Will inflation adjustment be applied in 2025 and 2026?
The balance sheet for the end of the 2023 accounting period will be corrected in accordance with the temporary article 33 of Law No. 213, and the adjustment transactions for the balance sheets for later periods (provisional tax periods and accounting periods) will be corrected depending on the conditions stipulated in paragraph (A) of Article 298 of the same Law.
***
Conditions for inflation adjustment – 29.08.2024
ARTICLE 32- (1) The balance sheet for the end of the 2023 accounting period will be corrected in accordance with the temporary article 33 of Law No. 213, and the adjustment transactions for the balance sheets for later periods (provisional tax periods and accounting periods) will be corrected depending on the conditions stipulated in paragraph (A) of Article 298 of the same Law.
According to subparagraph (1) of the said paragraph, if the increase in the price index (PPI) announced by the Turkish Statistical Institute for Turkey in general exceeds 100% in the last three accounting periods including the current period and 10% in the current accounting period, the financial statements are subject to inflation adjustment. In determining these rates in temporary tax periods, the previous thirty-six months including the last month of the three-month periods and the last twelve months instead of the current accounting period are taken into account instead of the last three accounting periods. If the said rates are changed by the President, the new rates are taken into account.
Inflation adjustment will end if both conditions are not met at the same time. In other words, the obligation to make inflation adjustment will continue even if only one of the said conditions is not met after an accounting period in which inflation adjustment is initiated.
Within this framework, depending on the occurrence of the conditions in question, starting from the provisional tax period in which the conditions occur, inflation adjustment transactions will be made in the framework of the provisions of paragraph (A) of Article 298 of Law No. 213, and in the following periods depending on the continuation of the conditions (including provisional tax periods).
If an adjustment is made in any of the provisional tax periods within an accounting period, the adjustment will also be made in the following provisional tax periods and at the end of the current accounting period.
(2) Taxpayers who are required to make inflation adjustments, as specified in Article 8 of the Communiqué, are required to subject their balance sheets related to provisional tax and accounting periods to adjustment transactions, if the conditions in subparagraph (1) of paragraph (A) of Article 298 of Law No. 213 are met, in terms of the 2024 accounting period and subsequent accounting periods.
(3) If the increase in the price index (PPI) after the conditions for making inflation adjustments are met is less than 100% (inclusive of 100%) in the last three accounting periods including the current period as of the financial statement date and less than 10% (inclusive of 10%) in the current accounting period, the financial statements will not be subject to inflation adjustment and the conditions for making inflation adjustments will have ended.
Taxpayers who use the calendar year as the accounting period will check whether the conditions in question have been met as of the calendar year provisional tax periods, and taxpayers who are assigned a special accounting period will check whether the conditions in question have been met as of the provisional tax periods of the special accounting period they use. However, if an adjustment is made in any of the provisional tax periods within an accounting period, the adjustment will also be made in the following provisional tax periods and at the end of the current accounting period.
Taxpayers who are assigned a special accounting period will decide whether to make inflation adjustments by checking whether the conditions in question have been met as of the provisional tax periods of the special accounting period they use. Taxpayers assigned a special accounting period shall adjust their balance sheets at the end of the first provisional tax period and the following provisional tax periods in which the inflation adjustment conditions of the special accounting period are met, as well as at the end of the same accounting period. If the adjustment conditions continue, the provisional tax and accounting period-end balance sheets shall also be subject to adjustment in the following accounting periods.
(4) Taxpayers who keep books according to the balance sheet principle as of the end of the 2023 accounting period and who are required to make inflation adjustments according to this section of the Communiqué must have subjected their balance sheets for the end of the 2023 accounting period to inflation adjustments according to the principles in the third section of the Communiqué.
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.
