In the current practice, all expenses, especially the depreciation of the passenger cars, which are registered in the assets of the enterprise and used to obtain the income, are considered as expenses in the determination of the income. In the General Assembly of the Grand National Assembly of Turkey, the articles in the first part of the Bill on Amending the Digital Service Tax Law, Some Laws and the Decree Law No. 375 were accepted. In this context, a restriction has been imposed on the expenses of passenger cars for the following reason.

Entrance: 
In the current practice, all expenses, especially the depreciation of the passenger cars, which are registered in the assets of the enterprise and used to obtain the income, are considered as expenses in the determination of the income.

In the General Assembly of the Grand National Assembly of Turkey, the articles in the first part of the Bill on Amending the Digital Service Tax Law, Some Laws and the Decree Law No. 375 were accepted. In this context, a restriction has been imposed on the expenses of passenger cars for the following reason.

“It is seen that the said regulation can be abused by income or corporate taxpayers and the expenses of passenger cars used for personal needs can also be deducted from income or corporate income. 

Changes Coming with the Edit:

With the approved bill, the following restrictions were put into question in the expenses of passenger cars. In this context, except that those whose activities are partially or completely renting or operating passenger cars in various ways are used for this purpose;

– Up to 5,500 TL of the monthly rental price for each of the passenger cars acquired through leasing,

– Up to a maximum of 115,000 TL of the sum of the special consumption tax and value added tax related to the acquisition of passenger cars,

– Maximum % 70 of the expenses related to passenger cars

– The first acquisition price, excluding special consumption tax and value added tax, is 135,000 TL. the portion corresponding to these amounts,
An arrangement has been made so that it can be considered as an expense in the determination of commercial income.

Tax Effect of Depreciation Amount for Passenger Cars, which are not legally accepted as Expenses: 
Tax Procedure Law In accordance with Article 328 Sale of Depreciable Goods, in case of selling depreciable economic assets, the difference between the price received and their recorded values in the inventory book is transferred to the profit and loss account. Taxpayers who keep books on the basis of business account and taxpayers who keep self-employment earnings book record this difference as revenue or expense in their books. The value of the depreciated ones is the amount remaining after deducting the depreciated depreciation.

How will the process develop with the new application? I think it would be more useful to explain the next part through an example.

Let's assume that the business sold the passenger car with a value of 500.000,00 TL, which it bought on 01.01.2020 and recorded as assets, on 31.12.2020 for the same price and depreciated 100.000,00 TL as of 2020,

50.000.00 TL of the 100.000.00 TL depreciation allocated by the enterprise in 2020 will be an unaccepted expense, and the accounting record for the sale will be as follows.

As it can be seen in the journal article above, the enterprise has faced with the tax burden of 50.000,00 TL that it has incurred as an Unlawful Expense.

Tax Procedure Law Article 320 states that each year's depreciation can only be taken into account in the valuation of that year. Although it is obligatory to allocate depreciation within the scope of KGK, there is no such obligation in terms of TPL. The depreciation of the economic assets registered in the assets of the enterprise is optional, the taxpayer may not allocate depreciation for the economic assets included in the inventory of the institution. If the entity had not deducted any depreciation in 2020 or had depreciated only as much as the portion considered as an expense (50.000,00 TL). 50,000,00 TL of the profit from the sale would not have occurred due to the expenses that were not legally accepted.

A similar application was introduced with Article 24 of the Law No. 4008, which was published in the Official Gazette on July 6, 1994. The relevant restriction was lifted as of 01.01.1999 with the Law No. 4369. In the previous period, it was accepted that the depreciation, which was taken into account in the determination of taxable income - accepted as an expense, would be taken as basis in the determination of profit or loss in the sale of passenger cars. In my personal opinion, artificial profit, which is due to depreciation expense, which is not legally accepted, should be considered as tax-free income.

Conclusion:
For a fair and healthy tax system, businesses must keep their accounting records completely and accurately. In the case of depreciation, which I have tried to summarize above, if the amount of depreciation to be considered as an expense that is not legally accepted has a tax effect, many businesses will choose not to allocate their depreciation or to allocate it incompletely. Moreover, paying the tax of the unaccepted depreciation of the expense is also thought-provoking in terms of tax justice. In this context, I believe that a regulation will be made by the Financial Administration.

References: Tax Procedure Law No. 213.
Law on Digital Service Tax No. 7193 and Amending Laws in Decree Law No. 375.