Taking into consideration the reactions and suggestions from the business world and the public, two provisions prepared by the Revenue Administration of the Ministry of Treasury and Finance on two separate topics were included in the Proposal of Law Amending Some Laws Regarding Some Regulations on Defense Industry. However, this Proposal of Law, prepared to ensure continuous funding for the defense industry and submitted to the Grand National Assembly of Turkey, was withdrawn for reevaluation due to intense reactions and will be discussed in 2025. This situation caused uncertainties regarding whether the two regulations related to inflation adjustment included in the Proposal are retained or not. What are these two topics about? The first of these two regulations related to inflation accounting allows for inflation adjustment ease for ongoing investments, and the second one involves excluding companies in dissolution and bankruptcy situations, as well as economic state enterprises and public economic organizations within the scope of Decree-Law No. 233, from taking into account profit/loss differences due to inflation adjustment in determining income! It was stated that the first Proposal of Law will be inserted! Following the withdrawal of the Proposal of Law Amending Some Laws Regarding Some Regulations on Defense Industry, in our discussions afterwards, it was stated that these two regulations will be enacted by being added to another Proposal of Law. And true to what was said, they were added to the Proposal precisely as stated! Yes, just as mentioned, the aforementioned two regulations were added to the Law Proposal Amending Some Laws Regarding Consumer Protection passed in the Grand National Assembly yesterday. Additionally, another regulation from the Proposal of Law Amending Some Regulations on Defense Industry and Some Laws was also transferred to this Proposal. These regulations are as follows: 1) “Inflation Adjustment Ease” for ongoing investments was introduced! Investors were paying temporary tax and eventually corporate tax for adjustment differences resulting from the application of inflation adjustment to the ongoing investments account, which were required to be considered as inflation adjustment profit, although referring to the period’s earnings even if such investments were not put into operation yet. This situation had caused significant reactions especially in the business world. Taking these reactions into account, the Revenue Administration of the Ministry of Treasury and Finance issued General Communique No. 563, stating that those taxpayers subject to the obligation to make inflation adjustments in the second and third provisional tax periods of the 2024 accounting period, with gross sales amount in the Income Statement as of December 31, 2023 below 50 Million TRY (except for the taxpayers within the scope of the repeated 298th article (A) paragraph (9) of the Tax Procedure Law), would not be obliged to make inflation adjustments. Thus, this satisfied to some extent small and medium-sized enterprises and investors who had not yet put their investments into operation. However, this regulation did not eliminate the obligation of businesses whose gross sales amount was below 50 Million TRY in the Income Statement dated December 31, 2023 to make inflation adjustments, it only ensured that they do not have to make adjustments in the second and third provisional tax periods of the 2024 accounting period. These taxpayers, like other taxpayers, are still required to make annual inflation adjustments at the end of the 2024 accounting period. With the new regulation added to the Proposal, by inserting an additional provision at the end of the repeated 298th article (A) of the Tax Procedure Law, it was ensured that the adjustments resulting from subjecting the “Ongoing Investments” account to inflation adjustment would not be associated with the period’s earnings. According to this regulation, these thaxpayers will subject the ongoing investments account in the class of non-monetary assets to inflation adjustment during the periods when inflation adjustment is applied, but they will not associate the adjustment differences created as a result of the adjustment and required to be considered as inflation adjustment profit with period’s earnings; instead, they will keep these amounts in a special fund account. These amounts taken into the special fund account will be considered in the determination of period’s earnings in equal installments during the period from the time the investment is completed and the relevant economic asset is activated, up to the four accounting periods following that period. Also, the amounts followed in the special fund account will be increased annually in the ratio of revaluation rate until they are taken into account in the determination of period’s earnings. In case investments cannot be completed due to various reasons, the activities are ended within five accounting periods after the economic asset is activated, or the amounts followed in the special fund account are transferred to another account or withdrawn from the operation, the amounts not taken into account in period’s earnings within the scope of this regulation will be considered in the determination of period’s earnings in the period where the investment is not completed, the activity is terminated, or the special fund account is partially or completely used in violation of this regulation. This regulation will enter into effect on the date of publication and will apply from January 1, 2024, so taxpayers who took inflation adjustment differences from this account into account in determining the tax base in the provisional tax periods of the 2024 accounting period will transfer those adjustment differences to the special fund account by correcting their records from the beginning of the accounting period until the end of the accounting period. With this regulation, the adverse effects of inflation adjustment on investments are delayed throughout the investment period, ensuring that investments are not negatively affected by inflation adjustment, by foreseeing that they are associated with earnings starting from the operational period, and aiming to support ongoing investments. 2) New additions were made to the taxpayer group that will not consider the profit/loss difference due to inflation adjustment in income determination! With another provision added to the Proposal, entities in liquidation and bankruptcy situations, as well as economic state enterprises and public economic institutions within the scope of Decree-Law No. 233, were included in the taxpayer group for whom the profit/loss difference due to inflation adjustment will not be considered in the determination of taxable income from 2024 through company dissolution and bankruptcy, including provisional tax periods. This regulation will apply from the accounting period in which the general assembly decision for companies in liquidation and the date when the bankruptcy was declared for companies in bankruptcy is registered. No retroactive adjustments will be made for inflation adjustments made for provisional tax periods before this date. In case of withdrawal from liquidation or lifting of bankruptcy, the inflation adjustment will be applied from the provisional tax period in which the decision to withdraw from liquidation or lift the bankruptcy is made. In cases of withdrawal from liquidation or lifting of bankruptcy, the amounts that are not taken into account in earnings according to this regulation will be considered in the determination of period’s earnings when withdrawal from liquidation or lifting of bankruptcy is decided. 3) Regulation made for the Establishment of a New Organized Industrial Zone in Samsun! With a change made in the Coastal Law, a provision was added to the Proposal, which was passed by the Grand National Assembly, allowing the establishment of an Organized Industrial Zone (OIZ) according to the zoning decision in a designated area determined by boundaries and coordinates in Samsun. It is expected that the Law will be published and enter into force shortly after being signed by the President!