What Are the Tax Advantages of Capital Increase?
What Are the Tax Advantages of Capital Increase?
What Are the Tax Advantages of Capital Increase?
Introduction
As of 2025, rising financing costs and difficulties in accessing credit have led companies to seek alternative financing models. In this context, capital increases have become a preferred method of financing through equity rather than debt. More importantly, capital increases offer significant tax advantages to companies.
This article explores the tax implications of cash capital increases, the legal framework, and how companies can benefit from this model.
1. Corporate Tax Deduction on Cash Capital Increase
According to Article 10/1-ı of the Corporate Tax Law No. 5520, capital companies that perform a cash capital increase can benefit from a tax deduction on their corporate income based on certain conditions.
1.1 Eligible Entities
Joint-stock companies (A.Ş.)
Limited liability companies (Ltd. Şti.)
Cooperatives (with capital company characteristics)
Not Eligible: Banks, insurance and financial institutions, and state economic enterprises.
1.2 Application Requirements
| Requirement | Description |
| Capital Payment | Must be an actual cash inflow into the company |
| Registration and Deposit Timing | If deposited before registration, registration date applies; otherwise, deposit date applies |
| Deduction Period | Applicable for up to 5 fiscal years |
1.3 Deduction Rates
| Source of Funds | Deduction Rate |
| Cash brought from within Turkey | 50% |
| Cash brought from abroad | 75% |
1.4 Interest Rate and Calculation
The deduction is calculated using the "weighted average interest rate applied to commercial loans" announced by the Central Bank of the Republic of Turkey (CBRT).
Formula:
Capital Amount x Interest Rate x Deduction Rate x (Months / 12)
Example Calculation
| Year | Interest Rate | Deduction Rate | Period | Deduction Amount (TRY) |
| 2024 | 55.58% | 50% | 3/12 | 2,084,250 |
| 2025 | 35% | 50% | 12/12 | 1,750,000 |
| 2026 | 35% | 50% | 12/12 | 1,750,000 |
| 2027 | 35% | 50% | 12/12 | 1,750,000 |
| 2028 | 35% | 50% | 12/12 | 1,750,000 |
2. Inflation Adjustment and Deductible Expense Impact
With the reintroduction of inflation accounting in 2024, capital accounts classified as non-monetary assets can be adjusted for inflation. This adjustment can create a "fictitious expense," effectively reducing the tax base.
Accounting Table
| Date | Initial Amount | Adjustment Coefficient | Adjusted Value | Inflation Difference |
| 27.02.2024 | 10,000,000 | 1.18974 | 11,897,400 | 1,897,400 |
Journal Entry
Dr. 698 Inflation Adjustment Account 1,897,400 TRY
Cr. 502 Capital Adjustment Positive Differences 1,897,400 TRY
3. Conclusion and Evaluation
Capital increase not only strengthens the financial structure of a company but also provides substantial tax benefits when applied correctly. Tax deductions based on cash capital increases and inflation-based fictitious expenses help reduce the overall tax burden over a multi-year period.
To fully benefit from these incentives, the capital increase must be properly planned and executed in compliance with current tax regulations.
For Consultancy and Implementation Support:
www.ozmconsultancy.com
info@ozmconsultancy.com
Ataşehir - Istanbul
