Bookkeeping of Companies in Turkey - Uzman Pay Senedi Basımı Danışmanı

Detailed Guide on Bookkeeping (BK) of Companies in Turkey

Bookkeeping of companies in Turkey are governed by the Turkish Commercial Code (TCC), Tax Procedural Law, and other relevant regulations, including the Turkish Accounting Standards (TMS) and Turkish Financial Reporting Standards (TFRS). Proper BK ensures compliance with the tax, legal, and regulatory obligations, and it is crucial for financial transparency and accountability.

Key BK Requirements for Companies

1. Legal Framework for BK

Turkish Commercial Code (TCC): Companies are required to maintain accurate and reliable financial records, following the principles of double-entry BK.
Tax Procedural Law (VUK): This law establishes tax-related obligations, including BK, invoicing, and tax filing requirements.
Turkish Accounting Standards (TMS): These standards govern the accounting practices and ensure that companies’ financial statements reflect the true and fair financial position of the company.

2.Books to be Kept

Every merchant, regardless of whether they are a natural or legal person, is required to keep a journal, inventory book, and general ledger.
In addition to the books listed above, sole proprietorships must also keep a general assembly meeting and negotiation book.
In addition to the books listed in the first paragraph:
Joint-stock companies, partnerships limited by shares, and cooperatives must keep a share ledger, board of directors’ resolution book, and general assembly meeting and negotiation book.
Limited liability companies must keep a share ledger and general assembly meeting and negotiation book.
Commercial enterprises without legal personality established by the State, special provincial administrations, municipalities, villages, and other public legal entities to be managed under private law or operated commercially, as well as commercial enterprises established by public benefit associations and foundations that spend more than half of their income on public service, and other similar commercial entities without legal personality, are also required to keep journal, inventory book, and general ledger.

3. Accounting Standards

Turkish Accounting Standards (TMS): Based on International Financial Reporting Standards (IFRS), the TMS applies to all companies, but small businesses can use simplified versions. The TMS regulates the presentation, recognition, and measurement of assets, liabilities, revenues, and expenses.
Turkish Financial Reporting Standards (TFRS): Companies listed on the stock exchange or those of a certain size are required to apply TFRS, which aligns with IFRS.

4. BK Methods

Double-Entry BK: Companies must maintain their financial records using the double-entry method, which requires each transaction to be recorded in at least two accounts (debit and credit).
Accrual Basis of Accounting: Turkish companies must follow the accrual basis of accounting, where revenues and expenses are recognized when earned or incurred, rather than when cash is received or paid.

5. Financial Statements and Reporting

Companies Turkey are required to prepare financial statements annually, which include:

Balance Sheet (Bilanço): A snapshot of the company’s assets, liabilities, and equity.
Income Statement (Kar ve Zarar Tablosu): A summary of the company’s revenues and expenses over a specified period.
Cash Flow Statement (Nakit Akış Tablosu): Details the inflow and outflow of cash within the business.
Shareholders’ Equity Statement (Özsermaye Değişim Tablosu): Tracks changes in the owners’ equity.
Annual Financial Reporting: Companies must file these financial statements with the Trade Registry and ensure they are prepared in line with TMS/TFRS.

6. Tax Filing and Reporting Obligations

Corporate Income Tax: Companies are required to submit an annual corporate tax return to the Revenue Administration. This must be accompanied by the financial statements, balance sheet, and income statement.
VAT Returns: VAT-registered companies must submit monthly or quarterly VAT returns to report VAT paid and collected. This is done via the Revenue Administration’s electronic portal.
Withholding Tax: Companies are also required to withhold and remit taxes on certain payments (e.g., employee salaries, dividend distributions). These taxes must be reported monthly via the electronic tax filing system.
Annual Tax Filing: A corporate tax return must be filed within 4 months following the end of the financial year (i.e., by the end of April for a calendar-year taxpayer). Payments of taxes are due after the filing.

7. Use of Accounting Software

Companies are required to maintain their BK records electronically in certain cases. For larger or more complex businesses, this often means using approved accounting software to comply with the requirements of the Revenue Administration and Turkish Commercial Code.

The accounting software must be capable of:

Generating the necessary accounting books (e.g., General Ledger, Journal).
Preparing tax returns and financial statements.
Storing financial data for a period of 5 years.
Electronic Signature: Companies are required to use electronic signatures for their filings with the Revenue Administration and Trade Registry.

8. Record Retention

All financial records must be maintained for a minimum of 10 years from the end of the fiscal year to which they relate. This includes both physical and electronic records.
For tax-related records, companies must retain them for at least 5 years from the date of the transaction.
All accounting records must be accessible and legible for auditors or tax authorities in the case of an inspection or audit.

9. Audit and Internal Control

Certain large companies (based on size, turnover, or public interest) are required to undergo external audits by licensed auditors.
Internal controls must be in place to ensure that the company’s financial records are accurate, reliable, and compliant with tax and commercial laws.

10. Penalties for Non-Compliance

Failure to maintain proper BK records or submit timely reports can result in significant penalties:

Fines: Companies can be subject to penalties if they fail to file tax returns or maintain proper accounting records.
Criminal penalties: If the violations are severe, individuals responsible for the company’s finances may face criminal charges.
Administrative fines: These may be imposed for failure to comply with specific BK or reporting obligations.

Proper BK is a crucial aspect of running a company, ensuring compliance with legal, tax, and financial regulations. Companies must maintain a range of financial books, adhere to Turkish Accounting Standards (TMS), and file required reports with tax authorities. Utilizing appropriate accounting software and maintaining records for the required duration can help companies avoid penalties and ensure transparency. Given the complexity of Turkish accounting and tax laws, it is advisable for companies to work with professional accountants or financial advisors to ensure compliance.

Bookkeeping of companies in Turkey should be done properly. Please feel free to contact us for more information and further inquiries about our unique services. You can also subscribe to Tacirsoft Hukuk Bilgi Sistemi, that is Turkey’s only Corporate Law and Organized Industrial Zones Law database.