REPUBLIC OF TÜRKİYE
REVENUE ADMINISTRATION
ANTALYA TAX OFFICE DIRECTORATE
Taxpayer Services Revenue Group Directorate
Date: 03/05/2011
Subject: Whether the rent paid by an individual can be deducted as an expense by the company after the company is established
In the private ruling request mentioned, it is stated that a shop was rented by the 51% shareholder and director of your company on 01.11.2009, a year’s rent was paid into the shop owner’s bank account on 06.11.2009, and during this period, your shareholder had no commercial activities or tax registration. However, renovation work on the rented shop began on 03.02.2010, and your company was established on the same date. It is also mentioned that, with an additional protocol to the existing rental contract, the rental status in the name of your shareholder was transferred to your company. In this context, you requested our opinion on whether a withholding tax declaration should be filed for the rent for the period between 01.11.2009 and 01.11.2010 and whether the rent already paid can be written off as an expense on behalf of the company.
In Article 1 of the Corporate Tax Law No. 5520 titled “Scope of Tax,” it is stipulated that capital companies are corporate taxpayers and their earnings are subject to corporate tax.
On the other hand, in Article 8 of the Tax Procedure Law No. 213, “A taxpayer is a natural or legal person who is liable to pay tax according to tax laws. A tax responsible person is a natural or legal person who is liable for the payment of taxes and acts as a representative to the tax office. Unless otherwise provided by tax laws, special contracts regarding tax liability are not binding on tax offices. The term ‘taxpayer’ in the following articles of this law also includes tax responsible persons.”
Additionally, every individual and legal entity in the Republic of Turkey is assigned a tax identification number. The Ministry of Finance is authorized to determine the procedures and principles for the implementation of this provision and to make it mandatory to use the tax number in records and documents related to transactions carried out by public institutions, organizations, and real and legal persons.
According to the Turkish Commercial Code, companies acquire legal personality upon registration in the trade registry. A company can only have rights between the date it acquires legal personality and the date its registration is deleted from the trade registry.
Therefore, for the rented business premise rented by your shareholder between 01.11.2009 and 01.11.2010, it is possible to deduct the rent payments made for the period after the company was established and became a party to the rental agreement (from 08.02.2010 to 01.10.2010) as an expense in determining corporate earnings. Additionally, withholding tax must be applied on these rent payments in accordance with Article 94/1(5/a) of the Income Tax Law. However, it is not possible to deduct the rent payments for the periods before the rental agreement was transferred to your company as an expense.
Source: Revenue Administration
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