million compared to the end of 2019; in February 2020 period, the net profit of the period is 15.130 million TRY and the capital adequacy standard ratio is 17.71%.

Source: Banking Regulation and Supervision Agency – Link: https://www.bddk.org.tr/Data/Monthly-Bulletin/21
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

Is it possible to transfer the shares of an incorporated company to shareholders or non-shareholders when necessary? What are the transactions to be carried out?

It is possible to transfer the shares of an equity company to the shareholders or third parties. For transactions that are subject to permission in accordance with the special provisions and law, the transfer may take place by getting the permissions.

However, share transfers in the trade registry are not subject to registration and therefore, they are not registered. The decisions taken through declaration for transactions that are subject to registration such as changing into a single share, changing the single share or changing into multiple shares from a single share are registered.

Source: İSMMMO
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

It is legal to increase the capital by using funds that are in the company records and that can be capitalised in accordance with law (internal equities).

Source: İSMMMO
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

A number of incentives have been included in the Finnish Government’s 2019 Budget to encourage investment in the shares of both small and listed companies.

The Budget, agreed by the Government on August 29, directs the Finnish tax administration to draw up guidelines later this year to enable employees to obtain shares in their employer at a lower price than a private investor “without tax consequences.”

It is also proposed that rules be drawn up easing the tax rules surrounding the ownership of stock options by employees of unlisted start-up companies. The aim is that any gains made from holding options will, in general, be taxed as capital income, and the tax paid only when such gains are realized.

The Budget also included plans to introduce a new tax-privileged equity savings account for retail investors, allowing them to invest in listed shares up to a maximum amount of EUR50,000 (USD58,400).

In other measures, the Budget restricts the the deductibility of interest paid on mortgages to 25 percent of the interest.

While the personal income tax burden will remain largely unchanged next year, the Government will ease tax on low income earners by increasing the tax-free allowance, the earned income deduction, and the pension income allowance.

Source: Tax News
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

Consolidated Financial Statements: Financial information presentation (in which the assets, equity, liabilities, and operating accounts of a company can be seen) and its subsidiaries are combined and shown as belonging to a single reporting entity.

These are the rules and procedures in regard to preparing consolidated financial statement;

– Financial statement items of a group company should be aggregated separately.
– Goods and service sales done between group companies are deducted from gross sales and cost of sales. Profit and loss generated from purchase and sale done within group should be eliminated also by applying it to corrected parallel stocks.
– Income and expense items generated from transactions done within the group are eliminated from each other like amortizations, interests and dividends.
– “Allowance for taxation on current period profit and other legal liabilities” related to all consolidated partnerships should be involved in consolidated financial statements.
– Profit belonging to non-community shares of community’s shareholders should be presented as “Minority Shareholders’ Profit and Loss” and as a discount item in financial statement.

Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

2- TOTAL EQUITY OF COMPANIES ESTABLISHED ON JULY 2017, HAS INCREASED %1,85 ACCORDING TO JUNE 2017.
42.043 companies and cooperatives were established in the first seven months of 2017. The 34,127 limited liability companies which were established in this period make up the %46,75 of the total equity, 7.358 joint companies make up the %53,25. Total equity of companies stablished on July has increased %1,85 according to June.

Source: The Union Of Chambers And Commodity Exchanges Of Turkey

Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.