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Vergide Gündem
English Translation

Assessment on whether the liquidation loss

of the affiliated company will be considered
as an expense in the detection of corporate
income

In this article, we will try to explain whether the liquidation process of the affiliated
company results in loss in the presence of the participating company and whether
the loss will be considered as expense in the detection of corporate income.

Opinion of the Revenue Administration

The administration has different rulings on different dates containing various
opinions regarding the issue.
Revenue Administration’s ruling dated 14.04.2006 contains explanations indicating
that if any value of the participation shares is not left as a result of the liquidation of
the affiliated company and if it is documented, it can be considered as an expense
during the detection of the corporate income and removed from the entries.

Revenue Administration’s ruling dated 06.10.2010, differentiating its previous
opinion, refers that in the circumstance of a disposal of participation stocks that
existed in the assets of the institutions for at least two full years, profit / loss arising
in the transaction will be determined on the basis of the most recent revision before
the transaction, the disposal’s occurrence during the liquidation process will not
change the status; in the event that no gain arises from the sale of participation
stocks that have been registered for more than 2 years, 75% of the losses
(expenses) related to this sale shall be deemed as non-deductible expenses and
will not be possible to deduct from earnings from other activities of the company,
however the remaining 25% of the losses (expenses) related to this sale can be
taken into account in detecting the cost as expense.

Revenue Administration’s ruling dated 09.06.2011, contrary to the previous
opinions, contained explanations indicating that it is not possible to consider the
loss arising as a result of the affiliated company’s losing its value following the
liquidation as an expense in the detection of corporate income.
In the ruling’s detail, during the detection of commercial income, it’s indicated that
the provisions of the Tax Procedure Law and the provisions of articles 40 and 41 of
the Income Tax Law and the provisions on exemptions within the Corporate Tax Law
should be complied and concluded that within the aforementioned articles there is
no provision that the loss resulting from the liquidation of the affiliate cannot be
considered as an expense in the detection of the corporate income.

Judicial decisions

In the circumstance that the shares in affiliates account are removed from the
assets as a result of the decision on the liquidation of the affiliated company,
regarding the controversy whether that loss would be taken into account during the
detection of corporate income or not, the Fourth Chamber of the Council of State
has decided that the loss resulting from the liquidation of the affiliated company
should be taken into account during the detection of the corporate income and the
ruling’s detail indicates that the participation of a company in another company is a

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