A new legislative tax incentive encourages companies to establish a capital-based financial structures, rather than structures relying on loans. The incentive is available to companies incorporated with cash capital, or which make a cash capital increase. For qualifying companies, 50% of the interest amount payable for the cash capital or capital increase amount will be deducted from the company’s corporate tax-base. The amendment adds a clause to the first paragraph of Article 10 of the Corporate Tax Law numbered 5520. This amendment entered into force on 1 July 2015. A Council of Ministers decision numbered 2015/7910 (adopted on 26 June 2015; published in the Official Gazette on 30 June 2015) determines different levels of deduction for certain types of companies.
The 50% deduction applies to the calculated interest payable with respect to:
– The share capital cash amount being invested into a company during incorporation.
– The cash capital increase amount (not the entire increased capital base).
At the end of the relevant financial year, 50% of the calculated interest amount calculated over the share capital in cash or cash capital increase amount will be deducted from the company’s overall corporate tax-base. The applicable interest rate is the “average weighted annual interest rate applied by banks to commercial loans in TRY”, announced by the Central Bank of Turkish Republic. The resulting amount will then be deducted from the company’s overall corporate tax-base.
The deduction amount is calculated annually as per the interest rates of the relevant year. However, the deduction is ongoing unless a capital decrease is made or the company is liquidated, and will also apply for following financial years, starting from the accounting period during which the company’s articles of association or cash capital increase were registered. The deduction amount is re-calculated for following financial years though, applying the updated average weighted annual interest rate for that period.
The amendment is introduced by Article 8 of the Law on the Amendment to Certain Laws and Decree Laws numbered 6637 (approved on 27 March 2015; published in the Official gazette on 7 April 2015). Please see this link for the full text of the Law on the Amendment to Certain Laws and Decree Laws numbered 6637.
The transitional period for electronic payment institutions, electronic money institutions, and system operators to become compliant with legislative requirements ended on 27 June 2015. After this date, un-licensed entities that have not yet filed an application or those which are not compliant with the legislative requirements, are required to suspend operations. Sanctions include imprisonment, as well as judicial and administrative fines. An exception applies for entities which made a license applications before the transition period expired and such application is not yet rejected. Such entities may continue operations while their applications are considered.
The Law on Payment and Security Settlement Systems, Payment Services and Electronic Money Institutions numbered 6493 (“Electronic Payment Law”) regulates alternative payment system and service providers in Turkey. It establishes the legal basis and legal definitions for recently developed electronic payment methods. Alternative payment systems and instruments have emerged in Turkey in parallel to significant changes in financial markets, technological developments and expansion of e-commerce market. The Electronic Payment Law‘s ultimate goal is to address a regulatory gap, ensuring adequate regulatory oversight, as well as secure and reliable transactions.
The Electronic Payment Law and secondary legislation collectively represent an alignment with European Union legislation in this area. The Turkish regime included a 12 month transitional period to allow existing electronic payment institutions, electronic money institutions, and system operators to become compliant with the new legislative requirements (Provisional Article 2 of the Electronic Payment Law). Entities which were already operating in this area prior to the transition period were given time to obtain the necessary permissions/licenses and make the necessary organizational changes in order to legally provide services within the scope of the Electronic Payment Law. A recent opinion published by the Banking Regulation and Supervision Agency stated that if an entitiy was operating before the enactment of the Electronic Payment Law, it may continue operations after 27 June 2015, provided a license application has been filed by that date (while the application is being considered). Approximately thirty license applications have been filed with the Banking Regulation and Supervision Agency since the Electronic Payment Law was enacted. However, none have yet been finalized.
Entities which have not filed a license applications before 27 June 2015 will be required to suspend their operations until they are fully compliant with the requirements of the Electronic Payment Law, as well as related Regulations and communiques.
Please see this link for the full text of the Law on Payment and Security Settlement Systems, Payment Services and Electronic Money Institutions numbered 6493. For detailed analysis, please see our article A Guide to Electronic Payment Regulations in Turkey.
The Turkish Constitutional Court (“Constitutional Court”) has struck out Article 16(5) and Article 7(1)(i) of the Trademark Decree Law numbered 556 on the basis that they are unconstitutional. The court deemed the articles to conflict with Article 91 of the Turkish Constitution. The Constitution states that (with limited exceptions) decree laws may not regulate fundamental rights, nor may they regulate individual or political rights and duties.
According to the now cancelled Article 16(5), when a trademark registration was assigned, any identical or similar trademarks (for the same or similar goods or services) were also required to be transferred to the same assignee. In practice, when an application to record the trademark assignment was filed, the Turkish Patent Institute (“TPI”) would allow a two month period to assign any remaining identical or similar trademarks. If the parties failed to comply with this requirement, the TPI would reject the assignment recordal request.
Article 16(5) created problems because in some circumstances the TPI would interpret the term “similar trademarks” in a broad manner. The TPI also began conducting a similarity search when an assignment recordal request was filed. These factors, combined with the TPI’s refusal to accept consent letters, conflicted with parties’ freedom of contract, one of the basic principles of civil law.
Cancellation of Article 16(5) will compensate for disadvantages stemming from the Trademark Decree Law’s strict rejection of consent letters, co-existence agreements, and sister company arrangements. Trademark holders which have failed to obtain registration in Turkey in the past (due to an earlier applied for or registered trademark) may now be able to obtain registration.
With the striking out of Article 7(1)(i), applications which are identical or similar with an earlier well-known trademark will now pass the TPI’s initial examination on absolute grounds. The TPI will publish these applications provided they do not cover the same goods and services as the well-known trademarks. Therefore, holders of well-known trademarks should closely monitor the Official Trademark Bulletin since more applications may now pass the TPI’s examination on absolute grounds than have done so in the past.
Article 7(1)(i) of the Trademark Decree Law established a legal basis in 1995 for the TPI to refuse trademark applications on the basis that an application is similar to a well-known marks, according to 6bis of the Paris Convention. Within this context, the TPI has rejected trademark registration applications which were identical to an earlier trademark, regardless of the goods and services covered by the later applications. The TPI also established the well-known trademark registry, aiming to record and make information about well-known trademarks publicly accessible. Moroğlu Arseven was involved in the dispute which led to the 3rd Intellectual and Industrial Property Rights Civil Court of Ankara requesting cancellation of Article 7(1)(i) of the Trademark Decree Law. The dispute involved the TPI refusing a trademark application on the basis of an existing well-known trademark registration.
The Directorate of Privatization Administration has announced new entities to be included in the privatization program, planned to be completed by 31 December 2020. The new privatizations include TP Petrol Dağıtım A.Ş., Türkiye Elektromekanik Sanayi, as well as three thermic and 26 hydroelectric power plants owned by Elektrik Üretim A.Ş..
TP Petrol Dağıtım A.Ş (“TPPD”)
TPPD is a petroleum distribution company affiliated to Türkiye Petrolleri Anonim Ortaklığı and represents the most significant company included in the privatization announcement. According to the privatization program, all public owned shares of TPPD will be privatized by way of sale, block sale, public offering, asset sale, application leasing method, or any combination of these methods.
TPPD currently has 300 power stations across Turkey. It is nationally ranked fifth out of 85 distribution companies (based on capacity) and aims to have 400 power stations by the end of 2015. TPPD is the second fuel distribution company announced to be privatized, after Petrol Ofisi, which is privatized in 2002.
Türkiye Elektromekanik Sanayi (“TEMSAN”)
TEMSAN is a 100% state-owned company, established in 1977. It currently has four factories in Diyarbakır and Ankara, involved in manufacture, installation and operation of electricity generation systems. According to the privatization program, TEMSAN will be completely privatized before 2020 by way of sale, block sale, public offering, asset sale, application leasing method, or any combination of these methods.
TEMSAN has completed construction of 23 hydroelectric power plants and currently has eight ongoing hydroelectric power plant projects.
29 thermic and hydroelectric power plants
Three thermic power plants and 26 hydroelectric power plants owned by Elektrik Üretim A.Ş. will be privatized.
Accordingly, Hopa Thermic Power Plant, Bursa Natural Gas Power Plant and Aliağa Power Plant will be privatized through asset sale, license transfer, granting of operating right, or any combination of these methods. Bursa Natural Gas Power Plant has an installed capacity of 400 MW, making it one of the largest power plants in Turkey.
The 26 hydroelectric power plants will be privatized by way of license transfer and/or granting of operating right.
The High Council of Privatization’s decision was published in the Official Gazette on 24 June 2015. Please see this link for the full text of the decision, dated 15 June 2015 with no. 2015/55.
Since April 2015, three out of seven seats on the Turkish Competition Board have been vacant due to the six-year appointment terms for the president and two other Board members expiring. Since then the Board’s meeting quorum of five members could not be met. As a result, the Board has been unable to convene and decide conclusively on pending files. Appointments for the three vacant seats were published in the official gazette on 24 June 2015. Hopefully, this will end the Authority’s stagnancy and the new appointments will heat up the competition law circles.
The Competition Authority is responsible for enforcing competition rules in Turkey. It is an independent regulatory authority with administrative and financial autonomy. The Competition Board is the decision making body within the Authority. Please see this link for more information about the Turkish Competition Authority.