Will the financial losses related to previous years that can be deducted from the income of subsequent years be deducted with the amount recorded in the previous declarations or with the new value formed as a result of inflation accounting?
The financial statements dated 31/12/2023 are subject to inflation adjustment regardless of whether the conditions for inflation adjustment are met. The profit/loss difference arising from the inflation adjustment made is shown in the profit/loss account of previous years. The previous year profit determined in this way is not subject to tax, and the previous year loss is not considered as loss.
Tax Procedure Law Communiqué No. 555;
Correction process
ARTICLE 12- (1) By the taxpayers within the scope;
a) The balance sheet for the end of the 2023 accounting period will be prepared without taking into account the provisions regarding inflation adjustment.
b) Inflation adjustment will be made for the balance sheet at the end of the 2023 accounting period and the tax base for the 2023 accounting period will be calculated based on the profits determined according to the financial statements before the adjustment.
c) The balance sheet prepared at the end of the 2023 accounting period will be subject to inflation adjustment in any case.
(2) According to subparagraph (7) of paragraph (A) of Article 298 of Law No. 213;
a) If the conditions for inflation adjustment occur again after an accounting period in which inflation adjustment is not applied, inflation adjustment will be made starting from the last period in which inflation adjustment is made.
b) The previous year profit determined in this way will not be subject to tax and the previous year loss will not be considered as loss. However, in determining the tax base, the previous year financial losses will be taken into account with their recorded values.
c) Accumulated depreciation is adjusted by taking into account the increase rate that occurs after the adjustment in the value of the asset to which it belongs on the balance sheet date.
d) Inflation difference accounts of passive items arising from these transactions, if transferred to another account or withdrawn from the enterprise in any way, are subject to tax in this period without being associated with the profit of the periods in which these transactions are made. However, inflation differences belonging to equity items can be offset against previous year losses resulting from the adjustment or added to the capital by corporate taxpayers; these transactions are not considered as profit distribution.
In addition, the profit/loss difference arising from the inflation adjustment of the balance sheet at the end of the 2023 accounting period is shown in the previous years’ profit/loss account. Previous year profit determined in this way is not subject to tax, and previous year loss is not considered as loss.
(3) Correction of the balance sheet at the end of the 2023 accounting period; The provisions of paragraph (A) of Article 298 of Law No. 213, the provisions of temporary Article 33 and the procedures and principles determined in this Communiqué are made within the framework of this Communiqué.
(4) Since the tax base for the 2023 accounting period must be determined according to the pre-correction financial tables, the depreciation expense for the 2023 accounting period will also be calculated based on the values before inflation adjustment.
Source: Istanbul Chamber of Certified Public Accountants
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