Shareholder Covers the Company's Loss: Is There Tax? With a Resolution No, Without One Yes (TCC Art. 376)

Regulatory Note: This article is based, as at 10 August 2026, on Corporate Income Tax Law No. 5520 Art. 6/3, Art. 32/B and Art. 32/C; Turkish Commercial Code No. 6102 Art. 376, Art. 421 and Art. 603; the Communiqué on the Application of TCC Art. 376 (Official Gazette 15.09.2018, No. 30536 — provisional Art. 1 last extended by Official Gazette 10.12.2025, No. 33103); VAT Law No. 3065 Art. 1; and the Istanbul Tax Office ruling dated 07.07.2026, No. E-62030549-125-894824. It is revised periodically in line with communiqué updates.

60-Second Summary: Your company made a loss and you covered it out of your own pocket. The condition that decides this money’s tax fate is clear: a general assembly resolution on “completion of capital” taken under TCC Art. 376, in proper form and with the required majority. If the resolution exists and the transfer falls within the amount set in it — the amount covering the portion left uncovered because of the loss — the transferred sum is not included in corporate income (CITL Art. 6/3). A gratuitous transfer labelled “loss covering” made without a resolution is, per the administration’s current ruling approach, subject to corporate tax at the general 25% rate; where the taxpayer falls within CITL Art. 32/C, the 10% minimum tax may also arise. Where the transfer is genuinely gratuitous, is not treated as financing and is not consideration for a supply or service, no VAT arises. For the shareholder, the payment is not a current-period expense.

What the capital completion fund is — and why the word “resolution” changes everything

The capital completion fund is the covering of balance-sheet deficits by shareholders in a company that has fallen into the TCC Art. 376 picture. The communiqué’s definition is sharp: the payment “is not in the nature of a capital contribution or a loan and is gratuitous”, and it “is not characterised as an advance against a future capital increase” (Communiqué on TCC Art. 376, Art. 9/1). The shareholder cannot take back what was given.

The tax-side rule became clear on 15 April 2022. The third paragraph added to CITL Art. 6 by Art. 23 of Law No. 7394 reads: “Amounts transferred by the shareholders of a company for which completion of capital has been resolved under Article 376 of the Turkish Commercial Code, in an amount covering the portion left uncovered because of the loss, shall not be taken into account in determining corporate income.”

Read the wording closely. The exemption is granted not to “a company that covers its loss” but to “a company for which completion of capital has been resolved”. Without a resolution the paragraph does not engage, and a gratuitous loss-covering transfer is treated as corporate income under the general regime.

That does not mean every lira a shareholder puts into the company is income. A properly documented capital increase, a capital advance or a loan is subject to its own regime. The problem lies with the “we covered the loss” transfer that carries none of these characteristics.

Behind this distinction sits a decade of assessment history. Before 2022 the administration added loss-compensation amounts sent by shareholders to income — the Large Taxpayers Tax Office ruling dated 19.07.2019 ended with the words “must be included in corporate income”. The 4th Chamber of the Council of State, by five parallel decisions dated 07.03.2022 (for example E.2018/4412, K.2022/1324), unanimously upheld the court judgments annulling those assessments.

Law No. 7394 then tied the regime applicable from 15.04.2022 to an express statutory provision. The Istanbul Tax Office’s current ruling dated 07.07.2026, addressed to its own applicant, set out the administrative approach across both scenarios: with a resolution the amount is not included in income; “where no resolution has been taken, it is self-evident that the amounts covered by the shareholders must be taken into account in determining corporate income.”

Is your company in the 376 picture? A two-scenario threshold calculation

TCC Art. 376 defines two thresholds. Where half of the total of capital and legal reserves is left uncovered, the board must call the general assembly to meet immediately and present remedial measures; under Art. 6 of the communiqué those measures may include the completion option. Where two-thirds is left uncovered the wording sharpens: if the general assembly does not resolve either to be content with one-third of the capital or to complete it, the company terminates automatically (Art. 7 of the communiqué adds the capital-increase option).

Example calculation (illustrative figures; all results are calculations — it is assumed that there is no profit or loss for the period and no other equity item compensating the capital loss, and that the threshold test is applied to the balance sheet as a whole on that assumption):

• Capital 2,400,000 TRY + legal reserves 165,000 TRY = 2,565,000 TRY
• 1/2 threshold: 1,282,500 TRY · 2/3 threshold: 1,710,000 TRY
• Total carried-forward losses on the balance sheet: 1,842,600 TRY → two-thirds exceeded, the company is in the Art. 376/2 picture.

The picture changes when you run the calculation under provisional Art. 1 of the communiqué. That article says that, until 1/1/2027, the whole of foreign-exchange losses arising from foreign-currency obligations not yet performed, and half of the total of lease expenses, depreciation and personnel expenses accrued in 2020-2021, may be disregarded in this calculation (last extension: Official Gazette 10.12.2025, No. 33103).

If 486,300 TRY of the loss is the exchange difference on an unpaid foreign-currency loan, the adjusted loss falls to 1,356,300 TRY: below two-thirds, above one-half. The company escapes the termination threat, but the board’s obligation to call the general assembly to meet remains.

Two nuances change the calculation. Provisional Art. 1 is an option — it says “may be disregarded”, it does not compel; you need to run both scenarios and then decide. If the company has not even exceeded the 1/2 threshold, whether the transaction counts as completion of capital under TCC Art. 376 — and therefore whether CITL Art. 6/3 applies — becomes debatable; in the official sources we searched, no ruling or case law directly resolving this sub-threshold scenario was verified. In that situation, assess alternative legal characterisations such as a capital increase or a loan separately.

The third paragraph of the article governs a separate situation, over-indebtedness: if interim balance sheets drawn up on both going-concern and probable-sale-price bases show that assets do not cover creditors, notification to the court comes onto the agenda; a fund resolution does not substitute for that obligation. In the band between one-half and two-thirds, completion is a legitimate remedial measure under Art. 6 of the communiqué.

With a resolution: a clean result on all three fronts

The company side. The transferred amount does not enter corporate income; it is recorded in equity, not in the income statement. Art. 9/3 of the communiqué requires payments to be collected and tracked “in a capital completion fund account within equity”. Determine the sub-account to be used together with your company’s accounting policy and application guidance.

The VAT side. If the true nature of the transfer is a gratuitous assumption of loss, if it is not treated as the provision of financing, and if it is not consideration for a supply or a service, it falls outside the scope of VAT. The ruling dated 07.07.2026 builds the outcome on exactly these conditions (VAT Law Art. 1); if the transfer has a different legal character, the VAT analysis is redone according to that character.

The shareholder side. Here the position is different. The amount paid does not fall within the expense lists in ITL Art. 40 or CITL Art. 8; neither an individual nor a corporate shareholder can deduct it as a current-period expense or loss. CITL Art. 6/3 does not expressly regulate the outcome of adding the amount to the cost of the participation for a corporate shareholder; in the official sources we searched, no current administrative view resolving this specific question was verified.

The absence of a ruling does not by itself produce a favourable or an unfavourable outcome. If the amount is material, obtain a ruling for your own specific case: the protection in TPL Art. 369 comes into play where the transaction conforms to an explanation given in writing by the competent authority to the taxpayer itself.

There is also a little-known side effect: the fund increases equity and feeds into the “three times equity” threshold that sets the thin-capitalisation limit on borrowings from shareholders (CITL Art. 12). Do not confuse two different time measures here. Whether the related-party debt balance exceeds the threshold is tested at any date within the accounting period; but the equity used in that test is, under subparagraph (b) of the third paragraph of the same article, the equity at the beginning of the accounting period. A fund contributed during the year therefore does not change that year’s equity measure; its effect arises, as a rule, in the following accounting period.

Without a resolution: the administrative approach and a possible 10% floor

Under the administration’s ruling approach of 07.07.2026, money sent with the words “let’s cover the loss”, without a resolution and carrying no other legal character, is corporate income; in the example of a company subject to the general rate, corporate tax is computed at 25% (CITL Art. 32/1 — the rate differs for banks and certain financial institutions). From the 2025 accounting period onward, the domestic minimum corporate tax may also arise within the framework of the taxpayer’s position under CITL Art. 32/C and its exemptions and deductions; it does not apply in the first three accounting periods for newly established entities.

The base for the minimum tax is “corporate income before deductions and exemptions”, and the law defines it: the amount found by adding non-deductible expenses to the commercial balance-sheet profit. The exemptions and deductions that may be subtracted from that base are listed one by one in the second paragraph of Art. 32/C — the offsetting of carried-forward losses is not on that list.

Example calculation, assuming break-even operations for the current year, that the company falls within CITL Art. 32/C, that it does not benefit from the first-three-accounting-periods exception, and that there are no other exemptions or deductions (calculation):

• No resolution, shareholders sent 1,842,600 TRY → the amount is corporate income, commercial profit 1,842,600 TRY.
• Ordinary computation: 25% × 1,842,600 = 460,650 TRY corporate tax.
• If you say “I have carried-forward losses on the return, the offset zeroes the base”: ordinary CIT may be zeroed, but the minimum CIT base is computed from commercial profit → 10% × 1,842,600 = 184,260 TRY is still payable.
• Under this example’s assumptions of break-even operations and no other non-deductible expenses, had the resolution been taken both computations would have been zero.

Two exception notes: for newly established entities the minimum tax does not apply for the first three accounting periods (Art. 32/C/5 — a company set up in 2025 is out of scope in 2025-2026-2027); entities formed through a merger, transfer or change of type cannot use this exemption. For young loss-making companies this window is critical but temporary.

There is also a ceiling: even with a resolution, CITL Art. 6/3 protects only “the amount covering the portion left uncovered because of the loss” — in the example, 1,842,600 TRY on the assumption that the uncovered amount equals the loss (calculation). If the shareholders send 2,000,000 TRY and do not characterise and document the excess 157,400 TRY (calculation) as a separate capital increase or loan, that portion falls outside the Art. 6/3 protection and carries corporate income risk.

Three routes side by side: increase, loan or fund?

There are three main routes for a shareholder to put money into the company; the tax outcomes are not the same.

A note on the simulation: the CITL Art. 10/1-i deduction does not arise automatically on every cash increase — the financial sector is excluded and there are rate and source limitations; the row should be read as “if the conditions are met”. The fund, because the communiqué allows it to be used only for offsetting losses, never converts into capital and therefore never reaches this deduction. For the threshold on the loan route, read it together with the opposite-direction traffic in the article on directors’ fees and shareholders drawing money from the company.

In practice: if the technical-insolvency threshold has not been crossed and the timetable allows, a direct capital increase is in most cases the stronger instrument — it creates cost at the shareholder, brings the interest deduction, and keeps the reduction route open. The capital completion fund is a special-situation solution that comes into play when the threshold has been crossed and speed is required; it is not the first choice.

After the fund: loss offsetting, Art. 32/B and the five-year rule

The single permitted use of the fund is written in the communiqué: “The capital completion fund may be used only by way of offsetting losses” (Art. 9/3, sentence added by Official Gazette 26.12.2020). It cannot be added to capital, refunded to the shareholder, or made the subject of a profit distribution.

At this point, the balance-sheet loss and the tax offsetting of carried-forward losses must be assessed independently of each other. Covering the balance-sheet loss with the fund does not extinguish the tax offsetting of carried-forward losses on the return (CITL Art. 9 — five years, shown separately year by year); the ruling of 07.07.2026 expressly emphasises that the two regimes run separately. Using both together is not duplication.

The real mistakes in the field are different: forgetting to use, on the return, the tax offsetting right for the balance-sheet loss covered by the fund; or writing the fund amount on the return a second time as if it were a tax loss.

As for capital reduction: because the fund cannot be added to capital, it never enters CITL Art. 32/B itself. The article engages if the company separately carries out a capital reduction: where equity items added to capital are reduced before five full years have passed, the reduction is deemed to start from the most heavily taxed item. The critical paragraph for our subject is the fifth: in a capital reduction made by way of offsetting carried-forward losses, no withholding is applied over those amounts — but the corporate tax side is assessed separately according to the nature of the item entering the reduction.

Gökay GÜL’s Note: In our practical experience the order we follow is this: first the two-scenario threshold calculation (with and without provisional Art. 1), then the general assembly resolution, and payment last. We have the resolution text state the phrase “covering the portion left uncovered because of the loss” and the amount down to the kuruş, and we have the resolution’s date and number written on the bank receipt. Explaining a payment made before the resolution during an audit can complicate the process considerably in terms of proof and transactional integrity.

Five risks: the most expensive mistakes arise in procedure

1. Majority defect. In a joint-stock company, a resolution imposing a binding payment obligation on shareholders to cover balance-sheet losses requires unanimity under TCC Art. 421/2-a. If unanimity cannot be obtained, the last sentence of Art. 9/2 of the communiqué permits some shareholders to complete voluntarily; in that separate structure, pin down the nature of the resolution, the general assembly majority to be applied, the participating shareholders and their amounts. In a limited company, a contractual basis alone may not suffice for a binding additional payment obligation: the conditions for calling it under TCC Art. 603 and the following articles, the amount limits, the resolution majority and, where necessary, the articles-amendment and registration steps must also be verified. For the effect of entity-type choice on such resolutions, see the limited company or joint-stock company comparison.
2. Order of resolution and payment. CITL Art. 6/3 does not write an express chronological order; nor did we come across, in the sources we searched, a published ruling or court decision on whether paying first and resolving later preserves the exemption. It is not a statutory condition, but for proof and transactional integrity the prudent course runs one way only: resolution first.
3. Exceeding the ceiling. Every lira above the portion left uncovered, and not otherwise characterised, falls outside the Art. 6/3 protection even with a resolution. Match the fund amount to the balance-sheet deficit; if more is needed, document it as a separate capital increase or loan.
4. Transfer pricing where there is a foreign shareholder. The fund transfer is not, in itself, a supply of goods or services to be priced under CITL Art. 13. If intra-group goods, services or financing transactions lie behind chronic losses, their arm’s-length nature may be examined separately; document the causes of the loss and the pricing of related-party transactions.
5. Return confusion. Forgetting the tax offsetting right for the balance-sheet loss covered by the fund, and writing the fund amount on the return a second time as a tax loss, both end in an amended return. Track the two records separately.

Step by step: a procedurally sound fund, from resolution to entry

1. Run the threshold test on the last annual balance sheet (or an interim balance sheet if needed) under both scenarios: with and without the provisional Art. 1 flexibilities. Put the result in writing.
2. Have the management body call the general assembly to meet with the agenda expressly stating that the total of capital and legal reserves has been left uncovered (Art. 5 of the communiqué).
3. Verify the majority in advance. In a joint-stock company, a resolution imposing a binding completion obligation on shareholders requires unanimity (TCC Art. 421/2-a); in a structure where some shareholders participate voluntarily, separately determine, under Art. 9/2 of the communiqué, the nature of the resolution, the majority to be applied, the participating shareholders and their amounts. In a limited company, check together the contractual basis under TCC Art. 603 and the following articles, the conditions for calling it, the amount limits and, where necessary, the articles-amendment and registration steps.
4. Have the general assembly resolve on “completion of capital”; state in the resolution text the amount to be covered and the balance sheet relied upon.
5. Make the payments after the resolution; enter the resolution’s date and number in the description on the bank receipt.
6. Record the amount not in income accounts but in a capital completion fund sub-account under equity; use the fund only for offsetting the balance-sheet loss, and run the offsetting on the return (CITL Art. 9) separately.