What business expenses are deductible for corporate tax in Turkey?

Understanding expense deductibility for Kurumlar Vergisi is essential for accurate tax planning and avoiding the KKEG add-backs that inflate taxable profit.

The general deductibility principle Under Gelir Vergisi Kanunu Article 40 (applicable to sole traders) and Kurumlar Vergisi Kanunu Article 8 (companies), expenses are deductible if they are: 1. Genuinely incurred (actually paid or accrued) 2. Incurred for the purpose of earning business income 3. Supported by documentary evidence (valid Turkish invoice, receipt, contract) 4. Not prohibited by specific KVK Article 11 exclusions

Key deductible categories

Staff costs: - Gross wages plus 24.5% employer SGK contributions — fully deductible - Severance pay (Kıdem Tazminatı) — deductible when actually paid - Private health insurance premiums up to 5% of gross salary per employee

Premises costs: - Rent (Kira) — fully deductible; 20% Stopaj must be withheld on rent paid to individual landlords - Utilities (electricity, water, gas) for business premises - Property taxes (Emlak Vergisi) on business premises — deductible

Depreciation (Amortisman): - Straight-line depreciation on fixed assets at GIB-prescribed rates - Assets below TRY 6,900 expensed immediately

Financing: - Bank loan interest — deductible subject to FGK (10% cap rule) and thin-cap (3:1 related-party debt) - Leasing finance charges - Bank fees and charges

Professional fees: - SMMM, YMM, lawyer, audit fees — fully deductible - 20% Stopaj applies when paying individual professionals

Marketing: - Advertising (no cap) — fully deductible - Entertainment and hospitality — deductible up to 0.5% of net sales only - Promotional gifts: deductible if item cost below TRY 2,200 per recipient

R&D: - 100% deduction plus 50% bonus for certified R&D under Law 5746 — effective 150% deduction

Non-deductible items (Kanunen Kabul Edilmeyen Giderler — KKEG) These are the items most often missed in tax declarations:

• Fines and penalties (para cezaları ve tazminatlar): Tax penalties, traffic fines, contractual penalties for the company's own breach
• Entertainment above 0.5%: The portion of entertainment/hospitality costs exceeding 0.5% of net sales
• Passenger car 30% restriction: 30% of fuel, maintenance, and repair costs for non-commercial vehicles
• Thin-cap disallowed interest (Article 12): Interest on related-party loans where debt exceeds equity 3:1
• FGK financial expense restriction (Article 11/j): 10% disallowance where total financing costs exceed 10% of pre-financing taxable profit
• Non-business personal expenses charged to company
• Unjustified provisions and reserves
• Charitable donations above 5% of pre-donation taxable profit
• Payments without supporting documentation (faturasız giderler)

KKEG add-back in practice The process for the annual KV declaration: 1. Start with accounting profit per the income statement 2. List and quantify each KKEG category 3. Add the total KKEG back to arrive at taxable profit 4. Apply 25% Kurumlar Vergisi to the adjusted taxable profit

Missing KKEG add-backs is the most common cause of understated corporate tax and subsequent Revenue Administration corrections.

Documentation requirements Every deductible expense must be supported by a valid document: - For transactions above TRY 3,000 with e-Fatura registered counterparties: e-Fatura - For transactions with non-e-Fatura businesses above TRY 3,000: e-Arsiv or paper fatura - Below TRY 3,000: Perakende Satış Fişi (retail receipt) or fatura - Employee expenses: signed expense claim forms plus underlying receipts