Inflation Accounting, Additional Motor Vehicle Tax, Rediscount Rate, and Current Developments

Inflation Accounting

- Will be applied at the end of 2023

- The inflation adjustment difference calculated for 2023 will not affect the profit/loss account, and no additional tax will arise. It will be recorded under equity accounts as retained earnings/accumulated losses

- Values adjusted for inflation as of December 31, 2023, will serve as the opening values for January 1, 2024

- The inflation adjustment difference calculated in 2024 will affect the profit/loss account, and additional tax payments may occur depending on the circumstances

- Indexation for items after 2005 (records had been brought up to 2004 through previous inflation accounting)

- A distinction will be made between monetary and non-monetary items

- No inflation adjustment will be made for monetary assets and liabilities; an inflation difference will be calculated for non-monetary assets and liabilities

- If a revaluation account was previously maintained, the inflation calculation will be performed based on the revalued amount

- Inflation differences may not be calculated for fully depreciated items among fixed assets (fixtures). Undepreciated amounts will be treated as if they had been depreciated

- A pooled (lump-sum) method will be used for inventories

- An inflation adjustment coefficient will be determined for non-monetary items (December 2023 Domestic PPI / Domestic PPI of the month the non-monetary item entered the balance sheet). The inflation-adjusted value of the non-monetary item will be found by multiplying it by this coefficient

- Legislation regarding inflation accounting and revaluation: Tax Procedure Law (TPL) Provisional Article 31, TPL Provisional Article 32, TPL Repeated Article 298/Ç

- Accounts subject to inflation adjustment: Inventories, fixtures, capital accounts, prepaid expenses, income for coming months and years, advances given and received, tangible and intangible fixed assets

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Briefly

- The Constitutional Court rejected the appeal against the additional Motor Vehicle Tax (MTV)

- The rediscount rate became 31.75%. This rate will be used in current account (ADAT) interest calculations. The previous rate was set at 26.75% on September 1st. The rate prior to September 1st was 16.75%

- The minimum wage payable to attorneys became 15,800 TRY. Legal fees will range from 8,000 TRY up to 67,000 TRY

- The CBRT increased the policy rate by 500 basis points to 30%. In parallel, the credit card late payment interest rate was raised from 3.11% to 3.56%, and the cash advance late payment interest rate from 3.87% to 4.32%

- For FX-Protected Time Deposits (KKM), the reserve requirements applied by banks were increased from 15% to 25%

- The office rent increase rate for September became 56.28%. For residential properties, the statutory increase rate remains 25% until July 2024

- The Medium-Term Program (MTP) has been announced. The year-end 2023 exchange rate projection was set at 30.40 TRY/USD

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Reminders

- The corporate tax rate will be considered as 25% in the Q3 2023 provisional tax return

- A 5% discount will be applied to income derived from manufacturing to export for companies engaged in exporting

- Mandatory independent audit criteria: Total assets of 75 million TRY and above, net sales of 150 million TRY and above, number of personnel of 150 individuals and above

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Planned Regulations in Legislation. Not much detail yet

- Interest-free loans up to 48 months for newly married couples

- Technological device support up to 5,500 TRY for young people

- Housing loans for first-time homebuyers

.- The ability to withdraw half of the private pension system (BES) savings without any fees under certain conditions

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