Preparing and filing financial statements and tax returns of and conducting an audit for a Turkish company. Service offer

Accounting records in statutory books must be kept in the Turkish language. The Turkish lira (TRY) is used as the currency in statutory books. Records can also be kept in a foreign currency, but with an indication of the TRY equivalent.

Accounting records (including the Journal Ledger, Inventory Ledger and General Ledge) must be kept for 5 years after the relevant accounting period in accordance with the Turkish tax procedural law and for 10 years in accordance with the new Commercial Code and social security rules. At the end of the financial year, the books of accounts and the register of shareholders must be authenticated by a notary.

Financial statements must include the following general reports:

• director’s report;
• balance sheet;
• profit and loss statement;
• cash flow statement;
• statement of changes in equity;
• notes to the financial statements.

Turkish companies are required to prepare financial statements and present them at the annual shareholders’ meeting within 3 months of the financial year end, but there is no need to file financial statements with the authorities. Only tax returns must be filed.

The obligation to file financial statements applies to public companies. All public companies must prepare and submit financial statements 4 times a year.

A parent company is required to prepare consolidated financial statements.

If a parent company is a subsidiary of another parent company, it is not required to prepare consolidated financial statements.

A company (or a group of companies) is subject to statutory audit if two of the below three conditions are met:

• total assets are or exceed TRY 35 000 000;
• annual net sales are or exceed TRY 70 000 000;
• number of employees is or exceeds 175.

The following companies are also subject to statutory audit:

• companies regulated by the Capital Markets Board of Turkey (Turkish name: Sermaye Piyasası Kurulu);
• companies regulated by the Banking Regulation and Supervision Agency (Turkish name: Bankacılık Düzenleme ve Denetleme Kurumu / BDDK);
• insurance, reinsurance and pension companies;
• institutions authorized by the Istanbul Gold Exchange, precious metals intermediary institutions; joint-stock companies engaged in the production of or trade in precious metals;
• companies licensed for warehousing of agricultural products established as a joint-stock company according to legislation on licensed warehousing of agricultural products;
• companies established as a joint-stock company in accordance with provisions of the Law on public malls;
• media companies that are owners of national terrestrial satellite and cable television.

The financial statements of a company (or a group of companies) must be audited in accordance with the Turkish Auditing Standards (TAS), which are based on the International Standards on Auditing (ISA).

Corporate income tax (CIT) is regulated by Corporate Income Tax Code No. 5520. The standard CIT rate is 25%.

Taxpayers are required to file an annual CIT return and quarterly returns. The tax period is generally the calendar year.

Taxable income is declared quarterly (as an advance tax) not later than on the 17th day of the second month following the lapsed reporting period (first quarter, six months, nine months). Advance CIT payments are deducted from the final tax amount, which is calculated on the basis of the annual tax return. The annual tax return must be filed by the 30th day (inclusive) of the fourth month after the end of the tax period (usually, it is 30th April). The payment deadline for this tax is also the 30th day of the fourth month after the end of the tax period.

VAT is payable by organizations and individual entrepreneurs. Companies are registered for VAT upon their establishment, there are no registration thresholds.

The tax is charged on the sale of goods / works / services in Turkey, including their import.

The current rates are as follows:

• general rate – 20%.

From 1 January 2018, non-Turkish electronic service providers must register and pay VAT when selling such services to non-VAT consumers, i.e. individuals. Electronic reports are submitted online on a monthly basis by the 24th day of the month following the reporting period. The currency to be used in the reports is the Turkish lira (all foreign currency must be converted to TRY at the official rate of the Central Bank of the Republic of Turkey). VAT must be paid by the 26th day of the month following the reporting period.

Organizations are liable to other taxes as well (for example, property tax and withholding taxes).

Turkey has 20 free zones. Conducting activities in free zones is regulated by Free Zones Law No. 3218.

Each free zone has its own list of permitted activities:

• trading,
• yacht construction,
• production of and trade in leather goods,
• heavy industrial production,
• textile industry,
• software development and others.

Free zones are generally located in sea port areas with access to the main trade routes.

Doing business in a free zone can have the following advantages:

• exemption from corporate income tax for manufacturers,
• no value added tax,
• no customs duties, and
• other benefits depending on the legislation of a particular free zone.

*The fees are valid at the date of sending of this offer.