Turkey's Revenue Administration has announced the publication of Presidential Decree No. 3490 of 3 February 2021, which provides for the implementation of the interest deduction limitation rules provided for under Article 41 (Payments of non-deductible expenses) of the Income Tax Law (Law No. 193) and Article 11 (Non-deductible Expenses) of the Corporate Income Tax (Law No. 5520). The rules were approved in 2012, pending the issuance of an implementing decree.
The limitation rules essentially provide that where the debt of a taxpayer exceeds equity, 10% of financing expenses are not allowed as deductible expenses. For this purpose, financing expenses include interest, commissions, late charges, exchange rate differences, and similar expenses and costs. However, credit institutions, financial institutions, and financial leasing, factoring, and financing companies are excluded from the limitation rules. Presidential Decree No. 3490 provides that the interest deduction limitation rules are effective from 1 January 2021.