Edition 30: 4 October 2016
Editorial Team:
Dr. E. Seyfi Moroğlu, LL.M., Işık Özdoğan, LL.M. and Bora İkiler, LL.M.
Turkey Updates Incentive Scheme For Projects Supporting National Development

Turkey has updated its project-based investment incentives scheme, providing financial support for innovative, technology-oriented, R&D focused, high value-added projects, which assist in reducing foreign dependency. The incentives are available to projects which comply with the Turkish government’s targets outlined in national development plans and annual programs, as well as projects specifically promoted by the Ministry of Economy.

The Law on Supporting Investments on Project Basis and Amending Certain Laws and Decrees numbered 6745 was published in Official Gazette number 29824 on 7 September 2016 (“Amendment Law”).

Accordingly, qualifying projects could receive the following support instruments and exemptions:

– Up to 100% corporate tax exemption.

– Up to 200% investment support.

– Corporate tax exemption for profits derived from the investment during the first ten years of operations.

– Income tax withholding support.

– Exemption from customs duties.

– Free land allocation for 49 years where the investment is made on an immovable property belonging to the Turkish Treasury, or free transfer of these immovable properties for completed projects, provided the anticipated employment lasts for at least five years.

– Up to ten years’ support with the employer’s share of social security premiums.

– Up to 50% compensation of energy consumption expenses related to the investment, for up to ten years.

– Abolishment of interest on loans for fixed investments.

– Up to five years’ salary support for qualified employees, capped at twenty times the gross monthly minimum wage.

– Up to 49% state partnership, provided an initial public offering or direct sale to investors will occur within ten years.

Support will be paid from the Ministry of Economy’s budget.

Goods produced under the project based incentive schemes may benefit from the government’s purchase guarantee, after the approval of the Council of Ministers on the amount and the time interval.

All infrastructure investments may be reimbursed, subject to approval from the Council of Ministers.

If ownership of an investment is transferred, all acquired rights under the investment scheme will be passed to the new investor.

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

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Turkey Expands Council of Ministers’ Power to Apply Withholding Tax

Turkey has amended withholding tax responsibilities for parties and intermediaries in taxable commercial transactions under the Tax Procedural Code. With the change, the Council of Ministers becomes entitled to enforce withholding tax responsibility against parties to taxable transactions or intermediaries regardless of a range of specified factors.

The Law on Supporting Investments on Project Basis and Amending Certain Laws and Decrees numbered 6745 was published in Official Gazette number 29824 on 7 September 2016 (“Amendment Law”). The Amendment Law makes changes to withholding tax provisions under the Tax Procedural Code. 

The Council of Ministers is generally entitled to determine different tax rates (between certain legislative thresholds) for taxable transactions, according to work classes, work kinds, sectors and commodity groups within the scope of its authority.

Under the Amendment Law, the Council of Ministers can now enforce withholding tax responsibility against parties to taxable transactions or intermediaries regardless of whether:

– The payee is a taxpayer.

– The payer or payment mediator is entitled to a tax cut.

– The subject of the payment is sale and purchase of goods or services.

– The subject of the payment took place in an electronic environment.

– The payee used the sum for discount in the tax assessment.

As a consequence to the amendments, the Council of Ministers becomes authorised to regulate withholding tax deduction obligation to intermediaries in commercial transactions concluded via the internet.

Article 15 of the Corporate Tax Law (titled “Tax Withholding”) is amended to include the obligations under Article 11(7) of the Tax Procedural Code as payment items, subject to withholding tax.

Article 30 of the Tax Procedural Code (titled “Tax Withholding in Limited Tax Payers”) is also amended to the effect that items under Article 11(7) of the Tax Procedural Code are now included as incomes subject to withholding tax for limited tax payer corporations.

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

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Turkey Amends Electricity Legislation to Support National Energy Security and Use of Domestic Resources

Turkey has amended the Electricity Market Law numbered 6446 to promote use and security of domestic energy resources. Under the amendments, planned capacity mechanisms must give priority to local energy sources. The amendments aim to support overall national energy security and extend the existing capacity mechanism provisions to also include security of Turkey’s electricity transmission system.

The Law on Supporting Investments on Project Basis and Amending Certain Laws and Decrees numbered 6745 was published in Official Gazette number 29824 on 7 September 2016 (“Amendment Law”). The Amendment Law makes changes to Article 20 of the Electricity Market Law numbered 6446.

Planned and future capacity mechanisms must give priority to the local energy sources. The intention of these mechanisms is to create efficient installed (and reserve) power capacity, to ensure security of supply and preserve reliable installed power capacity.

Payments made by the Turkish Electricity Transmission Corporation (TEİAŞ) within the scope of the mechanisms will be taken into consideration when calculating transmission tariffs.

Procedures and principles for establishing capacity mechanisms will be regulated by Energy Market Regulatory Authority in consultation with the Ministry of Energy and Natural Resources.

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

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Turkey Widens Scope of Expropriation Candidates to Include Certain Immovable Properties and Rights Held by Public Bodies

Turkey has amended expropriation requirements and procedures, tightening requirements for the contents of agreements for expropriated immovable property, while also expanding the scope of immovable property which is open to expropriation. Under the amendments, immovable property, resource rights and easements belonging to public entities and public enterprises are now open to expropriation if the Ministry of Internal Affairs requires them for security reasons.

The Law on Supporting Investments on Project Basis and Amending Certain Laws and Decrees numbered 6745 was published in Official Gazette number 29824 on 7 September 2016 (“Amendment Law”).

Notable changes introduced by the Amendment Law include:

– Immovable properties, resource rights and easements belonging to public entities and public enterprises are now open to expropriation if the Ministry of Internal Affairs requires them for security reasons.

– The expropriation price will now be paid upon registration or cancellation of an immovable’s registration, pursuant to the memorandum of agreement and the writ evidencing that the immovable is free from liens. It was previously paid upon owner’s alienation declaration (legal declaration before the title registry regarding the property transfer) in the land registry.

– Memorandums of agreement for expropriated immovables must now contain:

– The owner’s identity information and declaration of acceptance regarding registration or cancellation.

– The owner’s alienation declaration.

– Memorandums of agreement for expropriated immovable is now considered as the legal reason of the registration to be made in the land registry.

– If the right of disposition on immovable property is restricted in a way which harms the core property right because those properties were spared to the use of public entities and official duties in implementary development plans, either:

– The properties are expropriated within five years, upon developing new development programs and applications (measured from when the new development plans enter into effect); or

– The restrictions are eliminated by making necessary changes to the development plans.

A lawsuit can be bought against the responsible administration if neither of these occur.

– The value of immovable property will now be assessed as per the date it was registered with the directorate of land registry. This valuation approach applies to debt actions and actions on increase of value filed as per the Law numbered 2981 on Certain Procedures to be Applied to Immovables Built Against Development and Slums Regulations and Amending One Article of Development Law numbered 6785.

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

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Turkey Introduces Investor Repayment Mechanism for Dematerialized Capital Markets Instruments Transferred to Investor Compensation Center

Turkey has introduced principles and procedures for investors to claim payments for capital market instruments which have been transferred to the Investor Compensation Center (“Centre”). The compensation mechanism applies to circumstances where a capital market instrument is dematerialized. In such circumstances, investors must deliver the physical capital market instrument to the Center within seven years of the dematerialization date. Failure to deliver it by the deadline results in the instrument being transferred to the Centre. The new mechanism allows investors to claim for such transfer.

The Regulation on the Principles and Procedures Regarding the Payment to be Made to the Investors by the Investor Compensation Center due to the Partial Cancellation of the Article 13 Paragraph 4 of the Capital Market Law no. 6362 (“Regulation”) was published in Official Gazette number 29824 on 7 September 2016, coming into force on the same date.

Under the Regulation, investors receive until 7 September 2026 to apply for payment regarding capital markets instruments transferred to the Centre.

The Centre will make the requested payments if claimants submit a letter of undertaking and a release of debt, as set forth under Annex-1 of the Regulation.

The Centre will make payments in accordance with the following principles, depending on whether the Centre has sold the capital market instruments or not: 

– If the Centre has not sold the instruments: The exact amount of the instrument will be paid to the claimant, plus non-paid up share amounts (calculated up until the return date) and dividends with interest (except those transferred to the Treasure within the scope of Law no 2308).

– If the Centre has sold the instruments: The instrument’s sale amount will be paid, plus the non-paid up share amount (calculated up until the sale date) and dividends with interest (except those transferred to the Treasure within the scope of Law no 2308).

The Regulation outlines detailed provisions for delivery and annihilation proceedings in relation to capital markets instruments, application processes, as well as principles for assessing claimants.

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

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Turkey Introduces Intellectual Property Rules for Scientific and Technological Research Council

Turkey has introduced principles and procedures for management of intellectual property rights owned or shared by the Scientific and Technological Research Council (“TÜBİTAK”). The Regulation introduces provisions for protecting intellectual property developed by TÜBİTAK staff, or within related grant programs, as well as transfer, payments and use of these rights.

The Regulation on Procedures and Principles Regarding Management of Intellectual Property Rights and Technology Transfers (“Regulation”) was published in Official Gazette number 29818 on 1 September 2016, entering into effect on the same date.

Notable provisions introduced by the Regulation include:

– Intellectual products developed by TÜBİTAK’s staff as a part of their jobs, or based on TÜBİTAK’s experience, work or facilities, are deemed to belong to TÜBİTAK (unless another provision applies).

– TÜBİTAK staff must inform the relevant department about intellectual products within one month.

– TÜBİTAK staff must keep the intellectual product or other intellectual property rights confidential until the registration application has been made.

– Technology transfers can be made in four different ways: assignment; partnership capital; basic license; exclusive license.

– The Directorate of Technology Transfer Office will designate the distributable income after the intellectual product’s development cost is deducted. Maximum 30% of the distributable income will be passed to the people who developed the product and the remainder will be transferred to the Directorate.

– TÜBİTAK can establish a company or join an existing company as a partner in order to carry out activities regarding its intellectual property rights. For example, convert them into a product or serial production.

– TÜBİTAK can make technology transfers to companies which were founded by TÜBİTAK, or whose shares belong to TÜBİTAK, in accordance with their establishment purposes.

Commercialization processes for intellectual products subject to a decision from the Science Council before 1 September 2016 will continue to be executed by the departments noted in the decision. Commercialization agreements executed regarding Science Council decisions before 1 September 2016 will remain effective.

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

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Turkey Clarifies System For Auditing Contractor Performance in Health-Related PPP Construction Projects

Turkey has introduced clarifying provisions with regard to auditing contractor performance for construction and renovation of existing facilities in public-private partnerships. Legislation previously empowered the Ministry of Health to establish an audit system to assess contractor performance, but did not outline how to set up such a system. Accordingly, a list of documents and information has now been introduced for determining the eligibility of auditors.

The Law on Supporting Investments on Project Basis and Amending Certain Laws and Decrees numbered 6745 was published in Official Gazette number 29824 on 7 September 2016 (“Amendment Law”). The Amendment Law makes changes to Law No. 6428 Concerning the Construction of Facilities, Renovation of Existing Facilities and Purchasing Service by the Ministry of Health by Public Private Partnership Model.

Several sanctions will apply if an authorized auditor does not meet its contractual obligations. These include a delay fine (as specified in the tender documents), registration of performance guarantees as revenue, as well as contract termination without appeal.

Authorized auditors will be liable to the administration and third parties for any damages incurred as a result of false and misleading information on the audit reports. Auditors are also responsible for submitting their audit report (including information, documents, reports and tables) in line with related regulations and contracts. Auditor responsibility in this sense extends for fifteen years.

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

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Deadline for Wind Power Plant Pre-License Applications Postponed to 2017 in Turkey

Turkey’s energy regulator previously ruled (decision numbered 5709, dated 30 July 2015) that a total capacity of 2,000 MW would be reserved in the period up until 2020 for wind power pre-license applicants to connect to the grid. The deadline for making wind power plant pre-license applications has now been extended from October 2016 to April 2017.

Previously, the deadlines for submitting wind power plant pre-license applications to the Energy Markets Regulatory Authority were 3, 4, 5, 6 and 7 October 2016. These deadlines have now been extended to 3, 4, 5, 6 and 7 April 2017. 

The Energy Markets Regulatory Authority’s decision dated 8 September 2016 numbered 6471-1, was published in Official Gazette number 29827 on 10 September 2016. Please see this link for the full text of the Decision (only available in Turkish).

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Turkey Classifies Biodegradable and Mineral Waste Management Premises as Holding a “High” Pollution Danger Level

Turkish environmental regulations now classify premises for biodegradable waste management and mineral waste removal as holding a “high” pollution danger level. Accordingly, these premises are now subject to related processes and requirements for environmental permits and licenses.

Annexes to the Regulation on the Environmental Permit and License were (“Regulation”) amended by the Amendment Regulation on the Regulation on the Environmental Permit and License (“Amendment Regulation”), published in Official Gazette number 29834 on 21 September 2016.

The Amendment Regulation also introduces several new document requirements, depending on the type of operation. Documents include management plan, trial burning plan and the letter of guarantee. Changes apply to the Regulation’s:

– Annex-3B, titled “Application Documents for Temporary Operation Certificate”; and

– Annex-3C, titled “Information and Documents Required for the Environmental Permit or the Environmental Permit and License Process”.

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

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Turkey Amends Staffing and Location Rules for Medical Device Sales Centres

The Turkish Medicine and Medical Device Institution has amended requirements for notifying the local health authority about staff changes for medical device sales and promotion support. Changes also apply to where medical device sales centres can be located, generally lifting certain restrictions acceptable locations.

The Regulation Amending the Regulation on Sale, Advertising and Promotion of Medical Devices (“Amendment Regulation”) was published in Official Gazette number 29835 on 22 September 2016, entering into effect on the same date.

Notable amendments introduced by the Amendment Regulation include:

– Sales centres which have only one staffmember for sales and promotion support must now notify the Local Health Authority within five working days if that person is no longer working at the centre (due to resignation, dismissal or loss of qualifications). The deadline is 15 working days if the relevant staffmember has died. New personnel should be assigned to this position within one month.

– Education activities for health professionals and technical personnel working in the medical devices department of health institutions and organizations executed in simulation centres and cadaver study centres will no longer be considered scientific and educational activities.

– The scope of prohibited locations for sales centres is reduced and this restriction no longer applies to:

– Clinics and laboratory diagnosis centres which merely provide examination and imaging services.

– Pharmacies.

– Optician centres.

– Hearing aid centres.

– Prosthesis and orthosis centres.

– Dental prosthesis laboratories.

– Except for the above exemptions, medical device sales centres cannot be opened in the buildings (including its yard) and its extensions in which a health institution and organization is located. The restriction on establishing a sales centre in places zoned for healthcare which are owned by the serving health facility has now been removed.

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

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Turkey Announces Rules for Municipality Checkpoint System to Monitor Fruit, Vegetables and Other High Demand Goods

Turkey has announced rules for establishing and operating control and checkpoints for fruit, vegetable and other high demand goods, to ensure sufficient supply and demand. Under the rules, municipalities must establish, equip and operate checkpoints. The primary tasks for checkpoints are to determine whether fruit and vegetables comply with related identification documents and that such documents have been entered into the electronic wholesales market system.

Turkey’s Ministry of Customs and Trade and Ministry of Internal Affairs published the Communiqué on Procedures and Principles of Establishment and Operation of Control and Check Points (“Communiqué”) in Official Gazette number 29792 on 4 August 2016, entering into effect on the same date.

Notable provisions introduced by the Communiqué include:

– Municipalities must establish control and check points at entry/exit points to city/town centers and expressways, situated and built in a manner to avoid hampering traffic order and safety.

– Control and check points must be located a proper distance from roadside check points operated by other institutions.

– Municipalities must procure all necessary equipment for control and check points.

– Nationwide roadside control and check stations established by the Ministry of Transport, Maritime Affairs and Communications can be used as common check points, under protocols executed by municipalities.

– Checkpoint staffing must be planned to allow sufficient checks to occur, considering seasonal production and interprovincial transport.

– Checks will include review of identification documents to determine whether fruit and vegetables stopped at control and check points have been entered into the electronic wholesales market system.

– Control and checkpoints which were established before 4 August 2016 will continue to operate within the framework of the Communiqué’s procedures and principles.

Please see this link for the full text of the Communiqué.

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D-8 Certificate of Origin Included in Turkey’s Customs General Communiqué (International Treaties) Serial No: 8

Turkey’s Ministry of Customs and Trade has included the “D-8 Certificate of Origin” in the Customs General Communiqué (International Treaties) Serial No: 8, which regulates principles and procedures for recording and searching electronic certificates of origin in Turkey. The D-8 Organization for Economic Cooperation is an organization for development cooperation among the following countries: Bangladesh, Egypt, Indonesia, Iran, Malaysia, Nigeria, Pakistan, and Turkey.

The D-8 Certificate of Origin is primarily regulated under the “Regulation on Determining the Preferential Origin of Goods within the scope of Preferential Trade Agreement among the D8 Countries”. Under the amendments, the D-8 Certificate of Origin will be recorded at the Customs Central Information System electronically and may be confirmed online by the importing country’s authorities as per the Customs General Communiqué (International Treaties) Serial No: 8.

The D-8 Organization for Economic Cooperation’s objectives are to improve member states’ position in the global economy, diversify and create new opportunities in trade relations, enhance participation in decision-making at international level, and improve standards of living.

The communiqué of the Ministry of Customs and Trade is published in the Official Gazette date 3 September 2016 number 29830.

Please see this link for the full text of the Communiqué.

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