Edition 23: 2 June 2016
Editorial Team:
Dr. E. Seyfi Moroğlu, LL.M., Işık Özdoğan, LL.M. and Bora İkiler, LL.M.
Tax Exemption Introduced for Software Which is Electronically Exported From Turkey

Turkey has introduced an income tax exemption for employees in free trade zones who prepare software which is exported from Turkey via electronic transfer. The mechanism is introduced to address difficulties which arise when delivering CD-based software programs to customers outside Turkey. Software programs which are sold within Turkey are not eligible for this income tax exemption. The Communique (No.3) Amending the General Communique (No.1) on Free Trade Areas Law number 3218 was published in Official Gazette number 29695 on 26 April 2016.

Accordingly, an income tax exemption applies for preparing programs which meet the Communique’s definition of “software” and are exported via electronical transfer. The salaries of employees in free trade zones who are related to such software are exempt from income tax if:

– The software is prepared only for foreign customers.

– The software is used outside Turkey.

– The invoice must be issued to a foreign customer.

– The invoice should show that foreign currency is being brought to Turkey.

Electronic transfer refers to exporting software programs via the internet, through an electronic environment. The concept is introduced to address difficulties which arise for delivering CD-based software programs to customers outside Turkey. 

Please see this link for the full text of the Notification and this link for the full text of the Explanatory Annotation (only available in Turkish).

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Turkish Notary Association: Employment Transfer Agreements not Subject to Stamp Tax; Statutory Form Lease Agreement Not Necessary for Registry Annotation

The Turkish Notary Association made two announcements to clarify and amend notarial requirements. It declared that employment transfer agreements are no longer subject to stamp tax. The association also clarified that real estate leases are not required to be in the statutory form in order to be annotated to the real estate registry. Previously, individual notary publics had inconsistently required standard form lease contracts for annotation purposes.

Based on advice from the Revenue Administration, the Notary Association announced that employment transfer agreement protocols are not subject to stamp tax. Previously, these had been deemed to be a type of commercial agreement. Accordingly, these agreements were subject to proportional revenue stamps and fees. However, the latest opinion from the Revenue Administration is that these agreements are now only subject to fixed fees. Please see this link for the Notary Association’s Circular No 7, dated 7 April 2016 (only available in Turkish).

The Notary Association also clarified that statutory form property lease agreements are not required in order for these agreements to be annotated to the real estate registry. Article 47(ç) of the Land Registration Regulation simply states that property leases must be in written form, and this is sufficient to be annotated to the real estate registry. Please see this link for the Notary Association’s Circular No 38, dated 2 May 2016 (only available in Turkish).

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Turkey Accedes to International Conventions For Protecting Children and Collecting Child Support

On 25 April 2016, Turkey acceded to the 1996 Convention on Jurisdiction, Applicable Law, Recognition, Enforcement and Co-Operation in Respect of Parental Responsibility and Measures for the Protection of Children (“Hague Convention”), as well as the 2007 Convention on the International Recovery of Child Support and Other Forms of Family Maintenance (“Child Support Convention”).

The Hague Convention and Child Support Convention are important requirements in the Visa Liberalization Dialogue between the European Union and Turkey, also contributing to Turkey’s European Union harmonization process.

Convention on Jurisdiction, Applicable Law, Recognition, Enforcement and Co-Operation in Respect of Parental Responsibility and Measures for the Protection of Children

In 1983, Turkey acceded to the 1961 Convention regarding Applicable Law on Protection of Children and Competency of Authorities on the same issue. However, the 1961 convention became insufficient to meet modern needs. Accordingly, the Hague Convention was opened for signature on 19 October 1996.

The Hague Convention introduces regulations to eliminate jurisdictional disputes between foreign states regarding protection of children and their property. According to the Hague Convention, if an international dispute arises, the child’s habitual residence state’s authorities and courts are primarily authorized.

The Hague Convention’s provisions aim to eliminate confusion regarding competency disputes between foreign states regarding protection of children and difficulties which arise from recognizing and enforcing decisions.

Convention on the International Recovery of Child Support and Other Forms of Family Maintenance 

The Child Support Convention was opened for signature on 5 November 2007 and acceded by Turkey on 25 April 2016. It aims to regulate efficient recovery of child support and other forms support which arise from family law in general. The Child Support Convention combines provisions from many different conventions and international agreements regarding the topic.

The Child Support Convention states that a foreign state cannot claim any guarantee regarding litigation expenses from the state where support will be recovered, as well as ensures free of charge legal support regarding child support for children under 21 years old. Recognition, enforcement conditions and recovery methods for child support are explained in detail.

Please see these links for the full text of the conventions:

– Convention on Jurisdiction, Applicable Law, Recognition, Enforcement and Co-Operation in Respect of Parental Responsibility

– Protection of Children and Convention on the International Recovery of Child Support and Other Forms of Family Maintenance

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Turkish Constitutional Court: Monitoring Employee E-mail Accounts Does Not Breach Privacy Rights

The Turkish Constitutional Court has recently published a decision where it held that an employer monitoring an employee’s institutional email account and using correspondence in court did not violate the employee’s constitutional rights. The court held that the employer had monitored these accounts prudently and with just cause, since it was done to verify allegations that the employee had breached corporate regulations. It noted that monitoring had not gone beyond verification purposes and content of the correspondence was not made public.

In the case at hand, an employee’s spouse alleged an affair among employees to a senior manager. The spouse submitted copies of e-mail correspondence to support her claim. The employer terminated the related employees on the basis of Article 25 of Labor Law No. 4857, which addresses immoral and bad-faith acts. The terminated employees filed a re-employment lawsuit in 2012, arguing their employment agreements were wrongfully terminated because the employer monitored their e-mail accounts contrary to their constitutional rights to privacy and communication.

The re-employment lawsuit was rejected in 2013 on the grounds that the applicants made personal correspondence from their institutional e-mail accounts within working hours, including obscene content. The court held that these factors made it impossible for the employer to maintain the employment relationships. The rejection decision was also upheld by the appellate court. However, the terminated employees continued to pursue the matter before the Constitutional Court.

The Constitutional Court held that terminating the employment agreements upon monitoring their institutional e-mail accounts did not violate the right to privacy (Article 20 of the Constitution) or the right to communication (Article 22 of the Constitution). The court reasoned:

– The relevant employment agreements required the terminated employees to comply with all corporate regulations, including Basic Company Regulation and an Information Security Undertaking.

– Sending explicit content from an institutional e-mail account violates the Basic Company Regulation, which requires employees to maintain professional relationships.

– The Information Security Undertaking prohibits personal use of company computers and institutional e-mail accounts, specifically warning employees that e-mail correspondences and communication might be monitored when needed.

– The employer only monitored the e-mail accounts to confirm the spouse’s claim about violations of the employment agreements. Therefore, just cause existed, together with a proportional response.

– The proceedings did not reveal the terminated employees’ private lives and the privacy of their communications weren’t breached.

The Constitutional Court’s decision dated 24 March 2016, with application number 2013/4825, was published in Official Gazette number 295708 on 10 May 2016. Please see this link for the full text of the Constitutional Court’s decision (only available in Turkish).

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Updated Rules for Electricity Demand Estimates in Turkey

Turkey has revised its procedures and principles for making, evaluating, updating and approving electricity demand estimates. The revised regulations apply to the Turkish Electricity Transmission Company (“TEİAŞ”), organized industry sites, distribution companies and supplier companies in charge. They set detailed procedures for demand estimates, as well as overarching principles. The Regulation on Electricity Market Demand Estimates 29705 was published in Official Gazette number 29705 on 7 May 2016 (“Regulation”), entering into effect on the same date.

Distribution companies and supplier companies in charge must make annual demand estimates and submit these estimates to the Energy Market Regulatory Authority (“EMRA”). The distribution companies make their estimates regarding their distribution areas, whereas supplier companies in charge make estimates regarding the final retail source, retailer sale and consummation of free consumers.

Organized industry sites must prepare demand estimates for their distribution areas. Depending on their connection, they must submit these estimates to the relevant distribution company, or to TEİAŞ.

While making the estimates, these principles apply:

– The preferred demand estimate model should be consistent with electricity demand behavior,

– Variations which are scientifically and economically meaningful should be used,

– Determinacy coefficients should be explainable.

The Regulation also outlines detailed procedures for preparing, submitting, evaluating and approving demand estimates.

Failures to comply with the Regulation can result in fines or license cancellations (Article 16 of the Electricity Market Law with no. 6446).

The Regulation abrogated the Regulation Regarding Electricity Energy Demand Estimates published on the Official Gazette number 26129 on 4 April 2006.

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

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