Page 11 - EY-VG_Temmuz_2018_v3

Vergide Gündem
English Translation

Legal and taxational aspects of capital

increase, capital decrease and simultaneous
capital decrease and increase

Companies may need to increase or decrease the capital amount over time due
to various reasons. The increase, decrease of corporate capital or performing
these two transactions simultaneously is possible under the terms indicated in
the Turkish Code of Commerce no. 6102. Accordingly, the joint stock companies
and limited liability companies may increase capital in three ways through capital
commitments, from internal sources and contingently; while reduction is possible
through repayment of capital to the shareholders or deduction of losses (balance
sheet deficits) or decrease and increase may be performed simultaneously which
is frequently implemented. As the terms and methods of these procedures may be
differing, taxational impacts may also show differences in terms of transactions and
the qualifications. As well as the Turkish Code of Commerce is the main legislation
to comply with; the secondary legislation arrangements released by the Ministry of
Customs and Trade, tax laws and rulings of the Revenue Administration should also
be considered.
In this article we will be providing context on the terms and rules applied for
adding cash/capital in kind elements in the circumstance that the capital is
increased through commitment, whether cash capital increase is possible or not
if the balance sheet contains the funds permitted by the legislation, in case the
capital increase is intended to be performed through the usage of certain internal
resources existing within the corporate assets, the conditions that should be met
for using those resources, in what way the capital advances considered as specific
internal resources and shareholders’ receivables from the company can be used in
capital increase, secondary legislation of the Ministry of Customs and Trade, capital
increase through share issue with premium, contingent capital increase arranged
among the ways of capital increase in joint stock companies although that is not so
common in implementation.

Regarding the section on capital decrease, differences between decrease aimed
at repayment of capital to the shareholders and decrease performed through the
deduction of losses, although any specific regulation on tax legislation does not
exist, since the procedure of decrease also concerns taxation essentially, specific
matters that the implementers should pay attention in line with the Revenue
Administration’s approach on which elements of the capital forms the reduced
portion, how taxation should be made if cash or capital in kind payments by the
shareholders or certain items added to the capital without being subjected to tax
are withdrawn from the company through capital decrease are the other matters to
be dealt in this article. Finally, specific situations to be taken into account in case
these procedures are handled simultaneously are also elaborated.

Temmuz 2018 11