International Tax · Thin Capitalization
Thin capitalization analysis (örtülü sermaye)
When a Turkish company borrows from related parties above a 3:1 debt-to-equity ratio, interest on the excess is treated as disguised capital — non-deductible and, in some cases, re-characterized as a hidden dividend. We check your structure before the tax office does.
Who this is for
- Turkish subsidiaries financed by intercompany loans from foreign parent
- Foreign investors using shareholder loans to capitalize Turkish entities
- Groups with cash-pool arrangements involving the Turkish entity
- Turkish borrowers from related parties in any form (direct or back-to-back)
What's included
- Debt-to-equity ratio calculation using statutory equity definition
- Identification of disguised capital portion and non-deductible interest
- Hidden dividend risk assessment and re-characterization analysis
- Structuring advice: convert debt to equity, arm's-length re-pricing, or third-party refinance
- Documentation pack for tax audit readiness
Scope & SMMM disclosure
We deliver the full engagement under SMMM (Certified Public Accountant) scope — preparation, filings, advisory, and ongoing compliance. For YMM certification reports, statutory audits, and court representation we coordinate with vetted partners. You get one point of contact and one invoice.
Frequently asked questions
What is the debt-to-equity limit?
3:1 ratio — related-party debt exceeding 3 times the shareholder equity is treated as disguised capital.
Does it apply to bank loans?
No — only related-party loans. Third-party bank debt is outside thin-cap rules (though it can still create transfer-pricing questions if guaranteed by related parties).
Related services
Transfer pricing local file (Ülke Dosyası)
If your Turkish entity has related-party transactions — management fees, royalties, intercompany sales, intra-group financing — Turkish law requires an annual local file. We prepare it in OECD + Turkish Ministry of Treasury format.
Learn more →Open a Turkish branch or subsidiary of your foreign company
Branch, subsidiary, or liaison office — we walk you through the trade-offs and run the full setup. Three structures, three tax regimes, three exit paths. We pick the right one before we file.
Learn more →Ready to start?
Book a free 20-minute call. We scope your situation and give you a clear fixed-fee quote.
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