Inflation Accounting in Turkish Tax Legislation

Circular No: 2023 / 118

Date: 07.09.2023

The conditions for inflation accounting are stipulated in Article 298/A of the Turkish Tax Procedure Law.

If the Producer Price Index (PPI) has exceeded 100% in the last three accounting periods, including the current period, and exceeds 10% in the current accounting period = the financial statements must be subjected to inflation adjustment.

As of December 31, 2022, the increase in the Producer Price Index (PPI) has exceeded 100% over the last three accounting periods, an increase of more than 10% in 2022.

Although the conditions for inflation accounting have been occur for the years 2021 and 2022, the process has been postponed under the scope of The Law Numbered 7352 Amending the Tax Procedure Law and Corporate Tax Law, published on January 29, 2022. According to the current regulations, the implementation will take place at the end of the 2023 accounting period.

Inflation accounting is defined as the calculation of financial statements in terms of purchasing power at the date of origin, resulting from the multiplication of non-monetary values by an adjustment index in consideration of inflation corrections.

During periods of high inflation, corrective measures need to be undertaken to fix the impacts of inflation on financial statements. These technical adjustments performed to achieve this are categorized as "Inflation Accounting".

As the year-end approaches, it would be beneficial to initiate the necessary preparations for the implementation during this period.

Furthermore, the Turkish Revenue Administration shared a draft regulation on January 6, 2022 regarding the implementation, and the final version of the regulation is expected to be published.

With Kind Regards.

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