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According to the Turkish tax laws, deductions and business expenses may be claimed as specified below:
- Offset of losses - A loss may be offset forward for 5 years.
- It is not possible to offset a loss retroactively.
- Finance expenses - As a general rule, interest on credit from suppliers and loans are allowable for tax. Nevertheless, interest on owners' investments is not allowable for tax, if the debt/equity ratio is higher than 3.
- Fines and interest on arrears in the payment of taxes are not allowed as an expense.
Depreciation of Fixed Assets in Turkey
- The declining balance method or the straight-line method are the accepted methods of depreciation in Turkey.
- The declining balance method may be changed to the straight-line method, but not the reverse.
- The basic rates of depreciation are 20% for the straight-line method and 40% for the declining balance method.
- For many assets, the depreciation is adjusted to the rise in the index from the date on which the asset was purchased.
- With the straight-line method, the basic rate of depreciation for real estate is 2% - 10%.
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