Corporate - Deductions

Last reviewed - 02 May 2024

Turkish CIT legislation allows a deduction for all the 'ordinary and necessary expenses paid or incurred for the generation and sustenance of income during the taxable year in carrying on any trade or business'.

The general principle for tax deductibility is that the payment should be a necessary business expense and it should be properly documented in accordance with the relevant provisions of the Turkish transfer pricing regulations and those in the local tax procedural law.

Depreciation and amortisation

Fixed assets are subject to depreciation at rates determined by the Turkish Ministry of Finance (MoF), based on their useful life.

Intangible assets (i.e. licence, franchise, copyright, etc.) and goodwill are depreciated over 15 years and five years, respectively. Additionally, leasehold improvement is depreciated based on lease period.

Depreciation can be calculated by applying either the straight-line or declining-balance method (limited to 50%), at the taxpayer’s discretion. The taxpayer may also change the option from declining-balance to straight-line (but not vice versa) at any time during the life of the asset. The applicable rate for the declining-balance method is twice the rate of the straight-line method, subject to certain limitations. Furthermore, in special cases, the tax authorities may determine higher depreciation rates.

Intangible assets are amortised by the straight-line method over their estimated useful lives, if objectively determinable.

Profits or losses on disposal of fixed assets (i.e. the difference between the proceeds and the written-down values) are included in taxable income in the year of disposal. If the renewal of disposed-of assets is considered necessary by the owners of the business concern, the profit accrued may be retained for a certain amount of time. After the purchase of new fixed assets, the profits may be offset against the depreciation of the new assets.

A limitation has been introduced with the introduction of Communiqué No. 311 on Income Taxation and Law No. 7194, limiting the deduction of expenses relating to passenger vehicles to 70% of these expenses and a maximum of TRY 26,000 for rental expenses of personal automobiles (with an exemption of financial leasing) in determining commercial and professional earnings.

Start-up expenses

Start-up expenses are considered as deductible expenses as incurred. Also, the taxpayer has the option to capitalise such expenses and to depreciate them over five years at equal amounts.

Interest expenses

In Turkey, interest is generally treated as an ordinary business expense and is tax deductible. There are certain limitations, such as the arm’s-length principle and thin capitalisation rule for related-party borrowings (please see Thin capitalisation in the Group taxation section for more information).

Starting from year 2021, a new restriction also applies in situations where the amount of external financing of the taxpayer exceeds the taxpayer's equity. In such situations, 10% of the borrowing costs (such as interest, commission, exchange rate differences) corresponding to the excess borrowing become non-deductible for corporate tax purposes. Interest and similar payments capitalised to the cost of investment are not subject to deduction limitation. Different than the thin capitalisation rule, this new limitation applies to all borrowings, related party or third party. Credit institutions, financial institutions, financial leasing companies, factoring companies, and financing companies are excluded from the application of this restriction.

Notional interest deduction 

For capital contributions in cash, a tax incentive of notional interest deduction is available, allowing companies (except for those that operate in banking, finance, and insurance sectors) to deduct from their taxable income a notional interest calculated based on their capital amounts contributed after 1 July 2015. 

The deduction is equal to 50% of the notional interest that is calculated on the qualifying capital increase (net of qualifying decrease). The deduction rate is 75% for capital sourced from abroad. The notional interest rate is determined based on the interest rates the Turkish Central Bank announces annually in relation to commercial bank credits.  

With the Law no. 7417, published in the Official Gazette on 5 July 2022, the right to claim notional interest deductions, which was available for an indefinite period, has been limited to the fiscal year in which the decision on capital increase is registered and the following four fiscal years. For newly established companies and for companies that increased their capital before the amending law was published on 5 July 2022, the five-year limitation started in 2022.

Bad debt

Bad and doubtful accounts receivable are deductible under certain conditions. Amounts of the receivables collected afterwards are added to the profits of the year in which they are collected.

Charitable contributions

Donations to listed charities and for construction of schools, hospitals, and scientific research organisations are deductible at up to 5% of the company’s gross profit.

Pensions and employee termination benefits

Payments for pensions and employee termination benefits are deductible for CIT purposes under certain conditions.

Fines and penalties

In principle, fines and penalties incurred due to the wrong-doings of the taxpayer or its employees are not tax deductible.


Essentially, the CIT itself and VAT are, subject to certain exceptions, not deductible for CIT purposes.

Fees and duties paid in relation to assets of the company are, in principle, deductible in determining taxable corporate income.

Net operating losses

Corporate losses may be carried forward for five years. Losses cannot be carried back.

Payments to foreign affiliates

Charges for royalties and interest by foreign affiliates may be deductible for CIT purposes, provided that transfer pricing and thin capitalisation rules are followed (see the Group taxation section for more information).