12 Months Financial Report - Turkish Airlines

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TÜRK HAVA YOLLARI ANONİM ORTAKLIĞINOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE PERIOD ENDED 31 DECEMBER, 200935 TAX ASSETS AND TAX LIABILITIES (cont’d)The Group is subject to taxation in accordance with the tax procedures and the legislation effective inTurkey. Provision is made in the accompanying financial statements for the estimated charge based on theGroup’s results for the years and periods.Corporate Tax Law of 5520 entered into force by 21 June 2006 and published in the Official Gazette No.26205. With this Law, Law No. 5422 was repealed from application.The corporate tax rate is 20% since 2006 (2006, 2007 and 2008 years: 30% for investment deduction).Corporate tax is applied on taxable corporate income, which is calculated from the statutory accountingprofit by adding back non-deductible expenses, and by deducting dividends received from residentcompanies, other exempt income and investment incentives utilizedInvestment incentive certificates are revoked commencing from January 1, 2006. The investmentincentive amount that cannot be deducted from 2008 taxable income will not be carried forward tofollowing years. In accordance with Income Tax Law Temporary Article 69, investment allowancesavailable as of 31 December 2005 and due to insufficiency of profit are transferable to next year’s; can bededucted from the profits of 2006, 2007 and 2008 depending on taxpayers’ choice. Investment allowancescan be forwarded to next year’s by restatement with Producer Price Index (PPI)In case of benefiting from investment allowances, the Corporate Tax rate is 30 % instead of 20%.Taxpayers have the option to benefit from investment allowances in all or any of the years 2006, 2007and 2008.Group preferred to deduct the investment allowances of 2005 from the earnings in 2006 and 2007.Therefore, the applicable current corporate tax rate is 30% for 2006 and 2007. The applicable currentcorporate tax rate is 20% for 2008. The deferred tax rate used for the calculation of deferred tax assetsand liabilities is also 20%Corporations are required to pay advance corporation tax quarterly, at the current rate on their corporateincome. Advance tax is to be filed in the following second month’s 14th day and paid on 17th day.Advance tax paid by corporations is credited against the annual corporation tax liability. The balance ofthe advance tax paid may be refunded or used to set off against other liabilities to the government.Despite of the offset, if there are temporary tax amounts, it may be returned by cash or may be offset anyother financial liabilities.Under the <strong>Turkish</strong> taxation system, tax losses can be carried forward to offset against future taxableincome for up to 5 years. Tax losses cannot be carried back to offset profits from previous periods.In Turkey, there is no procedure for a final and definitive agreement on tax assessments. Companies filetheir tax returns within the 25th of the fourth month following the close of the related financial year. Taxauthorities have the right to audit tax declarations and accounting records for 5 years, and may issue reassessmentbased on their findings.Except for the dividends paid to non-resident corporations, which have a representative office in Turkey,or resident corporations, dividends that are paid to non-resident corporations or corporations exempt fromtaxation in accordance with Income Tax Law article 75 paragraph 2 lines (1), (2) and (3) are subject towithholding tax at the rate of 15%. An increase in capital via issuing bonus shares is not considered as aprofit distribution and thus does not incur withholding tax.55
TÜRK HAVA YOLLARI ANONİM ORTAKLIĞINOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE PERIOD ENDED 31 DECEMBER, 200935 TAX ASSETS AND TAX LIABILITIES (cont’d)In accordance with “Bringing Some Assets Into National Economy” Law No: 5811, which has becomeeffective as of 22 November 2008, earnings of real persons and entities which are full fledged taxpayersobtained through their foreign offices/branches and their permanent agencies, including of those that areobtained by the end of 30 April 2009, are exempt from income and corporate taxation to the extent thatsuch earnings are transferred to Turkey from the date of the issuance of the related law until 31 May2009.Article 7.4 of the General Communiqué issued on 6 December 2008 in regards to “Bringing Some AssetsInto National Economy” Law Serial 1, No: 5811 requires the inclusion of such earnings to the exemptionto the extent that they are transferred to Turkey as of 31 May 2009, even if earnings attributable to 2008are subject to temporary tax filings for the 2008’s temporary tax periods, since branch earnings obtainedthrough their foreign offices/branches and permanent agencies are determined at the last day of thefinancial year.In this respect, the Company’s TL 436.428.799 of foreign branch earnings exemptionobtained in 2008 is subject to as a deduction against the 2008’s Corporate Tax base. Unused and carryforward exemption amount of 2008 is also subject to deferred tax calculation.During the calculation of prepaid tax for the 2009 March period, the issues about the calculation offoreign branch earnings were evaluated again by the Company management due to the factors ofuncertainty in regulations, arising of different figures for the matter about which initiative can be useddepending on the opinion taken from Tax authority, arising of different exception figures when themethods other than in the Tax authority’s opinion was applied. Foreign branch earnings, which werecalculated previously on the location basis, are calculated again in the line basis, the previous earningsfigure TL 436.428.799 has decreased to TL 114.788.079. Because of the changes made in accountingestimates, an additional tax burden of TL 64.328.144 is stated in the financial statements as of 31December 2009.Furthermore, the period of these exceptions are extended with Law No: 5917 article 46 which has becomeeffective as of 10 July 2009 and the provisional article 3 added to the Law No: 5811. Accordinglycommercial earnings obtained by corporations through permanent representatives and branches abroad,between the dates of 1 May 2009 and 31 December 2009 are exceptional from income and corporate taxif, those earnings were transferred to Turkey until the date 28 February 2010. The Company hascalculated TL 156.045.544 foreign branch earnings for the year 2009 and has incorporated this amount tothe calculation of corporation of tax relevant year.In August 2009, the company has reflected TL 508.580 additional tax burden, which is related to thecorporate tax for the period 2008 into the financial statements as of 31 December 2009 via adjustmentdeclaration.56
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12 Months Financial Report - Turkish Airlines

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