Edition 13: 4 January 2016
Editorial Team:
Dr. E. Seyfi Moroğlu, LL.M., Işık Özdoğan, LL.M. and Bora İkiler, LL.M.
Amendments to Turkey’s Electricity License Regime For License Transfers, Preferential Rights and Pre-License Amendment Procedures

Changes have been made to the electricity licensing regime in Turkey with regard to entities established by a demerger, as well as preferential rights if multiple applications exist for activities in the same location. Changes have also been made to the pre-license amendment procedure. The Regulation Regarding the Amendments in the Electricity Market License Regulation (“Amendment Regulation”) was published in Official Gazette number 29571 on 23 December 2015, entering into effect on the same date.

The Amendment Regulation maintains the non-transferrable license principle in the Electricity Market License Regulation (“Regulation”), but changes the cases which are not deemed to be license transfers.

In general, Energy Market Regulatory Board (“Board”) approval is required to transfer rights and obligations from a legal entity which holds a production license to another legal entity which is established within the same partnership structure. Under the Amendment Regulation, new legal entities which are established by means of a demerger are excluded from this requirement.

The Amendment Regulation amends the regime for changing pre-licenses. To change the production facility registered under a pre-license, the new facility must be found suitable as a result of technical evaluations by the General Directorate of Renewable Energy. For wind power based generation plants, applications should be made for an Environmental Impact Assessment and Technical Interaction Permission for the new site.

The Amendment Regulation states that a new unlicensed generation applications will not be accepted in relation to project fields which are subject to an existing pre-license or license application. However, such unlicensed generation applications will be accepted if:

– The application is made after the generation license was issued;

– The application is made by the project field’s owner;

– The Renewable Energy Administration approves the technical evaluation of the unlicensed project; and

– The unlicensed project does not adversely affect existing licensed generation facilities in the same field.

Please see this link for full text of the Amendment Regulation (only available in Turkish).

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Procedures and Principles Introduced for Determining Target Loss Rates for Electricity Distribution Companies in Turkey

Procedures and principles have been introduced in Turkey for calculating target loss rates for determining technical or non-technical losses for electricity distribution companies, under the Electricity Market Tariffs Regulation. The Energy Market Regulatory Board published its decision (dated 26 November 2015) regarding the Procedures and Principles on Determination of the Electricity Distribution Companies’ Target Loss Rates (“Procedures and Principles”) in Official Gazette number 29563 on 15 December 2015, entering into effect on the same date.

Under the Procedures and Principles, a distribution company’s actual annual technical and non-technical loss rates for previous three years (“Actual Loss Rate”) are taken into account when calculating the company’s target loss rate (“Target Loss Rate”) for the coming year. Electricity leak costs billed for the relevant year will also be taken into consideration.

The Procedures and Principles outline different equations for determining the Target Loss Rates. Factors which determine the relevant equation for a given electricity distribution company are the company’s weighted average Actual Loss Rate for the previous three years, compared to:

– The threshold value determined by the Energy Market Regulatory Board, and

– The national Actual Loss Rate for the previous three years

The Procedures and Principles state that if a distribution company’s calculated Target Loss Rate for a tariff year is lower or higher than its Actual Loss Rate for that year, the difference will not be subject to any correction during tariff calculations.

Please see this link for full text of the Procedure and Principles (only available in Turkish).

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Procedures and Principles Updated For Determining Revenues and Tariffs for Electricity Distribution Companies in Turkey

Procedures and principles have been updated for determining revenues and tariffs for electricity distribution companies in Turkey. These include applicable equations, as well as factors which should be included or excluded during calculations. The Energy Market Regulatory Authority (“Authority”) published the Communiqué Regarding Regulation of Distribution System Revenues (“Communiqué”) in Official Gazette number 29567 on 19 December 2015, entering into effect on 1 January 2016.

Charges for use of distribution system will be determined based on the activities that are necessary for the distribution company to carry out its distribution activities (Article 2). These charges are calculated within the scope of procedures and principles for tariff practices applicable to distribution companies, taking into account the distribution revenue ceiling and demand forecast. The distribution revenue ceiling includes the system operating revenue ceiling and lost energy revenue ceiling.

The system operating revenue requirement will be calculated for each tariff year, before the implementation period, in accordance with an equation outlined in Article 6 of the Communiqué. All amounts and elements of the calculation will be calculated with reference to the implementation period’s base CPI.

Information about investments must be presented to the Authority in the requested format (Article 11). Approved investment expenses include spending which is necessary to carry out distribution activities and sub-activities, as well as other spending with investment characteristics.

In principle, investment spending made during the implementation period’s tariff year must not fall below 65% of the investment ceiling for the relevant year (Article 12). If spending falls below this threshold, the Energy Market Regulatory Board may revise the investment ceilings and/or revenue requirements for the relevant implementation period.

Distribution companies can only charge consumers for services specifically stated under Article 25.

The Communiqué includes a non-exhaustive list of revenues which are not included when calculating revenues and tariffs (Article 26). Revenues that have similar characteristics with those listed under Article 26 will also be excluded during calculations.

Please see this link for the full text of the Communiqué (only available in Turkish).

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Comparative Advertisements Postponed in Turkey Until End of 2016

Previously, comparative advertisements were planned to be permitted in Turkey from 10 January 2016 onward (more information). However, this date has been postponed to 31 December 2016, by a regulation published in Official Gazette number 29573 on 25 December 2015 (“Regulation”). Until the end of 2016, the Regulation on Implementation Fundamentals of Commercial Advertisement and Announcements will continue to apply, including a prohibition on using the names of compared goods, services or trademarks in advertisements.

Once the changes comes into effect at the end of 2016, Article 8(2) of the Regulation on Implementation Fundamentals of Commercial Advertisement and Announcements will allow advertisements to include “competitors’ title, trademark, logo or other distinguishing marks or phrases and commercial names and company names”, provided they meet certain requirements.

Accordingly, comparative advertising:

  1. Must not be false or misleading.
  2. Must not cause unfair competition.
  3. Must involve goods and services which have a similar nature and meet the same needs or demands.
  4. Must compare aspects of goods and services which are beneficial to consumers.
  5. Must objectively compare goods and services on at least one point which is substantive, essential, and certifiable. Comparisons can also be made about characteristic features and prices.
  6. If a claim is based on objective, measurable and numeric data, this should be proved by scientific tests, reports or documents.
  7. Must not denigrate or discredit competitors’ intellectual and industrial property rights, company names, other distinguishing marks, goods, services, operations or other features.

Please see this link for the Regulation (only available in Turkish).

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New Disclosure Obligations in Turkey From July 2016 for Certain Tax Payers With Activities in E-Commerce Sector or Which Sell Goods and Services Online

From 1 July 2016, certain Turkish tax payers with activities in the e-commerce sector will be required to supply information about the services they provide to the Ministry of Finance on a monthly basis, along with certain identifying and contact information. E-commerce taxpayers which sell goods and services over the internet and have a gross annual sales revenue of more than TRY 5 million will be required to make an e-Archive application. The Revenue Administration of the Ministry of Finance published Tax Procedure Law General Communiqué number 464 in Official Gazette number 29572 on 24 December 2015 (“Communiqué”).

The Communiqué’s requirements apply to:

– Mediator Service Providers which establish e-commerce substructures for economic and commercial operations by other parties.

– Banks.

– Internet Advertising Service Mediators.

– Cargo and Logistics Businesses.

From 1 July 2016 onward, these parties must supply the following information via the Ministry of Finance’s Data Transfer System (“BTRANS”) on a monthly basis, by midnight on the last day of the following month:

– Details of the service they provide.

– The name of related person and institutions, as well as their ID and tax numbers.

Under the Communiqué, e-commerce taxpayers which sell goods and services over the internet and have gross annual sales revenues of more than TRY 5 million will be required to complete their filings and all transitional formalities by the beginning of the financial year following the deadline for delivery of income tax or corporate tax returns set out regarding launch of the e-Archive application in the Tax Procedure Law General Communiqué number 433.

Taxpayers will be required to store the electronic data required by the Communiqué, for the same retention periods which apply to books, records and documents under the Tax Procedure Law. Taxpayers must supply the electronic data, upon request.

Taxpayers will be held personally responsible for the accuracy of submitted information. Submissions which are not supplied in the designated format or methods will not be accepted.

Penalties outlined in the Tax Procedure Law will apply for failures to comply with the Communiqué’s requirements.

Please see this link for the full text of the Comminiqué (only available in Turkish).

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The Lower Limit for Administrative Fines Relating to Competition Law Infringements Increase 5.58% for 2016 in Turkey

The lower limit for Administrative Fines under the Law on the Protection of Competition number 4054 has increased by 5.58% for 2016, from TRY 15,226 to TRY 17,700. The revised lower limit will apply for administrative fines issued in relation to protection of competition in the goods and services sector, issued between 1 January 2016 and 31 December 2016.

The increase is introduced by the Communiqué regarding Increase on Sub Limit of Administrative Fine Arising from Article 16 of Law no 4054, Law on the Protection of Competition, published in Official Gazette number 29573 on 25 December 2015 (“Communiqué”). The Communiqué was issued in line with the Ministry of Finance’s 2016 tax revaluation rate, published in the General Communiqué for Tax Procedural Law, published in Official Gazette number 29528 on 10 November 2015 (more information).

Please see this link for the full text of the Communiqué (only available in Turkish).

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Young Entrepreneurs Become Eligible for Treasury Incentives Available From Credit Guarantee Institutions in Turkey, Scheme Extended for Travel Agencies and Yacht Builders

Amendments have been made to beneficiary groups for incentives offered by banks and certain credit guarantee institutions. The Turkish Treasury offers these incentives with the intention of enabling certain businesses to access financial credits, as well as ensure efficiency of the credit system. Major changes affect young entrepreneurs (between 18 and 30 years old), travel agencies, as well as yacht builders.

The Council of Ministers’ Decision regarding Amendments to the Decision on the Procedures and Principles of Incentives to be provided by the Treasury to Credit Guarantee Institutions (“Amendment Decision”) was published in Official Gazette number 29566 on 18 December 2015, entering into effect on the same date. The Amendment Decision makes changes to the earlier Council of Ministers’ Decision regarding the Procedures and Principles of Incentives to be provided by the Treasury to Credit Guarantee Institutions, number 2015/7331 and dated 25 February 2015 (“Decision”). The Decision outlines procedures and principles for the Treasury’s incentives, as well as defines the eligible beneficiary groups.

Accordingly, key changes under the Amendment Decision include:

– Introducing “young entrepreneurs” as an eligible beneficiary group. These are defined as businesses where at least half of the total shares are owned by persons between 18 and 30 years old, who have at least a primary school qualification on the date of the credit application.

– An existing beneficiary group under the Decision were travel agencies which brought at least 400,000 tourists to Turkey from certain designated countries during the year preceding the credit application. Designated countries included Azerbaijan, Belarus, Kazakhstan, Kirghistan, Uzbekistan, Russian Federation, Turkmenistan and Ukraine. The Amendment Decision expands these countries to now also include: Austria, Belgium, Bulgaria, Czech Republic, Denmark, Finland, France, Germany, Holland, Hungary, Ireland, Italy, Norway, Poland, Romania, Sweden, Switzerland and the United Kingdom.

– Yachts on or over 24 meters length are now considered “ships”, within the scope of the Decision. Therefore, businesses engaged in yacht construction for vessels this size will also be able to benefit from credits granted for ship construction, provided they also meet other eligibility criteria.

Please see this link for full text of the Amendment Decision (only available in Turkish).

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Interest-Free Finance Coordination Board Established in Turkey, Supporting Development of Islamic Finance Sector

Turkey’s Prime Ministry has established an Interest-Free Finance Coordination Board (“Board”) to support improvement of the country’s interest-free and Islamic Finance sectors, as well as to coordinate developments in the banking and insurance sectors. The interest-free and Islamic Finance sectors are intended to support wider development and stability of Turkey’s overall financial sector, contributing to the country’s aim to be an international financial center. The Board was established by a Circular numbered 2015/17, published in Official Gazette number 29563 on 15 December 2015 (“Circular”).

Key aspects of the Board’s framework and functions include:

– The Board’s Chairman will be a Minister affiliated with the Treasury Undersecretary. The Board will include representation by the following entities:

– Development Ministry Undersecretary.

– Treasury Undersecretary.

– Finance Ministry Undersecretary.

– Turkish Republic Central Bank Undersecretary.

– Banking regulatory and Supervision Agency Undersecretary.

– Head of Capital Market Board.

– Principal of İstanbul Stock Exchange Inc..

– Head of Turkey Participation Banks Union.

– Head of Participation Insurance Association.

– The Board will convene at least three times per year, at the Chairman’s request.

– If necessary, the Board can establish sub-committees, committees, consultancy groups, and temporary and permanent working groups. These can include representatives from the entities noted above, as well as representatives can be invited to participate from universities, non-governmental organizations, occupational groups and the private sector.

– The Treasury Undersecretary will ensure co-operation and coordination between the Board and related public institutions, organizations, private sector representatives and non-governmental organizations, as well as monitor enforcement and execution of the Board’s decisions by relevant institutions.

Please see this link for the full text of the Circular (only available in Turkish).

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Threshold Revised in Turkey for Certain Payments Which Must be Made Through Intermediary Financial Institution

From 1 January 2016, certain tradesmen, freelancers, farmers and merchants in Turkey must make receipts and payments over TRY 7,000 through an intermediary financial institution. The value threshold was last considered in 2004. The Turkish Ministry of Finance published the Tax Procedure Law General Communiqué number 459 in Official Gazette number 29572 on 24 December 2015 (“Communiqué”).

The Communiqué’s requirements apply to:

– Merchants who are obliged to obtain invoices, according to Article 232 of the Tax Procedure Law.

– Individuals who work as freelancers.

– Merchants whose incomes are determined by simplified business taxation.

– Farmers who are obliged to keep books.

– Tradesman who are exempted from tax.

In this context, receipts and payments are deemed to include all kinds of delivery of goods or fulfillment of services, as well as advance payments and deposits.

Qualifying individuals must use an intermediary financial institution even if payments for a particular transaction are made on different dates, provided the total combined amount of the payments exceeds the TRY 7,000 transaction threshold. Similarly, an intermediary financial institution must be used if the total combined value of multiple transactions with the same recipient on the same day exceeds TRY 7,000, even if each transaction is less than TRY 7,000 on its own.

For transactions within the Communiqué’s scope, intermediary financial institutions must prepare documents to certify receipts and payments. However, these documents are not deemed to certify the transaction itself, but rather are only deemed to certify receipts or payments regarding the transaction. Therefore, any transaction certification obligations arising from the Tax Procedure Law will continue to apply.

Exclusions from the Communiqué’s requirements include (Article 4.2):

– Transactions made at capital market intermediary institutions.

– Foreign exchange purchases.

– Transactions realized at notary publics.

– Transactions realized at real estate registration offices.

Penalties outlined in the Tax Procedure Law will apply for failures to comply with the Communiqué’s receipt and payment obligations.

Please see this link for full text of the Communiqué (only available in Turkish).

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Procedures and Principles Introduced for Foreign Procurement Made Within Health Industry Cooperation Programs

Procedures and principles have been published for activities within the scope of Health Industry Cooperation Programs (“HICP”) in Turkey. These apply to HICPs involving innovation, indigenization and/or technology transfers in overseas purchase of goods and services, which are in the health care services sector and where the main supply contracts amount to more than US $10 million in one single project. The Communiqué on Implementations Regarding Industrial Cooperation Programs in the Health Care Services Field was published in Official Gazette number 29568 on 20 December 2015 (“Communiqué”), entering into force on the same date.

The Communiqué defines Health Industry Cooperation Programs as any operation involving overseas supply of goods and services in the health care services sector. Supply must be undertaken with the intention of enabling Turkish companies to increase their competitiveness through exports, as well as provide opportunities for technological cooperation and transfer, investment, technology gains, maintenance and repair, as well as research and development.

The Department of Investment Models (“Department”) within the Ministry of Health will be responsible for ensuring the conduct of HICP operations with respect to purchase of goods and services, as well as preparing lists of required goods and services. The unit of the Ministry of Health which requires the goods or services to be purchased (“Requiring Unit”) and related units will work to allocate funds for a given HICP, in coordination with the Department.

Requiring Units must send lists of required goods/services to the Health Investments General Directorate (within the Ministry of Health) by the end of January each year. These lists should be prepared every year and include at least five years’ requirement plans for purchase of goods and services amounting to at least US $10 million.

The Health Industry Development Commission will evaluate requirement lists by the end of March each year. The Requiring Unit and Department will prepare an investment project offer for the intended purchases, including HCIP pre-information and a detailed feasibility report. The Requiring Unit submits the project offer to the Health Industry Development Commission. Projects for which funds are already allocated will be deemed approved for tender process upon approval by the Health Industry Development Commission.

The Communiqué also outlines details for the tender process to be conducted after  projects have begun.

Please see this link for the full text of the Communiqué (only available in Turkish).

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2015 Situation Report on Counterfeiting in the European Union

The 2015 Situation Report on Counterfeiting in the European Union (“Report”) gives insight into the status and current trends of counterfeit activities in the region, including consideration and analysis of Turkey’s role. The Report is based on surveys of the public as well as private sector. It was jointly prepared by the European Police Office and the Office for Harmonization in the Internal Market, with the project conducted through the European Observatory on Infringements of Intellectual Property Rights.

Noteworthy points in the 2015 Report include:

– Counterfeiting causes damage to consumers and enterprises, as well as directly finances organized crime.

– The primary source-countries for counterfeiting are: China, India, Egypt, Ghana, Korea, Morocco, Greece, Malaysia and Turkey.

– China is the primary source of counterfeiting, providing more than two thirds of counterfeit goods.

– Noteworthy countries with respect to particular types of counterfeit goods include:

– India with regard to medicines.

– Egypt with regard to foodstuffs.

– Turkey with regard to perfumes and cosmetics.

– Turkey produces 52% of overall seizures for perfumes and cosmetics.

– The Directorate-General for Taxation and Customs Union reported that customs authorities seized perfumes and cosmetics originating from Turkey, worth a total of EUR 26.1 million in 2013.

– Turkey is a country with a substantial impact on counterfeit foodstuff distribution within the European Union.

– Organized crime groups in Belgium, the Netherlands and Germany have strong links to Turkey in terms of language and culture.

– Movement of counterfeit goods into the European Union is facilitated by organized crime groups, through ports at Istanbul or Constanta.

– Istanbul is commonly used as an entry point for the overland route to Bulgaria and Romania, which is a preferred route for movement of counterfeit goods.

– Particular areas which should be addressed include:

– Counterfeiters abusing free trade zones for assembling, packaging and labeling counterfeited goods.

– Limited resources of small and medium enterprises.

– Lack of investigation possibilities.

– Weak cooperation with payment processors and advertising companies in the e-commerce sector.

– Low consumer awareness and education.

– Lack of awareness and training for investigators, prosecutors and judges.

Please see this link for full text of Report.

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Responsibilities and Principles Announced for Turkey’s Management of European Union Pre-Accession Funds

A Circular has been published in Turkey, outlining distribution of tasks between governmental institutions for 2014 to 2020, as well as principles for managing financial assistance given to European Union candidate countries. Accordingly, European Union financial assistance must be spent towards the purposes of the Instrument for Pre-Accession (“IPA”). The financial assistance must be used to support political, institutional, judicial, administrative, social and economic reforms in Turkey, in order to comply with European Union values, standards, policies and the implications of becoming a full member. The Circular Regarding Management of Pre-Accession Funds Given By the European Union (“Circular”) was published in Official Gazette number 29556 on 8 December 2015.

The first period of the IPA ran from 2007 to 2013. A framework agreement was signed in February 2015 for the 2014-2020 period. Financial aid for this second period amounts to €4.5 billion, which will be used primarily in nine specified areas.

Responsibility for policy areas is allocated under the Circular as follows, with each institution required to follow the European Union’s principles of transparency and visibility:

– With regard to preparation for Union membership:

– The Ministry of the European Union is responsible for democracy and governance.

– The Ministry of Justice is responsible for rule of law and fundamental rights

– Either the Ministry of the European Union or Ministry of Interior are responsible for sub-sectors.

– With regard to socio-economic and regional development:

– The Ministry of Environment and Urbanization is responsible for environment and climate action.

– The Ministry of Transport, Maritime Affairs and Communication is responsible for the transport sector.

– The Ministry of Energy and Natural Resources is responsible for the energy sector.

– The Ministry of Science, Industry and Technology is responsible for competitiveness and innovation.

– The Ministry of Labor and Social Security is responsible for education, employment and social policies, including matters related to employment, social policies, education, promotion of gender equality, and human resources development.

– The Ministry of Food, Agriculture and Livestock as well as the Agency for Instrument for Pre-Accession Assistance in Rural Development are responsible for agriculture and rural development.

According to the Circular, multi-year programs should be prepared for employment, social policies, education, promotion of gender equality, and human resources development, as well as agriculture and rural development. Annual programs are envisioned for other policy areas.

The Anti-Fraud Coordinating System is established to research, examine and investigate expenditure of funds, including a coordination board and three monitoring committees.

Each responsible institutions must prepare an evaluation of operations in the relative sector or sub-sectors. The National Pre-Accession Assistance Coordinator submits a country evaluation plan to the European Committee, made up of these sector evaluations.

Please see this link for the full text of the Circular (only available in Turkish).

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