Inflation accounting suspended until 2027
Provisional Article 37, added to the Tax Procedure Law by Law No. 7571, provides that financial statements will not be subject to inflation accounting for the 2025, 2026 and 2027 periods, regardless of whether the conditions are met.
Inflation accounting restates non-monetary items in the financial statements for changes in purchasing power. Its purpose is to make the balance sheet reflect the real position during periods of high inflation. Application depended on two conditions defined in the Tax Procedure Law being met together.
The new position
Provisional Article 37 removes that test: for the three periods stated, financial statements are not subject to inflation accounting. This applies irrespective of whether the conditions arise. In practice, businesses make no restatement entries in these periods and reach the tax base on unadjusted figures.
| Period | Inflation accounting | Basis |
|---|---|---|
| 2023 | Applied (balance sheet restatement) | TPL provisional 33 |
| 2024 | Applied | TPL repeated 298/A |
| 2025 | Not applied | TPL provisional 37 |
| 2026 | Not applied | TPL provisional 37 |
| 2027 | Not applied | TPL provisional 37 |
What replaced it: revaluation
At period ends where inflation accounting is not applied, depreciable fixed assets and their accumulated depreciation may be revalued. This does not fully replace restatement, but it partly offsets the erosion of book values and affects the tax base through depreciation.
- Revaluation is an option, not an obligation, and must be decided at period end.
- The resulting increase is followed in a special fund account; using it other than for a capital increase triggers tax.
- Depreciation is then calculated on the revalued amount.
- On disposal of the asset, the treatment of the fund balance must be assessed separately.
Practical consequences
- Opening balances carried over from the 2024 restatement remain in the records; suspension does not reverse the past.
- In inventory- and asset-heavy businesses, the gap between book value and economic value begins to widen again. Management reporting should track it separately.
- Balance sheets presented to lenders and prospective partners show unadjusted amounts; it is prudent to explain this.
- Because revaluation affects the tax burden through depreciation, it is a planning decision, not merely an accounting one.
Legal basis
- Tax Procedure Law No. 213, provisional Article 37 (added by Law No. 7571)
- Tax Procedure Law No. 213, repeated Article 298
- Tax Procedure Law No. 213, repeated Article 298/Ç (revaluation)
This article is general information and does not replace professional assessment of a specific matter. Amounts and rates relate to the stated year; please verify the current provisions before acting.
