Turkey has introduced new legislative incentive and support mechanisms for research and development activities, as well as extending existing mechanisms. The changes are intended to support technology and innovation companies, enhance university-industry cooperation, as well as increase R&D human resources capacities. The Amendment to the Law on Supporting Research and Development Activities and Other Laws (“Amendment Law”) was published in Official Gazette number 29636 on 26 February 2015, entering into effect on 1 March 2016.
The Amendment Law makes changes to the Law on Supporting Research and Development Activities No. 5746 (“Law No. 5746”) and the Law on Technology Development Zones No. 4691 (“Law No. 4691”).
Design Activities Now Eligible for Incentives and Support
Law No. 5746 is extended to include design activities as being eligible for incentives and support granted to R&D and innovation activities.
Specialized Technology Development Zones
The concept of “specialized technology development zones” is introduced to Law No. 4691. These are defined as “thematic development zones with entrepreneurs operating in the same sector group, or sub-sectors pertaining to such sector group”. These zones will receive the same support, incentives, exemptions and exceptions granted to technology development zones.
University – Industry Cooperation
Academic personnel can now be employed in R&D or design centers as full or part time researchers, designers or administrative personnel, provided that university committees grant approval.
The Amendment Law also amends the Law on Higher Education No. 2547. Accordingly, revenues from R&D, design and innovation projects, as well as activities conducted within the scope of university-industry cooperation must be held in a separate account within the circulating capital of universities, and are not subject to any deductions. Also, 85% of the amount payable to academic personnel are now exempt from tax withholdings.
The Ministry of Science, Industry and Technology (“Ministry”) will now provide funds equivalent to the monthly gross minimum wage, for employees at R&D centers who have at least an undergraduate degree in mathematics, physics, chemistry or biology (“Basic Sciences”). The Ministry will grant these funds for up to two years and the amount is capped each month at 10% of the total employees working at each R&D center.
Incentives are re-introduced for R&D and support personnel regarding income tax withholding:
– 95% exemption for employees with a doctorate degree in any field or a master’s degree in Basic Sciences.
– 90% exemption for employees with a master’s degree in any field or an undergraduate degree in Basic Sciences.
– 80% exemption for other employees.
The salaries of R&D, design and support personnel working at technology development zones or specialized technology development zones will be exempt from all taxes until 31 December 2023. However, overtime work above 45 hours and additional work hours are not included. The number of support personnel who can benefit from the incentives for income tax, withholding, and employer’s contribution to insurance premiums, is limited to 10% of the R&D and design personnel.
Capital Contributions as Incentives
Until 1 December 2023, when calculating commercial earnings and corporate profits, capital contributions to finance projects in fields deemed appropriate by the Ministry within specialized technology development zones or technology development zones will now be eligible for reductions of up to TRY 500,000 per year. Reductions are capped at 10% of corporate profits and 20% of the equity capital.
Tax Exemption for Imported Goods
Goods imported for research purposes in software, R&D, innovation and design projects within the scope of Law No. 4691 are now exempt from customs tax and funds. Related transactions have also become exempt from stamp tax and duties.
Support to Ordering Parties
50% of expenses by R&D or design centers are now eligible for deductions if the research and development activities are carried out on an order basis. The ordering party is also eligible for deductions on the remaining 50% of the expenses. If the ordering party is not subject to income and corporate taxes, 100% of the expenses can now be eligible for deductions by the R&D or design centers and the ordering party may only benefit from stamp duty exemptions.
Please see this link for the full text of the Amendment Law (only available in Turkish)
Turkey has continued legislative developments to give effect to a tax incentive for share capital increases which are made in cash. The incentive encourages use of equity capital and strengthens capital structures in equity companies. The Communiqué to Amend the General Corporate Tax Communiqué (Serial No: 1) (“Communiqué”) was published in Official Gazette number 29643 on 4 March 2016. The incentive was introduced by legislative amendments in July 2015 (more). The latest Communiqué outlines details about the incentive’s scope, limits, procedures and principles.
When calculating corporate tax, using the Central Bank’s weighted annual average interest rate for commercial loans, 50% of the following amounts can be deducted from the company’s profits:
– Amounts registered as paid and issued cash capital increases in an existing company. To be eligible in this first year, the amounts must have been registered with the trade registry by 1 July 2015. In future years, the increases must be registered by the end of the relevant accounting period.
– Amounts paid in cash as capital in companies formed after 1 July 2015.
The tax incentive is not available to public economic enterprises, or entities operating in finance, banking and insurance.
Capital increases caused by the following events are excluded from the incentive calculations:
– Asset transfers other than cash.
– Mergers, demergers or transfers.
– Adding equity capital items which are already on the balance sheet to the capital.
– Loan or debt by a shareholder (or related person).
– Introducing instruments such as stock certificates, bonds and notes.
– Offsetting items on the balance sheet.
Equity companies are not eligible for the tax incentive if they have more than 25% passive income, or more than 50% of total assets as long term securities and shares of affiliates and subsidiaries.
The tax incentive percentage will be taken as 0% for:
– Cash capital injected in other companies as capital or as a loan.
– Cash capital corresponding to land and premises investments.
– Decreased capital in companies which decreased their capital between 9 March 2015 and 1 July 2015.
Please see this link for full text of the Communiqué (only available in Turkish).
Turkey’s Banking Regulation and Supervision Agency (“Agency”) has amended regulations governing asset management companies. Changes effect establishment principles, fields of activity, operating licences, amending articles of association, share transfers, corporate management and information system. The Regulation Amending the Regulation on Principles Regarding Establishment and Activities of Asset Management Companies (“Amendment Regulation”) was published in Official Gazette number 29644 on 5 March 2016, entering into effect on the same date.
Significant amendments made by the Amendment Regulation include:
– A minimum amount of paid-up capital is required during establishment of asset management companies. The amount increases from TRY 10,000,000 to TRY 20,000,000. Asset management companies must comply with this requirement by 31 December 2017.
– If the documents required from foreign nationals for establishment and operation licenses cannot be obtained due to the absence of any authority or system in their country of residence, the Agency will now certify this situation with documents obtained from the authorities of the relevant country. If certification is not possible, the license applicant must make a written declaration in this regard.
– The Banking Regulation and Supervision Board (“Board”) will grant operating licence to asset management companies, giving consideration to:
– Whether the capital is paid in cash and free of any collusions.
– The company’s ability to conduct the planned activities.
– Establishment of appropriate service units alongside internal control mechanisms, accounting, data processing and reporting bodies.
– Whether sufficient personnel strength is established for these bodies and whether appropriate job descriptions, duties and powers are determined for these employees.
– Board permission is now required for:
– Change of control.
– Issuing new privileged shares.
– Establishing privileges on existing shares.
– Abolishing privileges.
– Establishing usufruct rights.
– Board permission is no longer required to transfer shares with usufruct rights.
– Notification periods for general managers and board members of asset management companies increase from seven days to one month. Notification procedures are outlined in detail.
– Regulations are introduced for establishing systems for internal control, information systems and risk management. Asset management companies must comply with these regulations by 31 December 2016.
– Several changes are introduced regarding fields of activity for asset management companies.
– Financial statements and statistical data must now be presented to the Agency within requested periods and via requested methods.
– Grounds for cancelling operating licences have expanded. If an asset management company does not rectify its situation within the three month period granted by the Agency, the Board has discretion to cancel the operating licence, giving consideration to certain criteria.
Please see this link for the full text of the Amendment Regulation (only available in Turkish).
Turkey’s Small and Medium Sized Industry Development Organization (“Organization”) has narrowed the scope of sectors in which it offers SMEs financial support. Under the changes, all beverage services, as well as production, distribution and post-production of television programs have become specifically excluded from eligibility for financial support.
The Council of Ministers’ Decision number 2009/15431 and dated 5 August 2009 on Determination of Sectoral and Geographical Priorities regarding SMEs Eligible to Receive Financial Support outlines the sectors and geographic areas which have priority in terms of the Organization’s support and services.
The Council of Ministers’ Decision regarding Amendments to Determination of Sectoral and Geographical Priorities regarding SMEs Eligible to Receive Financial Support (“Amendment Decision”) was published in Official Gazette number 29636 on 26 February 2016, entering into effect on the same date.
Changes under the Amendment Decision include:
– Accommodation and food services are eligible for financial support, with certain exceptions. Bars, taverns, cocktail lounges, discotheques, pubs and coffee rooms were already excluded. However, the Amendment Decision expands the exclusion to cover any beverage service activities.
– Production, distribution and post-production of motion pictures and video programs were already excluded. The Amendment Decision expands the exclusion to also cover production, distribution and post-production of television programs.
Please see this link for full text of the Amendment Decision (only available in Turkish).
A unique code system has been introduced in Turkey to identify electricity consumption points, as well as for registering these points to the central Market Management System. Public entities can also now execute agreements directly with electric distribution companies for certain electricity use. The Regulation Introducing Changes to the Electricity Market Consumer Services Regulation (“Amendment Regulation”) was published in Official Gazette number 29635 on 25 February 2016, entering into effect on the same date.
Changes introduced by the Amendment Regulation include:
– Electricity distribution companies must now use a unique code for each electricity consumption point and for registering this consumption point to the Market Management System. Electricity supply companies must add the relevant code information to their invoices by 1 April 2016.
– For consumers who have their electricity disconnected due to non-payment, the notice must now also include:
– Seal information and registration number of the worker who cut the electricity, or
– The unique code for their particular consumption point.
– Certain facilities with fixed electricity consumption can now ask to execute retail sales agreements, bilateral agreements and/or invoicing, without obtaining metering equipment. If the distribution company agrees, invoicing will be based on a mutually agreed figure. Qualifying facilities are electricity facilities used (or allowed to be used) by public entities for:
– Advertisements, announcements and promotions.
– Electronic communication or public safety.
Please see this link for full text of the Amendment Regulation (only available in Turkish).
The Energy Investments Tracking and Coordination Board (“Board”) has been established in Turkey. It was created within the action plan for Energy Production With Domestic Resources Program. Prime Ministry Circular numbered 2016/6 (“Circular”) was published in Official Gazette number 29634 on 24 February 2016. The Circular outlines the Board’s purposes and general working principles, as well as which ministries and institutions which have representatives on the Board.
The Board will follow, audit and coordinate the permissions and processes for public and private sector investments, as well as speed up the investment processes for:
– Lignite grounds which will be opened to the private sector.
– Electric production and transmission plants.
The Energy and Natural Resources Ministry Undersecretary will chair the Board.
If necessary, the Board is authorized to establish subcommittees, consulting and/or working groups. It can also invite representatives from related institutions and organizations, nongovernmental organizations, universities and the private sector to Board meetings.
The Board will determine its own working procedures and principles, as well as number of meetings annually. However, implementation of the Board’s decisions will be overseen by the Energy and Natural Resources Ministry Energy Transactions General Directorate.
Please see this link for the full text of the Circular (only available in Turkish).
The Union of Turkish Public Notaries (“Union”) has clarified to notaries that a permit from the Ministry of Energy and Natural Resources (“Ministry”) is not required to execute royalty agreements between license holders and third parties. The Union issued an Information Letter dated 20 January 2016, in line with a related letter issued by the General Directorate of Mining Affairs dated 14 December 2015.
2015 amendments to Mining Law Number 3213 stated that a permit from the Ministry is required to execute royalty agreements between license holders and third parties before notaries. Accordingly, the Union declared in February 2015 that a permit from the Ministry was required to notarize royalty agreements.
However, upon learning that the Ministry actually issues the relevant permit after execution of royalty agreements, the Union asked the General Directorate of Mining Affairs at the Ministry (“General Directorate”) to clarify the situation, to ensure all notaries adopt a consistent approach.
The General Directorate clarified the situation in an information letter dated 14 December 2016. It stated that when a royalty agreement between license holders and third persons is delivered to the General Directorate to be entered in the mining registry, the General Directorate evaluates such agreement in the light of the Mining Law and the Application Regulation for Mining Affairs. If the General Directorate finds the agreement appropriate, it will then send the agreement to the Ministry to obtain a permit (in accordance with Additional Article 7 of the Mining Law). Therefore, the General Directorate stated that since royalty agreements executed before notaries will not be submitted to the Ministry until after the General Directorate’s examination, notaries should not require a Ministry permit in order to notarize the royalty agreements.
Please see this link for the full text of the Union’s Information Letter (only available in Turkish).
The Turkish Ministry of Finance (“Ministry”) has expanded the scope of the Pre-prepared Leasing Statement System (“System”), which has been in effect since 2012 for real estate income statements. The system is now also available for salary and security income, as well as other revenues. The system prepares statements and submits these for taxpayer approval. The Ministry published the General Communiqué on Tax Procedure Law number 470 (“Communiqué”) in Official Gazette number 29635 on 25 February 2016, entering into effect on 1 March 2016.
The System’s main purpose is to ensure that tax statements are prepared and submitted in a fast, easy, economic, reliable and accurate manner. It is intended to increase voluntary compliance levels by decreasing tax compliance costs. It also ensures efficiency by simplifying actions and transactions conducted at tax offices.
Key aspects of the System include:
– The System will begin implementation during the declaration period for revenues generated in 2015.
– Taxpayers can only use the System if their income derives exclusively from salary, rental or security income, and/or other revenues and income (as this phrase is defined in tax legislation). Taxpayers cannot use the System if they also earn income from commercial or agricultural activities, as well as self-employment.
– The System prepares tax statements according to a taxpayer’s income type, using information from data warehouses, as well as from other institutions and organizations.
– Once prepared, tax statements are electronically submitted to the taxpayer for approval, including tax and accrual information.
– Correction statements for previous years can only be submitted via the System for rental income. Taxpayers must apply to the tax office if the correction statement includes any salary, security income or other revenues and income.
– Tax statements in relation to the rental income generated before 2015 can be submitted through the System. However, tax statements in relation to salary, security income and other revenues and income generated before 2015 must be submitted to tax offices until an the Administration makes an announcement on its website (gib.gov.tr). Following the announcement, those statements can also be submitted through the System.
– Taxpayers must check and (if necessary) correct these tax statements. Taxpayers will be liable for the contents of approved statements.
– Taxpayers can access the System on the Revenue Administration’s official website (gib.gov.tr), along with detailed information and announcements about the System.
The Communiqué revokes the General Communiqué on Tax Procedure Law number 414, published in Official Gazette number 28208 on 18 February 2012.
Please see this link for the full text of the Communiqué (only available in Turkish).
Regulations have been introduced in Turkey outlining procedures and principles for opening, operating and inspecting shopping centres, as well as respective duties and responsibilities for owners, management and government agencies. The Regulation on Shopping Centres (“Regulation”) was published in Official Gazette number 29636 on 26 February 2016, coming into force on the same date.
The Regulation defines shopping centre as facilities which meet the following criteria:
– A single building, or group of buildings in a specific area.
– At least 5,000 m2 selling space.
– At least ten stores, if the shopping centre contains at least one department store, or 30 stores if no department store exists.
– Include shared areas, as specified in the Regulation.
– Have centralized management.
Within the context of shared areas, shopping centres should contain areas (relative to the centre’s overall size) which are available free of charge for:
– Social and cultural events.
– Immediate medical response.
– Child care.
– Playgrounds for children.
The owner and management are jointly responsible for safety measures guarding against accidents in these shared areas, along with other requirements for these areas.
The Regulation outlines cost allocation rules for:
– Recurring costs (electricity, water, heating, maintenance, security, cleaning, etc.).
– Common costs which are not related to ownership of the shopping centre.
– Common costs for un-rented stores.
– Contributions by stores for the shopping centre’s common interests, such as marketing or management.
The Ministry of Customs and Trade enforces the Regulation and inspects shopping centres regarding complaints. If a shopping centre contradicts legislation, sanctions under Article 18 of the Law on Regulation of Retail Trade will apply.
Any shopping centre operating on 29 January 2015 must have establish the required shared areas and centralized management by 29 January 2016.
Please see this link for the full text of the Regulation (only available in Turkish).
Turkey’s Revenue Administration has issued explanations about special consumption tax (“SCT”) for pay TV services. The clarifications apply to services rendered on satellite platforms, transmitted by cable, or provided through wired, wireless and mobile ISPs, by entities which have been issued licenses by the Information and Communication Technologies Authority (“Authority”). The Special Communication Tax Communiqué (Rank No: 13) (“Communiqué”) was published in Official Gazette number 29635 on 25 February 2016, entering into force on the same date.
Explanations provided by the Communiqué include:
– Pay TV services includes allowing subscribers/clients to watch/listen to different kinds of broadcast, in addition to standard broadcasts.
– Licensed operators which pay SCT on the basis of providing transmission services can provide their own content, as well as content created by other content providers.
– If an authorized operator transmits content owned by entities which are outside the Authority’s competence to subscribers, SCT will be calculated based on the transmission fees received from subscribers. However, if authorized operators also charge content providers for transmitting works, the SCT tax base will also include fees received for this.
– SCT also applies to transmission services rendered for radio and TV broadcast on cabled, wireless and mobile internet service providers. If a price is determined for internet access to transmit and watch such broadcasts, then SCT will also be calculated upon this price.
– For pre-paid TV services, SCT will be calculated by taking into account the portion of collected fees which correspond to the transmission services.
Please see this link for the full text of the Communiqué (only available in Turkish).
The Constitutional Court, with its decision published in Official Gazette number 29633 on 23 February 2016, struck out part of Article 20(1) of the Turkish Code of Civil Procedure (“Code”) on the grounds that it exceeds its aims and restricts the right to legal remedies (Decision numbered E. 2015/96, K. 2016/9, dated 10 February 2016). According to the article, if a court gives a decision about jurisdiction or competence, parties are allowed two weeks to appeal, beginning on the decision’s date. The court ruled to strike out the phrase which states the appeal period begins on the decision’s date.
Under the Code, parties can object to a court’s jurisdiction or competence at any stage of litigation. The court can choose to render its decision based on the casefile alone, without the parties being present at the court. The court is also not legislatively required to pronounce or serve its decision to the parties. Under the Code, once a jurisdiction or competence decision is made, parties receive two weeks to appeal, starting from the decision’s date. However, since the court is not obliged to notify the parties about its decision, parties may not be aware of the decision and lose their opportunity to appeal.
The right of access courts is accepted as an element of the constitutional right to a fair trial (Article 36 of the Constitution). According to the European Court of Human Rights, restrictions on an individual’s right of reach the court must not injure the core of this right.
The Constitutional Court noted that Article 20(1) was intended to expedite proceedings and decrease judicial workload. However, it found that an appropriate balance did not exist between the article’s aim and the risks involved in making a final decision without the parties present, or without the court pronouncing or serving the decision to the parties. Accordingly, it struck out the phrase “if this decision is final as of its rendering, starting from this date” from the article. The struck out phrase will be removed from the Code, taking effect nine months after the publication date of the Constitutional Court’s decision in Official Gazette, since the court deems the legal gap that will occur due to the cancellation will violate public interests.
The Constitutional Court does not specifically state in its decision when the two week appeal period should now be calculated from and it is not the court’s role to make such a declaration. According to general principles under Turkish law though, the period would begin on the date the parties are advised of or duly served the decision (Article 91 of the Code). Further judicial or legislative clarification on this subject is necessary.
Please see this link for the full text of the Constitutional Court decision (only available in Turkish).