Edition 69: 20 September 2018
Editorial Team:
Orçun Çetinkaya, LL.M., Ezgi Baklacı, LL.M., and Pelin Oğuzer, LL.M.
Turkey Introduces Currency Control Measures on Domestic Contracts Involving Foreign Currency

Turkey has introduced new contract rules, intended to protect the national currency’s value. From 13 September 2018, certain agreements between parties which are both located in Turkey can only be made in Turkish Lira. Contracts entered before 13 September 2018 which contain payment obligations in foreign currencies must be amended and restated in Turkish Lira by 13 October 2018. The rule also applies to payment obligations which are indexed to foreign currencies.

The new currency rule applies to contracts for:

– Sale and purchase of movable or immovable assets.

– Rental of movable or immovable assets (including vehicle and financial leasing).

– Leases.

– Employment and service arrangements.

– Work/construction (eser sözleşmesi).

The Ministry of Treasury and Finance (“Ministry”) is authorized to announce exclusions for the new rules. The scope of the exceptions have not yet been determined. However, the Ministry recently announced that exclusions will be determined by taking into account the input costs and liabilities in foreign currency. Accordingly, the Ministry plans to introduce an exception for persons who are able to obtain foreign currency loans under the Decree No. 32 on Protection of Value of Turkish Lira.

Failure to comply with the new rules entails an administrative fine ranging between 6,300 and 52,600 Turkish Liras.

Decision numbered 85 by the President of Turkish Republic was announced in the Official Gazette number 30534 on 13 September 2018, amending Decree No. 32 on Protection of Value of the Turkish Lira. Please see this link for the full text of the Decision (only available in Turkish).

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Turkey Lowers the Maximum Period for Consumer Loans, Plus Credit Card Instalment Schemes

Turkey’s Banking Regulatory and Supervisory Authority (“Authority”) has lowered the cap on consumer loans. Accordingly, from 1 September 2018, the maximum term for consumer loans becomes 36 months (previously 48 months), with some exceptions. The Authority has also reduced payment periods for credit card instalment schemes.

36-Month Cap for Consumer Loans

From 1 September 2018, the maximum term for consumer loans becomes 36 months (previously 48 months).

The 36-month cap does not apply to:

– Loans for purchasing or renovating houses.

– Financial leasing for houses.

– Loans for other real estate purchases.

– Loans for financing education fees.

– Loans for financing debts owed to public authorities and institutions (provided such payment is made directly to the public authorities or institutions’ account).

Other new caps for loan periods (including loan restructures) are:

– Auto loans and loans secured by vehicles: 48 months.

– Loans to purchase mobile phone, tablets and computers: 6 months.

The aim of these amendments is to promote conscious consumption.

Existing consumer loans (before 1 September 2018) can be restructured for up to 48 months, if the borrower requests the restructuring by 1 September 2019. Any additional loans granted during a restructure are subject to a 36-month cap.

The Regulation Amending the Regulation on Bank Loan Transactions was published in Official Gazette number 30510 on 15 August 2018. Please see this link for the full text (only available in Turkish).

Credit card instalment periods

The Authority has also reduced payment periods for credit card instalment schemes.

The new caps for credit card payment instalment periods are:

– Purchasing electronic appliances: 3 months (previously 6 months).

– Payments to clubs and associations, flights, travel agencies, transportation and accommodation: 6 months (previously 9 months).

– Payments for corporate credit cards: 9 months (previously 12 months).

Jewellery purchases could previously be made via monthly instalment schemes for up to four months. However, jewellery purchases are now prohibited from being paid via instalments.

The Regulation Amending the Regulation on Bank Cards and Credit Cards was published in Official Gazette number 30510 on 15 August 2018. Please see this link for the full text (only available in Turkish).

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Turkey Caps Instalment Payment Schemes for Retail Sales

Turkey has capped the instalment payment period for retail goods and services at maximum 12 months, with lower caps for certain types of goods. The cap applies from 1 September 2018 and applies irrespective of whether the sale involves a negotiable instrument. The cap applies even if a customer pays an additional fee to pay via instalments, or to defer payment until later.

The cap is set at three months for audio and video systems, as well as six months for computers, tablet and mobile phones.

Instalment payment schemes are now prohibited for retail jewellery sales.

The Amendment Regulation on the Regulation on Principles and Rules for Retail Trade was published in Official Gazette number 30510 on 15 August 2018. Please see this link for the full text of the Amendment Regulation (only available in Turkish).

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Turkey Introduces Principles and Procedures for Capital Loss and Financial Distress

Turkey’s Ministry of Trade has issued a communiqué outlining principles and procedures for companies with share capital to follow in cases of capital loss or financial distress. It applies to joint stock companies, limited liability companies and commandite companies with equity shares. Accordingly, companies can now choose to omit foreign currency losses from their calculations arising out of their outstanding foreign currency liabilities until 1 January 2023.

The communiqué details the role of shareholders and management, and remedial actions to be considered in cases where half or two-third or all of the share capital and legal reserves is not covered due to losses, which are primarily regulated under Article 376 of the Turkish Commercial Code.

Notable aspects of the communiqué include:

– Until 1 January 2023, it is possible exclude foreign currency losses arising out of outstanding foreign currency liabilities from calculations made to identify the capital loss or financial distress.

– If shareholders inject cash to impair the share capital to cover losses, the supplemented amounts are not refundable to shareholders and cannot be facilitated as capital advance in prospective share capital increases. Each shareholder may participate to the commitment pro rata to their shareholding. If capital cannot be impaired, this would not impede any shareholder to voluntarily make payments for impairment of capital. Payments contributed for the impairment of the capital must be recorded as equity in the “capital impairment fund” account.

– If the company carries out a capital decrease in the amount of the losses as well as a simultaneous capital increase, an amount corresponding to at least one-fourth of the increased capital must be paid before registration.

– If the company carries out a capital increase, without decreasing in the amount of the losses, an amount covering half of the capital must be paid before registration.

– If half or two-thirds of the share capital and legal reserves are not covered due to losses, the shareholders’ general assembly must discuss the issue, even if it is not included in the meeting agenda.

The Communiqué on Principles and Procedures on Implementation of Article 376 of the Turkish Commercial Code numbered 6102 was announced in Official Gazette number 30536 on 15 September 2018, entering into force on the same date.

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

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Turkey Introduces Rules Requiring Export Proceeds to be Repatriated Within Certain Timeframes

Turkey has introduced new rules to protect the value of its currency, aimed at ensuring profits from export transactions between 4 September 2018 and 4 March 2019 are returned to Turkey. Accordingly, values received from export transactions made by Turkish residents must be repatriated within certain time limits.

Notable aspects of the new rues include:

– After the importer’s payments, values received by Turkish residents from export transactions must be directly and without any delay transferred or repatriated to the bank which mediates the export.

– The value must be repatriated within 180 days from the date of actual export.

– At least 80% of the values must be sold to a bank (converted to Turkish Liras).

– Any exports carried out in return for cash currency must now be concluded within 24 months.

– The following conditions apply to exports which are characteristic:

– The values of exports made by contractors must be repatriated within 365 days and must be sold to a bank.

– Following the final sale of the values obtained via export on consignment, the values of goods sent to international fairs, exhibitions and weeks to be sold must be repatriated and sold to a bank within 180 days of the fair, exhibition or week’s end.

– If goods are temporarily exported in accordance with the provisions of the relevant legislation are not repatriated or are sold, within the given or additional period, the sale value must be repatriated and deposited in a bank within 90 days of the term expiring or from the final sale date.

– Values of exports on credit or values of exports concluded within the scope of the Export Regime and Leasing Legislation, must be repatriated and sold to a bank within 90 days following the due date determined under the sales or leasing agreement relating to the export.

The Communiqué Concerning Decree No. 32 on Protection of Value of the Turkish Lira was published in Official Gazette number 30525 on 4 September 2018. Please see this link for the full text of the Communiqué (only available in Turkish).

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Turkey Announces Further Exemptions from Registering with the Data Controller Registry and Publishes New Rulings on Processing Personal Data

Turkey’s Data Protection Board (“Board”) has extended the scope of data controllers which are exempt from registering with the Data Controllers Registry (“Registry”), as well as the dates which data controllers must register. The Board has also published new rulings which shed light on some important matters regarding personal data processing.

Additional criteria extending the scope of data controllers who will be exempt from registration to the Registry 

In addition to the data controllers exempt from registration, data controllers which employ less than 50 employees and with an annual balance sheet total less than 25 million Turkish Liras turnover are also exempt from the requirement to register with the Registry (unless the data controller’s main business activity is processing sensitive personal data). Customs brokers and mediators are also released from such obligation previously. The Board’s ruling number 2018/87 was made on 19 July 2018.

Earlier exemptions are outlined in the following Board decisions:

– 2018/32 on 2 April 2018 (more).

– 2018/68 on 28 June 2018.

– 2018/75 on 5 July 2018.

Accordingly, the Board has exempted the following categories of data controllers from registering with the Registry to date:

– Data controllers employing less than 50 employees and with less than 25 million Turkish Liras annual balance sheet total (unless the data controller’s main business activity is processing sensitive personal data).

– Data controllers which process personal data through non-automatic means, provided the processing is part of a data filing system.

– Public notaries.

– Associations.

– Foundations.

– Unions.

– Political parties.

– Lawyers.

– Public accountants and sworn-in public accountants.

– Customs brokers and authorized customs brokers.

– Mediators.

Registration deadlines announced

The Board has announced the dates when data controllers’ must register with the Registry. Failures to comply with these dates risks a fine ranging from 20,000 and 1,000,000 Turkish Liras.

– 1 October 2018 to 30 September 2019:

– Data controllers which employ 50 or more employees.

– Data controllers with annual balance sheet total of 25 million Turkish Liras or more.

– Data controllers located abroad.

– 1 January 2019 to 31 March 2020: Data controllers which employ less than 50 employees and with annual balance sheet total below 25 million Turkish Liras and their main business activity is to process sensitive personal data.

– 1 April 2019 to 30 June 2020: Public authorities which are data controllers.

Recent Board Rulings

The Board has announced three new rulings regarding processing personal data. Notable points from the rulings include:

– The Board has refused a data subject’s request to remove his/her name from a column in a journal, on the basis that freedom of press overrides their right to privacy.

– The Board imposed fines on:

– A hospital which could not provide an adequate level of protection for patients’ personal data.

A career platform which shared an applicant’s personal data with other applicants without any legal basis.

– A company which shared an applicant’s CV with the other group companies, without the applicant’s consent.

Please see this link for full text of the Board’s ruling on the recent exemption and registration deadlines. Please see this link for the full text of the Board’s rulings regarding personal data processing (both links are only available in Turkish).

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Turkey Updated Rules for Distributing Advance Dividends

Turkey has made changes to its calculation and distribution rules for advance dividends. Changes apply to advanced dividends for joint-stock companies (not subject to the Capital Market Law), limited liability companies, as well as limited partnerships. Notably, advance dividends are now paid to shareholders in proportion to payments made to the company in consideration for capital share (not in proportion to each party’s shares). Also, advance dividends are now distributed with priority for privileged shareholders.

The Amendment Communique on the Advance Dividend Distribution (“Amendment Communiqué”) was published in Official Gazette number 30522 on 1 September 2018. The Amendment Communiqué makes changes to the Communiqué on Advance Dividend Distribution, published in the Official Gazette number 28379 on 9 August 2012.

Notable changes include:

– Advance dividends are no longer paid to shareholders in proportion to each party’s shares (pro rata). Rather, advance dividends are now paid in proportion to payments made to the company in consideration for capital share.

– Advance dividends are now distributed with priority given to privileged shareholders.

– If a company decides to distribute an advance dividend and a loss occurs at the end of the related fiscal period, only free reserve funds can be used to deduct the loss. General reserve funds can no longer be used.

– The amounts which must be reserved for privileged shareholders cannot be taken into account anymore when calculating an advance dividend’s amount for distribution. Only the amounts reserved for non-shareholders should be considered (as determined in the company’s article of association).

– The rule which stipulates that members of the executive body cannot receive dividends will not apply anymore if members of the executive body are also simultaneously company shareholders.

– The calculation method for advance dividends has been updated (annex to the Communiqué).

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

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Turkey Introduces Mechanism Enabling Taxpayers Subject to Special VAT Principles to Revert to General Principles

Turkey’s Ministry of Treasury and Finance has introduced a redemption mechanism for certain taxpayers which are subject to special VAT principles due to their past negative acts. The mechanism allows qualifying taxpayers to return to general VAT principles.

Taxpayers will qualify for the mechanism if they are subject to the special principles due to the following negative acts in the December 2017 (or earlier) tax periods (“Qualifying Taxpayers”):

– Received a negative report due to fraudulent or misleading use of a document.

– Received a negative determination due to:

– Being caught using a fraudulent or misleading document.

– Failing to submit a statement.

– Failing to be present at the declared address.

– Failing to submit commercial books and documents.

To access the mechanism, a Qualifying Taxpayer must:

– Increase VAT in accordance with the Law No. 7143 (known as the Restructuring Law), for the full periods in which it operated from 2013 to 2017 (inclusive).

– Pay the increased VAT amount in full.

A taxpayer will not be deemed to have returned to general principles if increases its VAT but is subject to special principles for a negative act which is not noted above.

Please see this link for the full text of the Communiqué on Amendment of Value Added Tax General Implication Communiqué (Serial No: 20) published by the Ministry in Official Gazette number 30527 on 6 September 2018 (only available in Turkish).

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Turkish Patent and Trademark Office Reduces Official Fees by 25% to 40%

Turkey’s Ministry of Industry and Technology has announced a support package for industrialists, intended to reduce industrial property application and registration fees for SMEs, industrialists and citizens, Accordingly, the official fees for assignment, opposition, appeal, application and registration processes regarding trademarks, patents, utility models and designs have been reduced by between 25% and 40%.

The Amendment Communiqué on the Turkish Patent and Trademark Office’s 2018 Fee Tariff was published in duplicated Official Gazette number 30526 on 5 September 2018.

Please see this link for full text of the Protocol and the approval decision (available only in Turkish).

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Turkey Increases Deferment Interest Rates and Default Interest for Public Receivables

Turkey’s Ministry of Finance and Treasury has increased the deferment interest rate which is applied to deferred public receivables from 12% to 22%. The new interest rate will apply to applications made after 6 September 2018. For previously deferred public receivables which are being duly paid, the deferment interest rate of 12% will continue to apply. Further, the monthly default interest rate for delinquent receivables increases from 1.40% to 2% from 5 September 2018.

If the terms of public receivables which were deferred before 6 September 2018 are violated, the following rates will apply:

– Instalments up to 6 September 2018: 12%

– Instalments after 6 September 2018: 22%. 

Please see this link for the full text of General Communiqué on Collection of Revenues (Serial No: C Item No: 3) published in Official Gazette number 30527 on 6 September 2018 (only available in Turkish).

Please see this link for the full text of the Presidential Decision on Redetermination of the Default Interest Rate for the Public Receivables (Decision No: 62) published in Official Gazette number 30526 on 5 September 2018 (only available in Turkish).

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Turkey Updates Electricity License Application Rules

Turkey has amended the application processes for pre-licenses and licenses within the electricity licensing regime. Accordingly, joint-stock companies which apply for such licenses can no longer issue bearer shares (except stock exchange bearer shares). The restriction must now be included in the related company’s articles of association. Further, from the end of 2018 preliminary project approval will no longer be valid grounds for beginning construction of an electricity generation facility. Rather, a project approval or definite project approval will be required to begin construction. 

The Regulation Regarding the Amendments in the Electricity Market License Regulation (“Amendment Regulation”) was published in Official Gazette number 30473 on 9 July 2018, entering into effect on the same date.

Previously, preliminary project approval, project approval, or definite project approval were sufficient to begin construction of a generation facility. However, from 31 December 2018 preliminary project approval will no longer be valid grounds for beginning construction. Rather, from that date onward, project approval or definite project approval must be held in order to begin building a generation facility.

According to the Amendment Regulation, pre-license and generation license holders must obtain the right to use immovables which are within the scope of the project (or directly affected directly by the project). License holders which have not yet obtained the right to use such immovables must initiate compliance processes by 9 January 2019. The additional six-month period granted to licenses which have not yet commenced operation will not be affected by these transactions.

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

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European Court of Justice: Nestlé Failed to Sufficiently Prove Acquired Distinctiveness for KitKat’s 3D EUIPO Trademark Registration

The European Court of Justice (“ECJ”) has considered the European Union Intellectual Property Office’s (“EUIPO”) decision about a request to invalidate a 3D trademark registration for the four-fingered KitKat chocolate bar. It declared that the evidence which Nestlé had provided about acquired distinctiveness through use was insufficient on the basis that the evidence did not include all European Union (“EU”) countries. The case will be sent back to EUIPO for reassessment. 

Nestlé registered its KitKat chocolate bar’s four-finger shape in 2006 as a three-dimensional sign before the EUIPO. In 2007, Cadbury Schweppes filed an application seeking to have the registration declared invalid. Cadbury Schweppes was later sold to Mondelez UK Holdings & Services (“Mondelez”) and this company took the position of Cadbury Schweppes in the invalidation claim.

EUIPO rejected the invalidation application in 2012. It stated that surveys conducted in ten EU member states showed that the four-finger shape had acquired sufficient distinctiveness throughout the EU. Mondelez brought an action before the General Court seeking to annul EUIPO’s rejection decision.

The General Court confirmed that three-dimensional KitKat mark has acquired distinctiveness in Denmark, Germany, Spain, the Netherlands, Austria, Finland, Sweden and England, where the surveys had been conducted. However, it annulled EUIPO’s decision because it had failed to consider the public’s perception in Belgium, Ireland, Greece and Portugal, which had not been included in the surveys.

Both Nestlé and Mondelez appealed the General Court’s decision to the ECJ, which upheld the General Court’s decision. The ECJ stated that there is no obligation to submit separate evidence in each individual EU member state to prove acquisition of distinctive character through use. However, the evidence which is submitted must be capable of establishing such acquisition throughout the EU member states.

For example, for certain goods or services, the economic operators have grouped several member states together in the same distribution network and treat those countries as if they were a single national market (especially for marketing strategy purposes). In such circumstances, evidence of using a sign within such a cross-border market is likely to be relevant for all member states concerned.

The case will be sent back to EUIPO, which will examine the proof of use for all EU members. Nestlé is expected to continue its struggle at the national level, after losing the battle with Mondelez which has lasted 16 years so far.

Under the decision, the ECJ has declared that for a three-dimensional trademark which lack distinctive character to obtain EUIPO registration, it should submit evidence which proves distinctiveness has been acquired in all EU member states through use.

Three-dimensional trademarks received legal basis in Turkey for the first time in early 2017, via Industrial Property Law number 6769. The distinctiveness of three-dimensional trademarks which do not have any word elements is controversial in Turkey and evidence which proves acquired distinctiveness is crucial.

Please see this link for the full text of the ECJ’s decision dated 25 July 2018.

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