What Is Financing Expense Restriction?

Financing expense restriction is a law introduced to encourage companies to meet their financing needs from their own resources rather than from foreign sources. This law was enacted by the 37th article of Law No. 6322 and was added to the first paragraph of the 11th article of the Corporate Tax Law No. 5520 as subparagraph (i) to come into force as of January 1, 2013.

The legal regulation states that for businesses where the foreign resources used exceed their own resources, excluding credit institutions, financial institutions, financial leasing, factoring, and financing companies, any expenses and cost factors made under names such as interest, commission, term difference, profit share, exchange difference related to foreign resources used in the business will not be deducted in determining corporate income, excluding those added to the cost of the investment, up to 10% of the total determined by the President.