What is the impact of the interest deduction advantage for capital companies that make cash capital increases on corporate tax?

For limited or joint stock companies in Türkiye, whether domestic or foreign-owned, cash capital increases made in 2025 provide an additional deductible expense from corporate income. When companies increase their capital in cash, they may benefit from a significant tax deduction under corporate tax regulations. In this article, we briefly explain how to benefit from this tax advantage.

Is it Possible to Benefit from Corporate Tax with Cash Capital Increase?

Article 10/ı of the Turkish Corporate Tax Law offers a significant tax incentive that encourages companies to grow using their own equity. As of 2025, a specific amount calculated on cash capital increases may be deducted from the corporate income.

This implementation aims to:

  • Strengthen companies’ equity structure,
  • Improve financial independence,
  • Promote investment and growth through internal rather than external financing.

Legal Basis: Turkish Corporate Tax Law, Article 10/ı

According to this regulation:

  • Capital companies (excluding banks, insurance companies, and state economic enterprises),
  • May deduct an amount from their corporate income,
  • Calculated based on the cash capital registered with the trade registry,
  • At a rate equal to 50% of the commercial loan interest rate announced by the Central Bank of the Republic of Türkiye (CBRT).
    – This rate is increased to 75% for cash contributions made by foreign investors.
    – The deduction is applicable for five years, including the year of capital increase.

Example Application (2025)

Scenario:

  • Shareholder (K) injects 12 million TRY as cash capital into Company A Inc. in June 2025.
  • CBRT commercial loan interest rate (assumed): 40%
  • Deduction rate: 40% × 50% = 20%
  • Duration of application: 7 months (from June to year-end)

Deduction Calculation:

  • Annual base: 12,000,000 × 20% = 2,400,000 TRY
  • For 7 months: (2,400,000 / 12) × 7 = 1,400,000 TRY

Corporate Tax Impact:

  • At a 25% corporate tax rate:
  • 1,400,000 × 25% = 350,000 TRY less tax to be paid.

Key Points to Consider in Practice

  • Non-cash capital contributions (e.g., real estate, goods in kind, mergers) are not eligible for this deduction.
  • In the event of a capital reduction, the deduction right is forfeited for the reduced portion.
  • Unused deduction amounts may be carried forward to subsequent years.
  • The President has the authority to increase or decrease the deduction rate between 0% and 100%, based on criteria such as sector, region, and company size.-

10 Questions & 10 Answers About the Cash Capital Tax Deduction

  1. Does a cash capital increase provide a tax advantage?
    Yes. A deductible amount is calculated from the corporate income.
  2. Which companies can benefit?
    Limited companies, joint stock companies, and other capital companies (excluding banks, insurance firms, and state-owned enterprises).
  3. How is the deduction rate determined?
    50% of the TL commercial loan interest rate announced by the CBRT at year-end.
  4. What is the rate for foreign-sourced cash capital?
    75% of the interest rate is used for calculation.
  5. For how long can the deduction be applied?
    For the year of capital increase and the following four years — a total of five tax periods.
  6. What if the deduction is not fully used?
    The remaining amount is carried forward to future years.
  7. Is the deduction preserved if the capital is reduced?
    No. The right to deduction is lost for the reduced portion.
  8. Does the deduction apply to non-cash capital contributions?
    No. Only cash contributions are eligible.
  9. Can the President change the deduction rate?
    Yes. The rate may be adjusted based on sector, region, or public listing status.
  10. How is a cash capital increase registered?
    It must be registered with the trade registry and documented with payment receipts.


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 Karen Audit 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.