Newsletter

2020-63

Date     : June 3rd, 2020

Subject: Monthly Financial/Tax Regulations Summary in Turkey (May 2020)

Distinguished readers,

May 2020 was very busy in terms of financial agenda, because of the pandemic lots of expected arrangements were made and we are expecting June to be much busier month as well in tax, financial, monetary and economic agenda even the Summer is coming.

We would like to submit for your attention as a summary the important tax-related and financial issues that occurred within the last month in Turkey.

In addition, you can visit our Covid-19 Support website that we prepare in order to support the business society, employees and all stakeholders. We hope that you will benefit and enjoy our newsletters. You will receive the next bulletin in a different form.

In this context, we would like to add the topics you want to be analyzed. For example, the possible effects of the epidemic on tax justice and tax burden, the taxation regime of the healthcare system, especially the healthcare professionals, the creative fiscal policy recommendations that should be implemented in this period, and the examples of good practices that companies make for their suppliers and ecosystems can be considered within this scope.

We are looking forward to hearing from you to convey both your subject proposal and such expertise to a wider audience.

In addition, we organize a case study for university students on “creative fiscal and tax policies to combat with Covid-19”. We will select the best paper in this study and announce it.

Let’s briefly start with the headings and then examine the details. We will submit information about tax, customs, social security obligations, banking and financial issues, incentives and other related subject below.

     A. Tax Issues

  • Communiqué on “25% Profit Distribution Limit”: The Ministry of Commerce announced the exceptions to the restriction on profit distribution with a Communiqué. It is a crucial piece of legislation that the companies are supposed to stay safe in terms of balance sheet and financial health of the companies.
  • Corporate Tax Returns are supposed to be submitted by June 1st.
  • Tax Increases:
    • SCT (special consumption tax) has been increased in some products such as tobacco.
    • A regulation was made on income tax withholding rates. (on financial bonds and lease certificates)
    • The foreign exchange transaction tax was increased 5 times and the sale of gold without physical delivery was also subject to tax. (Tax rates is now 1% on the sales amount of exchange)
  • Tax Updates
    • New Tax Communiques on Income Tax (Nr. 311 and 312) were published. Both includes very important subjects such as “good taxpayer deduction of %5” and other deduction issues.
    • Communique nr. 311 has regulations regarding exemption application in self-employment earnings brought by the new law No. 7194, exemptions regarding the public transportation benefits provided by employers, exemptions for wages provided to amateur sports referees, expenses related to taxation of costs of company cars, new income tax tariff, the regulations on taxation of the attorney fee charged to the other party and the taxation of the wages paid to the athletes. All of those are very crucial subjects especially the football players are supposed to have more tax burden on their income after certain level of income.
  • Draft Communiques on the related subjects below are able to seen and open to public consultations.
    • Draft Communique regarding Transfer Pricing in Turkey to be in line with OECD standards,
    • Draft Communique regarding with the abandonment of the tax registration,
    • Draft Communique of Invitation for Disclosure was prepared.
  • Extensions on Tax Liabilities:
    • E-book deadlines such as signing and loading time have been extended.
    • Provisional tax has been postponed and submitted in May.
    • By making amendments in the General Communiqué on VAT Application, a guarantee application was introduced for VAT refund transactions in the force majeure period.
  • A brochure on the Electronic Notification System has been published by the Ministry of Finance and Treasury.
  • The e-book guide for taxpayers has been updated.
  • A guide on accounting slips issued in electronic environment has been published.

     B. Social Security Issues

  • Is there an opportunity for state owned enterprises and companies with different institutional codes to benefit from cash compensation for the headcount?
  • Is Covid-19 a Work Accident or Occupational Disease? Seems no. This issue will be widely discussed among the taxpayers and employees and apparently there will be many cases and conflicts among them.

     C. R&D & Incentives

  • Turquality Programme: The Turkish President’s Resolution No. 2564 on Branding Supports for Foreign Exchange Earning Services Sectors was published in the Official Gazette on 20 May 2020. (Turquality, an incentive program led by the Government)
  • The application periods for the Branding Support for Foreign Exchange Earning Sectors have been extended.
  • Decision on Supporting Digital Activities at Market Entry Has Been Published. (It will give incentives for digital fairs and e-commerce activities)
  • R&D Annual Activity Reports: Activity reports regarding the activities carried out in R&D & Design Centers must be submitted.
  • Opportunity to Work Remotely in R&D Centers: Remote Work Flexibility application was extended until the end of June for R&D and Design Centers and Teknokent Companies.
  • Progress Reports: Submitting progress reports on TUBİTAK projects
  • New Calls for Projects
      • It is possible to submit a project proposal for EUREKA Network Call on Covid-19.
      • KOSGEB Techno Investment (Tekno Yatırım) applications continue to be received.
      • Patent Based Technology Transfer Support Call (Patent License – 2020 – 1)
      • SME Support Call for Order Based R&D Projects (Order R&D – 2020)

     D. Banking & Finance

  • Monetary Restrictions:
    • The BRSA (Banking Regulation and Supervisory Authority-BDDK) announced in its press release on 21.05.2020 that gold purchases of 100 gr and above will be carried out in one day value.
    • The BRSA has published a new Regulation to prevent manipulation and misleading transactions in financial markets.
  • The BRSA narrowed down the placement and loan volume for banks with its decision dated May 20th, 2020.
  • The amount of the SWAP agreement between the CBRT (Turkish Central Bank) and the Central Bank of Qatar has been increased from 5 Billion USD to 15 Billion USD.
  • The CBRT made very important changes in the Capital Movement Circular which regulates the foreign direct investment, loans and capital movements.
  • CBRT 2019 Annual Report has been published. According to 2018 statistics, the CBRT met 12.4% of the total corporate tax on its own in Turkey.
  • Central Government Debt Statistics have been published.
  • The Banks Association of Turkey has published an information note summarizing the general measures taken within the scope of the fight against the epidemic, the financial measures taken by the banks, their recommendations and the work done by them.

     E. International Trade & Customs

  • The Covid-19 website of the Ministry of Commerce brings together very useful information. https://covid19.ticaret.gov.tr/
  • Increasing Custom Taxes: Additional customs duty has been imposed on many products.
  • The UK has published a tariff on the customs tax rates to be applied after Brexit. https://www.gov.uk/check-tariffs-1-january-2021
  • Communiqué on goods forbidden and export-related goods and goods subject to prior authorization has been updated.
  • An additional 1 year has been granted for Investment Incentives.

     F. Other Legislative Changes in Turkey

  • Significant changes were made to the Insurance Regulation.
  • State Aid Implementation to Private Theater Projects: The Amendments to the aid to be given to the projects of private theaters have been amended to increase the amount of assistance and the facilities have been provided due to Covid-19.
  • Some relaxing, regulatory legislative amendments were made within the scope of Covid 19.

We have summarized our notes on the changes and developments regarding the summary financial / tax legislation in the last one month, in English, in short headings.

Please do not hesitate to contact us for further information. As we summarized the bulletin for you, we keep it very short. Please tell us if you have any comments or questions on any of the subjects above.

Best regards,

Şaban Küçük

 

 

 

 

 

Taxademy Newsletter

 2020-54

Date     : May 5th, 2020

Subject: Monthly Financial/Tax Regulations Summary in Turkey (April 2020)

 Distinguished readers,

April 2020 was very busy in terms of financial agenda, because of the pandemic lots of expected arrangements were made and we are expecting May to be much busier month as well in tax, financial, monetary and economic agenda. We would like to submit for your attention as a summary the important tax-related and financial issues that occurred within the last month.

Let’s briefly start with the headings and then examine the details. We will submit information about;

  • Turkish measures explained and executed in April, 2020 to combat with Covid-19
  • The New Omnibus Law covering many of the measures explained by the President
  • Different measures taken by the Authorities, and postponements of the tax, financial and regulatory obligations
  • Draft Communique regarding Transfer Pricing in Turkey to be in line with OECD standards,
  • Important Changes on Tax Legislations in April
  • Social Security Issues
  • Other Measures and Postponements to Fight with Covid-19
  • Finance issues including CMB, BRSA and TBA
  • Changes in the Public Organizations in Presidential System in Turkey
  • Changes in Public Procurement and Tenders in Covid-19
  • Organized Industrial Zones Overseas Legislation and related changes
  • Amendments made to the Free Zones Implementing Regulation
  • The management structure change of Eximbank.

In addition, you can visit our Covid-19 Support website that we prepare in order to support the business society, employees and all stakeholders.

    • In April, including in this context, the new roles of internal audit in Covid-19 world, Turkey and the comparison of health systems in OECD countries, the sociological analysis of the epidemic, the proposal of refunding the accumulated VAT to the firms, the new transfer pricing provisions draft, regulations on public real property debts, the effect of the epidemic to public tenders, discounts and adjustments made in banking fees, and the tax-free periods, with special newsletters with the experts are published.

We hope that you will benefit and enjoy our newsletters. In this context, we would like to add the topics you want to be analyzed. For example, the possible effects of the epidemic on tax justice and tax burden, the taxation regime of the healthcare system, especially the healthcare professionals, the creative fiscal policy recommendations that should be implemented in this period, and the examples of good practices that companies make for their suppliers and ecosystems can be considered within this scope. We are looking forward to hearing from you to convey both your subject proposal and such expertise to a wider audience.

       A. Tax Issues

  •  Draft Transfer Pricing Communique
    • Long-awaited Presidential Decree regarding Transfer Pricing in Turkey put in force in February and now the Ministry of Finance and Treasury has announced the Communique to collect feedbacks and opinions. Here are the details.
    •  CbCr (Country Report): Turkish resident ultimate parent company of an MNE group having consolidated revenue exceeding Euro 750 Million is needed to submit this report. This annual report will be uploaded online until the end of a fiscal year.
      • Reporting should include the sales, profits, capital, retained earnings, headcount and other information.
      • The first country file will be submitted for the FY 2019.
      • Turkish and foreign headquartered firms with CbCR filing obligation should inform the Turkish tax authorities about their ultimate firm, reporting firms in Turkey, and fiscal year of the companies until June of each fiscal year. This information should be reported this year until the end of August 2020 as well.
    • Master File: With the amendments in legislation, corporate MNE taxpayers having TRY 500 million in both asset and net sales figures for the previous year need to prepare a master file and submit to the Tax Office and tax auditors upon request. The first master file will be submitted for the FY 2019 if there is no postponement because of Covid-19.
    • We have included all the details regarding the draft of the Communiqué in our circular numbered 2020-50.
    • The Communiqué also includes the following form and report templates in accordance with the new reporting format:
      • Annex-5 Notification Form Regarding Country-Based Reporting
      • Annex -5 Explanations on Filling Out the Country-Based Reporting Form
      • Annex -6 Country Based Report
      • Annex -6 Explanations on Filling the Country Based Report
  • New Omnibus Law: Covid-19 Measure Package 2 was enacted as Law No. 7244.
    • The Law Proposal, prepared as the second measure package for the outbreak, was sent to the Parliament Assembly and quickly accepted.
    • The Law includes the measures to ensure social isolation in various laws, granting 39.24 TL per day as temporary employment, reducing the conditions sought for the financial aids for elderly and the disabled, authorizing the relevant Ministries to postpone obligations such as notification, meeting, general assembly, continuing to benefit from incentives for R&D, design centers and technocities for those working at home, electricity debts, credit and dormitory payments, postponement of some dues, the costs related to the usage of various public lands can be postponed without interest, and limitation of profit distribution.
    • You can examine all of these regulations in 2020-45
  • Force Majeure Appeal Petitions: Within the scope of force majeure, the possibility of submitting an application for taxpayers who have objection about tax deferral was provided by the Ministry of Finance and Treasury.
  • Withholding VAT: VAT Withholding within the Scope of Force Majeure: Partial withholding for VAT will not be applied to taxpayers within the scope of force majeure.
  • Corporate Tax Return of 2019: The corporate tax return for 2019 was postponed to 1 June.
  • Deferrals of Submissions and Payments: Dates related to certain declarations and notifications such as payroll tax, VAT, social security premiums, Ba and Bs forms, and receipt of electronic ledger statements have been postponed or arranged by the competent authorities.
  • Private Pension Funds: The exchange rate difference in the private pension in foreign currency has been clarified in terms of income taxation and the state payment contribution rate is determined as 10% instead of 25%.
  • Double Taxation Agreements: Double taxation agreement signed between the Ivory Coast with Turkey and the Protocol amending the Agreement was signed with Ukraine have both been approved.

       B. Social Security Issues

  • International Social Security Agreements: Social Security Agreements signed with Mongolia and the Kyrgyz Republic have been approved.
    • The administrative agreement for the approval of the implementation of the Social Security Agreement signed between Turkey and Moldova Resolution No. 2472 was published in the Official Gazette dated April 22, 2020.
    • You can review our Social Security Guide 2020-14 for the implementation of social security agreements and your rights and obligations and details in this regard.
  • SGK (Social Security Premiums) Payment Delay: SGK payments have also been postponed for taxpayers whose tax returns have been postponed as part of the force majeure. Postponed payment is only, declarations should be given on time.
  • Postponement of MPHB: The project of combining the Concise and Premium Service Declaration (Muhtasar SGK) has been postponed to July 2020, except for 7 provinces which have started to implement as pilot cities.
  • Unpaid Leave: A new code definition has been made by SSI (SGK) for employees on unpaid leave. These newly created codes can also be selected for foreign policy holders.
  • Minimum Wage Support: SSI Circular on Minimum Wage Support, which will continue in 2020, has been published.
  • Unpaid Leave Transactions: Covid-19 leave without payment transactions module for employees who are not fired was opened by SGK.

       C.  Other Measures and Postponements

  •  Housing Credit Payments: It was aimed to prevent the citizens from falling economically by providing convenience in the payments of the state-sponsored housing account.
  • Postponement of Declarations: Association (NGO’s) statements and notifications were postponed to 1 August 2020.
  • The BDDK (BRSA) went to postpone the deadline for some notifications, financial reports and statements.
  • Cessation of Time in Judicial Procedures: The period of cessation brought until 30 April to prevent loss of rights in the judiciary has been extended to 15 June 2020. These periods include lawsuits, initiation of enforcement proceedings, application, complaint, appeal, notice, notice, submission and timeout periods, all periods related to the beginning, use or termination of a right, including mandatory administrative application periods.
  • Vehicle Inspections: Deferral was made in conducting vehicle inspections and an additional period of 45 days was granted.
  • Postponement of submissions to EMRA: The Energy Market Regulatory Authority (EPDK) has announced its postponement decision (number 2 April 2020/9276) in relation to certain obligations. Accordingly, the liabilities listed have been extended for 3 months without any further action.

        D.  Finance Issues

  • Limitation on Derivatives: BRSA (BDDK) and CMB (SPK) changed the limit of derivative transactions with the decisions they issued. Due to the imbalances in global markets and increased risks, this decision is a result of the evaluation made in order to increase the effectiveness of the steps and measures taken to manage these risks and maintain financial stability.
  • Expanding Credit Facilities: BRSA announced to the Banks in Turkey to expand its credit facilities and announced a new active ratio (AR) formula that they could take some more risk.
  • Money Transfers Abroad: The Banks Association (TBB) has published an information note on money transfers abroad. The transactions to be carried out at the banks will continue within the normal flow process, and there are no restrictions or suspension of transactions. Within the scope of FATF’s recommendation, only the regular notifications of 1 million Turkish Lira and equivalent foreign currency transfers and money transfers abroad to the Financial Crimes Investigation Board (MASAK) were taken one day before.
  • Bad Debts: An information note was published by the Turkish Banks Association on the temporary article added to the Law on the Failure to Consider Records Regarding Bad Checks and Protested Bills and Credit and Credit Card Debt.
  • Postponing the Debts of Forest Villagers: With the amendment of the Regulation published in the Official Gazette dated April 30, it was decided to postpone the loan installments that need to be collected for the 3-month period from April 1, 2020, without any application requirements.

        E.  Other Issues

  • Organized Industrial Zones Overseas: The amendments to the Organized Industrial Zones Legislation have been made and the President’s decision on the establishment and operation of an organized industrial zone abroad has been published which is a quite new in Turkey.
  • The Amendment to the Implementing Regulation on Organized Industrial Zones was published in the Official Gazette dated April 16, 2020 and entered into force.
    • With the aforementioned regulation, some changes made in the powers of the general assembly and the board of directors, the OIZ type change, the follow-up of the OIZ occupancy rate and notification to the Ministry, the right to vote in the general assembly, the decision to make a donation, the evaluation of past donations within this scope, the substitute members in the board of directors, the supervisory board’s inability to call the general assembly for an extraordinary meeting, construction plan in the OIZs, places where the participant’s support units can be built, commercial books to be kept, facilities that cannot be established in the OIZs, the form of the land allocation agreement, in which cases the land allocation can be canceled, the amount to be reimbursed in the cancellation of the land allocation, the conditions for the participant to rent his own facility to another tenant, the e-mail system registered in the call of the general assembly.
  • Free Zones: Amendments have been made to the Free Zones Implementing Regulation.
    • With the amendment of the Regulation published in the Official Gazette dated April 25, 2020, the definitions in the Regulation were changed and how to extend the time in the business or organization and operating contracts was regulated. In addition, changes have been made on how to re-grant the business or establishment and business permit, the duration of time extensions, the formation of commissions and independent audit reports to be requested.
  • Changes in the Public Organization in Presidential System: Significant changes have been made in the organizational structures of the related institutions and organizations such as the Ministry of Finance and Treasury and Industry and other institutions and organizations affiliated to the Ministries through Presidential Decrees numbered 58, 59 and 60.

Information Box: Presidential Decrees issued in the New Government System:

    • Within the framework of the new government system in Turkey, the ministries and all public institutions and organizations were redefined within the new public administration system and regulated with a single Legislative Decree. (Decree No. 4, Official Gazette dated 15/7/2018 – 30479)
    •  Presidential Decree No. 1 regulates the organization of the Presidency. (Decree No.1 Official Gazette dated 10/7/2018-30474)
    •  Decree No. 2 regulates the principles and procedures for the establishment, cancellation and use of the positions and positions of the public institutions and organizations within the scope of it. (Decree No. 2, Official Gazette dated 10/7/2018-30474)
    •  Procedures and principles related to senior public administrators and appointment procedures and principles in public institutions and organizations are determined by Decree No. 3. (Decree No. 3, Official Gazette dated 10/7/2018 – 30474)
  • Changes in Public Procurement and Tenders: The opportunity to give termination and time in public tenders has been stretched.
    • It is possible to decide on the extension of the contract or termination of the contract due to force majeure in the works carried out within the scope of the public procurement contract.
    • Within this scope, a circular on the effect of the epidemic on public procurement contracts was published in the Official Gazette with the Presidential Circular No. 2020/5 on April 2, 2020.
    • In this context, applications will be made to the administration and the Ministry of Treasury and Finance will be asked to make an assessment. As a result of the evaluation, the conditions that arise should not be caused by a defect arising from the contractor, should prevent the contractor from fulfilling its contractual obligations, and the contractor should not be able to eliminate this obstacle.
  • Regulation on Tourism: Some arrangements have been made in the quality of tourism facilities.
    • Amendments to the Regulation on the Qualifications of Tourism Facilities were published in the Official Gazette No. 31089 dated April 4, 2020. With the Regulation, arrangements have been made regarding the conditions sought in gastronomic facilities, camping and recreation areas.
  • The Ministry of Commerce has published the Regulation on Market Surveillance.
    • In this new regulation, the procedures and principles of the market surveillance and supervision processes carried out in accordance with the Law No. 4703, sensory examinations, corrective actions, the way of sampling and inspection, and the record and registration procedures, and the measures to be taken in violation are arranged in detail. The producer and distributor have duties and obligations such as the announcement, voluntary recall and traceability of non-technical regulation, insecurity and consequently unsafe products. The old Regulation of 2014 has been repealed. Documentation of transactions, VAT, commodity to be destroyed are the issues from tax point of view that needs to be carefully examined and implemented by production and distribution companies.
  •  Other Amendments: Within the scope of Covid 19, some relaxing and regulatory legislative amendments have been made. The following regulations were made with the arrangements made within the scope of the epidemic:
    • The importation of medical diagnostic kits in Turkey. The Pharmaceuticals and Medical Devices Agency should give a written permission (2020-19 Import Communiqué)
    • Lemon Export: Implementation of the Ministry of Agriculture preliminary permit requirement for lemon exports (Export 2020-7 Communiqué)
    • Expenditure on Pandemic: Healthcare pricing commission decision application related to pandemic care services (SGK-2020-3)
    • Exemption on Healtcare Spend: by the President’s Decision No. 2399 dated April 13, 2020 (All personal protective equipment, tests, kits and medicines to be supplied and distributed under the scope of Pandemic are included in the scope of exemption. This decision came into force to be effective as of March 1st.)
    • Payment for Teachers: Administrators and teachers affiliated to the Ministry of National Education benefit from additional tuition fees and do not make additional payments for compensatory and distance education activities (President’s Decision No. 2347)
    • Force Majeure in Farming: In the regulations on good agricultural practices and organic farming, the Ministry of Agriculture and Forestry has been given the authority to make regulations regarding the validity periods and the procedures and principles regarding the validity of the certificates, control and inspection in case of force majeure. (Official Gazette, April 28)
    • New arrangements have been made in accordance with social isolation in the fields of artificial insemination, medical insemination, embryo transfer, import of animal products, and preliminary notification and veterinary checks on the entry of animals and products into the country. (Official Gazette of 28 and 30 April)
  • The management structure of Eximbank has been changed.
    • On the basis of Law No. 3332, with the Decision of the President dated April 3 and numbered 2366, changes were made in the appointment of the Ministry, the General Manager and the structure of the High Advisory and Loans Steering Committee. These regulations came into force on April 4, 2020.

We have summarized our notes on the changes and developments regarding the summary financial / tax legislation in the last one month, in short headings. Please do not hesitate to contact us for further information.

Please send us your comments and suggestions regarding this bulletin format.

Best regards,

Şaban Küçük

 Tax-IA Newsletter

 Nr       : 2020-36

Date     : April 6th, 2020

Subject: Latest Financial/Tax Regulations in Turkey (March 2020 Summary)

 

Distinguished readers,

March 2020 was very busy in terms of financial agenda, because of the pandemic lots of expected arrangements were made and we are expecting April to be much busier month as well in tax, financial, monetary and economic agenda. We would like to submit for your attention as a summary the important tax-related and financial issues that occurred within the last month.

Let’s briefly start with the headings and then examine the details. We will submit information about;

  • Turkish economic measures explained by the President against Covid-19 on March 18th, 2020,
  • The Omnibus Law (nr.7226) covering many of the measures explained by the President,
  • Different measures taken by the Authorities, and postponements of the tax, financial and regulatory obligations,
  • Long-awaited Presidential Decree regarding Transfer Pricing in Turkey to be in line with OECD standards,
  • Changes in banking fees in Turkey,
  • New Communique on Digital Tax,
  • Tax Debt Limitations to pay for the contractors,
  • Special Collateral Certificate (SCT-ÖTS) for special consumption taxpayers (ÖTV)
  • Circular on “No-debt certificate” required by the Social Security Administration (SGK)
  • Additional tax on phone and other carriers,
  • Update on Inward Processing Regime (DİR)
  • Amendment on Withholding VAT rates,
  • Changes on the legislation of Mutual Funds, Pension Mutual Funds,

We hope that you have taken advantage of and have taken pleasure in our bulletins and we express our respects.

  1. Long-awaited Presidential Decree regarding Transfer Pricing in Turkey put in force in February and no legislative secondary legislation is announced or published yet.
    •  CbCr (Country Report): Turkish resident ultimate parent company of an MNE group having consolidated revenue exceeding Euro 750 Million is needed to submit this report. This annual report will be uploaded online until the end of a fiscal year.
      • Reporting should include the sales, profits, capital, retained earnings, headcount and other information.
      • The first country file will be submitted for the FY 2019 if there is no postponement because of Covid-19.
      • The firms obliged to prepare country report should inform the Tax Office about the ultimate firm and reporting firms, and fiscal year of the companies until June of each fiscal year. This information should be reported this year until the end of August 2020 as well if there would be no postponement.
    • Master File: With the amendments in legislation, corporate MNE taxpayers having TRY 500 million in both asset and net sales figures for the previous year need to prepare a master file and submit to the Tax Office and tax auditors upon request. The first master file will be submitted for the FY 2019 if there is no postponement because of Covid-19.
  1. Covid-19 New Omnibus Law referring Turkish Economic Stability Shield Package is announced and published very fast. Most of the measures explained by the President was regulated with a new Omnibus Law (No: 7226) including 53 articles in Official Gazette, dated March 26th, 2020.

A: Regulations laid down by this Law Proposal,  

  • By an article added to the Mining Law (Additional Article 19); in the case of any force majeure, the financial obligations and/or declarations within the scope of the Mining Law will be postponed and the financial obligations will be split into instalments by taking the opinion of the Ministry of Treasury and Finance,
  • A minimum monthly wage support of TRY 75 TL will be provided to employers throughout 2020 in order to reduce employers’ labour costs to maintain and increase employment,
  • Consumers will be allowed to request for meeting their electrical needs from renewable energy sources, and different tariffs may be determined for them,
  • The President is entitled to decide to postpone the electric and natural gas bills of citizens who are victims of earthquake, fire, flood, landslide or similar disasters, and in the case of postponement, cover the late fee to be collected by the electricity and natural gas distribution companies from consumers due to the postponement, other than the principal, from the budget of the Ministry of Natural Resources,
  • The Turkish Standards Institute will be entitled to examination staff from outside the Institute under employment contract,
  • The citizens who do not reside in Turkey and the persons included in the scope of the article 28 of Turkish Citizenship Law will be allowed to participate in the private pension system in foreign currency,
  • The amount of funds to be transferred to credit guarantee institutions (CGF) will be increased from 25 billion Turkish Lira to 50 billion Turkish Lira.

The original draft law was then sent to the Planning and Budget Commission.

 B: Regulations brought by the additions made by the Planning and Budget Commission of the Grand National Assembly of Turkey;

  • The article 75 of the Income Tax Law is amended to ensure that the exchange rate difference will not be taken into account in determining the amount of the income obtained from the pension mutual funds established in a foreign currency, in which the contribution payments made in foreign currency are deposited.
  • With the additional Article 2 added to the Law for Provincial Administration, the telephone subscriber and location information needed by the Information Technologies and Communications Authority under the following circumstances shall be provided without delay:
    • a) the telephone subscriber and location information needed by the Disaster and Emergency Management Directorate or the relevant governorship shall be provided without delay within the scope of search, rescue and response activities in disaster and emergency situations, to be limited to people affected by the disaster or emergency,
    • b) within the scope of calls to the emergency call service 112, the telephone subscriber and location information needed by the emergency call service or the relevant governorship to reach the callers shall be provided without delay.
    • In this context, an access system can be established in accordance with the procedures and principles to be determined by the Ministry and the Information Technologies and Communications Authority. Data obtained under this article may not be used for other purposes.

After the Commission the Draft Law is sent to the General Assembly in the Parliament. Mostly the measures mentioned by the President was added in the General Assembly.

C: Additions made during the General Meeting of the Grand National Assembly of Turkey:

  • The Law no 4706 is amended to postpone the fees including the rents, revenue shares and adequate pays that must be paid by tourism investors and establishments for the period from April 1st to June 30th by six months without seeking application,
  • The Labour Law is amended to increase the make-up period from 2 months to 4 months,
  • Social Insurance and General Health Insurance Law is amended and by the Additional Article 18, the lowest salary paid is increased to TRY 1500, and the holiday bonus will be paid according to the month of the holiday, instead of the date of payment,
  • The Unemployment Insurance Law is amended to alleviate the conditions for short-time working allowance, (2020-24)
    • After the amendment, the employees who (i) paid unemployment insurance premiums for at least 450 days in the three years prior to the start of the short-term working; and (ii) worked under an employment agreement for the last 60 days prior to the start of the short-term working, can benefit from the short-term working allowance due to the pandemic.
    • Employers are required not to fire any employees during the short-term working period in order to be able to benefit from the short-term working due to the pandemic.
    • Applications for short-term working allowance due to pandemic shall be evaluated within 60 days as of the application date by the inspectors.
    • The President of the Turkish Republic is authorized to extend the application for short-term working due to the pandemic, until December 31, 2020.
  • The Law on Bad Checks and Protested Bills is amended to provide relief to those whose principal or instalment payment was before 24.03.2020 but delayed allowing them to pay by 12.2020 or restructure the debt,
  • The Law of Checks is amended to halt execution for crimes committed until March 24th, 2020, and allow for payment in certain instalments,
  • Accommodation Tax which was introduced by the Law No 7194 and planned to start in April 2020 is postponed to the beginning of 2021,
  • The Provisional Article 1 added to the Law during the General Meeting regulates the provisions such as periods, procedures, trial, etc. to prevent loss of rights in jurisdiction,
  • The Provisional Article 2 added to the Law during the General Meeting stipulates that the failure to pay office rent between March 1st-June 30th 2020 will not considered as cause of evacuation.
    • This is about just the workplace lease agreements: The Law of 7226 regulates that a tenant’s inability to pay the rent for a workplace between March 1st, 2020 and June 30th, 2020 does not make reason for lease termination or eviction of the work place.
    • The new regulation, which is applicable only to workplace lease agreements, does not release the tenant from its obligation to pay rent. However, it offers them protection that the lease agreement will not be terminated and they will not be evicted due to their inability to pay rent.

Besides, the President of the Republic addressed other issues as follows. Those are very important to keep in mind:

  • The top priority is to avoid interruption of production and employment.
  • The prerequisite for any company that will benefit from the opportunities in the economy package described above is that it will not cause any loss of employment.

So, we assume that the prerequisite for any deferral in the economy package described above is that it must not cause any loss of employment. This is emphasized by the President of Turkey in his speech and some measures and incentives by the firms who are not firing any employees.

  1. OTHER COVID MEASURES EXPLAINED BY THE PRESIDENT
  • In domestic air transportation, the VAT rate is reduced from 18 percent to 1 percent for 3 months. Currently, VAT is not collected from the services and deliveries corresponding to the international section on flights abroad.
  • For companies with cash flows negatively affected by the measures taken against the COVID-19 pandemic, it is planned to postpone their principal and interest payments of loans to banks by minimum 3 months and provide them with additional financial support if necessary.
  • In order to maintain capacity utilization rates during the temporary slowdown in exports, inventory financing support will be provided to the exporters.
  • For the tradesmen and craftsmen who demands so declaring that their business is negatively affected during this period; the principal and interest payments for April, May and June regarding the loan payables to Halkbank will be postponed by 3 months without interest.
  • The Credit Guarantee Fund (KGF) limit will be increased from 25 billion Turkish lira to 50 billion TRY. In credit allocation, priority will be given to the companies and SMEs who need liquidity and have security gap since they are adversely affected by the events. This is regulated by the Omnibus Law nr. 7226 explained above.
  • Measures will be taken to promote introduction of credit packages for social purposes under favorable and advantageous conditions for citizens.
  • For any house with a price below 500 thousand Turkish liras, it is considered to increase the creditable amount from 80 percent to 90 percent and reduce the minimum down payment to 10 percent.
  • The firms going into default for April, May and June due to the effect of the measures taken against the spread of the virus will have a “force majeure” annotation in their credit registers.
  • Minimum wage support applied in previous years will be continued.
  • Flexible and remote working models in our legislation will be made more effective. These methods, which are already included in our labor law but not preferred too much, have become important due to this crisis.
  • The lowest retirement pension will be increased to TRY 1,500.
  • Holiday bonus of retirees will be paid at the beginning of April. Likewise, pension promotions of retirees will be directly paid into their accounts, so that they will not have to actually go to bank branches.
  • An additional fund of TRY 2 billion will be allocated for financial aids to families in need according to the criteria set by the Ministry of Family, Labor and Social Policies.
  • In order to ensure continuity in employment, the 2-month make-up period will be increased to 4 months. This practice is currently used in some sectors with high season intensity based on the Labor Law but the period of 2 months remains insufficient.
  • For elderly people over the age of 80 who live alone, a periodic follow-up program consisting of social and home health-care services will be launched.
  • Exports of some important goods such as ethyl alcohol, cologne and disinfectants have been export-listed.
  • Ministry of Finance designed all e-system for the taxpayers not to come to the Tax Offices until April 10th, 2020.

What did the Banks do after the President’s Speech?

After the speech of the President the Banking Regulatory Authority in Turkey (BDDK) and Turkish Banking Association (TBA) has announced some measures and advisory decisions.

  1. The BDDK took some additional measures regarding the outbreak with its decisions dated March 19th and nr. 8949 and 8950. https://www.bddk.org.tr/Home
    • 90-day default period for financial institutions to set aside special provisions is now 180 days for factoring and financing companies and 240 days for financial leasing companies.
    • 90-day default period for financing companies to set aside general provisions in respect of consumer loans other than housing loans is now 180 days.
    • All of the above measures will be valid until December 31, 2020, and applicable to all financial institutions setting aside provisions in accordance with the expected loan loss model under TFRS-9 and receivables that are not monitored under the “bad debt account”.
    • For receivables that are not transferred to the “bad debt account” in spite of the 90-day default, financial institutions will continue to set aside provisions in accordance with their own risk model.
  2. TBA issued certain advisory decisions on Turkish banks’ activities after the President’s speech as well. Pursuant to the TBA’s advice, Turkish banks, at their own discretion, will be able to be flexible in determining its working and customer hours by informing their customers; and take the necessary measures to prevent crowding and close contact; and temporarily close their branches that have the highest risks and the highest foot traffic.
  3.  Corporate Tax: Tax declarations period for corporations will start in April 2020. There is no postpone regarding with tax returns for corporate tax payers in Turkey, amounting of 860.000 roughly according to the Revenue Authority in Turkey as of February 2020.
  4. The Valuable Housing Tax was postponed to 2021 and Fundamental Changes were made in this tax so no need to take any action in this year.
  5. The Application of Appreciation Fee was being started in Turkey in February but no secondary legislation announced yet.
  6. The General Communiqués regarding the application of the Law no 7194 were published after announcement as Draft on the GIB (Revenues Authority of Turkey) website in order to obtain the opinions of the public.
    • Draft General Communiqué on the Application of Accommodation Tax is not published ad the tax is postponed to the beginning of 2021 because of Covid-19.
    • Communiqué on the Application of Digital Service Tax is published.
    • General Communiqué on Income Tax serial no 311 is not published yet.
      • This Communique explains the changes with the Law No. 7194. One of the changes is expense rules for company cars. Some limitations are imposed on the total amount of the monthly rental fee paid for each of the cars (binek oto) acquired by renting, and the amount of special consumption tax (ÖTV) and value added tax (KDV) that can be considered as an expense over the taxable income, and the amounts that can be calculated as a depreciation for passenger cars with some limitations.
      • The Communique explains new taxation on football players, wage earners, new income tax tariff, new taxation regime for professional service providers, referees, new tax exemption for employees on transportation, as well.

7.Amendments were made to the Mutual Funds and Pension Mutual Funds legislations in Turkey

    • The definition of the issuer was updated with the amendments to the Communiqué and Regulation published in the Official Gazette dated March 4, 2020, changes were made in the limitations regarding fund portfolio investments, and there were explanations regarding the investments in stock-dense funds and investment in stock market funds. These regulations came into force on the date of publication.
    • One of our partners, Saban Kucuk attended in a related Congress in 2019 by the IFA in London which is 81st international congresses (International Fiscal Association) as rapporteur on Turkey regarding the Investment Funds.

8. Export Limits are updated for some high demand goods such as ethyl alcohol, cologne and masks.

    • Because of the high demand after the Covid 19 some products were added to the List of Products Subject to Export Registration. This list keeps some goods first for domestic markets. The Communiqué nr. 2020/5 provides that these products’ customs declarations can only be recorded and assessed after applying to the relevant Export Union’s General Secretary for pre-approval. The Export Union’s General Secretary reviews the request and asks the Ministry of Trade’s Export General Directorate to issue the pre-approval. This new regulation was published in Official Gazette on March, 18th 2020.
    • The products needing approval first are ethyl alcohol, cologne, hydrogen peroxide and melt blown fabric.
  1. Public Administration and Institutions first pay the tax debt before the contractors, and the limit is amended.
    • The limit was determined again for the public institutions and organizations determined to be unable to pay without paying the tax debt (public debt) by amending the General Communiqué on Collection.
    • Accordingly, the said institutions and organizations will ask for a document showing that there is no tax debt for payments over 5.000 TL instead of the amount of 2.000 TL.
  1. Special Collateral Certificate (SCC) is in use in special consumption tax (ÖTV) in Turkey.
    • The Special Consumption Tax (SCT) General Communiqué on the application of Special Collateral Certificate (SCS-ÖTS), which provides facilities regarding the SCT collateral returns, has been published.
    • The amendments made with the Communiqué on SCT application number 7, published in the Official Gazette dated 3 March 2020, will come into force on 1 May 2020.
    • The parts of the preliminary guarantees that may fall within the scope of the ÖTS will be resolved within 2 months if they meet the necessary conditions.
    • In order to receive these guarantees, besides the general conditions stipulated, it is necessary to fulfill the special conditions determined for each type of certificate.
  1. No debt certificate by SGK in Turkey is updated. (2020-5 Circular)
    • The Social Security Institution (SGK) made important statements regarding the implementation of the No Debt Letter with Circular 2020/5.
    • No Debt Application for Tender Entry: According to the Circular dated March 2, 2020, there are no debt types and amounts, the types of debt not covered, the period of the debts, the specific conditions according to the type of the person to bid. business partnerships, consortia, trading companies and partners).
    • Debt Inquiry of the Administrations: In addition, during the progress payments, the details of the employers’ current debts by the administrations in electronic environment, the scope of the interrogation authority, the issue of the password, the debt inquiry and the responsibilities of the administrations are included.
    • Government Incentives: Besides, there are additional explanations about government aids, incentives and supports, debt inquiries, incentive types that are covered, types of incentives and support that are not covered, terms of use and no debt documents.
  1. Additional tax rates on phones and some carrier goods is amended.
    • The tax rates for the manufacturing or importing of some carrier goods for the reproduction and transportation of Intellectual and Artistic Works have been redefined and phone devices have been included as well.
    • According to the decision, the tax rates to be made on the production or import prices of the carrier materials such as blank CD, DVD, USB memory and technical devices used to reproduce the ideas and works of art, the item description and the position numbers of the products in the attached list are evaluated together.
  1. The Communique on the Inward Processing Regime was updated
    • With the closing of permits, documents and commitments in sales and deliveries considered as Inward Processing Regime and Exports, the list of goods that will not be granted inward processing was updated.
    • Besides, if the administration deems it necessary, it may request additional information and documents or may not want some of the information and documents counted.
    • These regulations are carried out by the Ministry of Commerce and will be effective from the date of publication in the Official Gazette on March 6, 2020.
  1. VAT withholding rates are updated
    • A new regulation has been made regarding VAT withholding rates. With the Communiqué No. 31 on the Amendment to the VAT Communiqué published in the Official Gazette dated March 3rd, 2020, the rate of withholding applied as 1/2 in bullion metal, copper, zinc, aluminum and lead products and scrap and waste deliveries has been changed to 7/10. The new rate will be applied for deliveries as of April 1, 2020.
  1. Online Application of the Government Incentives: A Circular regarding the Support Management System (DYS) that is applied in the governmental incentives was issued.
  • Within this scope, the components regarding;
    • Supports for good export,
    • Supports for service export,
    • Inward Processing Regime,
    • Outward Processing Regime,
    • Tax, Levy, Charge Exemption and
    • Clean Export Credits shall be carried out within the scope of Support Management System.
  • The new applications to be forwarded from March 31st, 2020 are accepted only via the Support Management System. It is not just because of Covid-19. This new application started months ago in order to make all those applications online.
  1. Changes were made in the Fees Charged for the Banking Transactions again in March after huge changes in February.
  • TCMB and BDDK made a regulation regarding the procedures and principles for the fees that will be charged from the financial consumers and the fees that can be charged from the commercial customers by the banks.
    • The purpose of the said Communiqué is to determine the types and qualities and the maximum amounts or rates of the fees that can be charged in return for the products or services provided and to establish the relevant procedures and principles in order to increase the predictability and transparency in the transactions that the banks will make with their commercial customers, to ensure the unity of concept and term and to prevent surcharging.
    • The minimum payment amount for credit card was fixed as at least (i) 30% of the debt incurred in the relevant period; and (ii) 40% of the debt incurred in the relevant period for the first year following the issuance of a credit card. As per the amendments, the BDDK is now entitled to determine the minimum payment amounts in a range between 20% and 40% of the debt incurred in the relevant period, by considering the opinions of (i) the Ministry of Treasury and Finance (ii) the TCMB. BDDK has announced such rate as 20% on March 31, 2020, to be applied until further announcement.  Nevertheless, Turkish banks may freely agree on a different minimum rate, provided that the rate is not less than the rate announced by the BDDK.
  1. Dates concerning some tax liabilities have been deferred or adjusted because of Covid-19:

Turkish Ministry of Treasury and Finance, Revenue Authority, Ministry of Commerce and Industry, authorities such as KGK and TUBITAK and state-owned banks, ISKUR and the Central Bank have introduced deferrals and easiness concerning some significant fiscal liabilities due to the pandemic.

We would like to summarize these practices and easiness for your attention below.

 

a) VAT and Withholding Tax Deferrals: Payments due in April, May and June on account of withholding tax and VAT (including VAT2) as well as the Social Security premiums for the sectors announced by the President will be deferred for 6 months for each. These sectors are Retail Sale Trading, Shopping Mall, Iron & Steel and Metal Industry, Automotive, Logistics- Transportation, Cinema- Theatre Activities, Accommodation, Food & Beverage Services, Textile- Clothing Industry and Event- Organization Industries and others added later in this list. Those are considered to be in force majeure for 3 months namely April, May and June 2020.

This force majeure rule does not regulate the contracts between the parties in private law, we advise that you read our advice on force majeure on private contracts. (2020-29)

Health services, construction, mining and quarry operations, furniture production, industrial kitchen equipment, car rental, printed media and printing and all real person taxpayers who are obliged to keep accounting books were added to the force-majeure list on March 24th.

More details can be found on the web page of the Revenue Authority.

b) Social Security Payments: Turkish Social Security Authority (SGK) made an adjustment in this regard as well in the beginning of April.

c) GEKAP Declaration & Payment Deferral: In the implementation of Recycling Share Return (GEKAP), the return periods have been adjusted as 6-month periods for 2020 and 3-month periods for 2021 and the subsequent years. The taxpayers who have not submitted their returns yet will be able to submit their returns until the end of July as the first return and payment period. You can find more information about this new tax in previous bulletins.

d) Execution & Bankruptcy Proceedings have been deferred: With the enactment made based on Article 330 of the Execution and Bankruptcy Law pursuant to the Presidential Decree Nr. 2279, it has been resolved to suspend all execution and bankruptcy proceedings throughout the country except for those related to the receivables for alimony until 30 April 2020 and not to carry out the proceedings in this framework and not receive any further execution and bankruptcy proceeding claims and not to executive and enforce the decisions regarding precautionary attachment.

After this Decree the Omnibus Law nr. 7226 made some regulations with the temporary article 1 of 7226 Law, so;

  • any and all terms regarding the origination, exercise and termination of any rights, including but not limited to the statute of terms for filing a lawsuit, enforcement proceedings, complaints, objections, warnings, notices, submissions and statute of limitations and mandatory administrative application terms;
  • terms regulated under Administrative Procedure Law, Criminal Procedure Law, Civil Procedure Law and other procedural law, and
  • terms in mediation and reconciliation proceedings are all suspended from March of 13th until April of 30th.

All suspended periods will begin to continue from the day following the day when the suspended period ends. The deadlines remaining fifteen days or less will be deemed extended for another fifteen days, starting from the day following the day when the suspended period ends. In case the epidemic will continue, and the President is entitled to extend the suspended period once again, but not exceeding six months.

  • No Announcement for Unpaid Taxes: We would like to remind that a similar decision has not been taken yet for the public receivables within the scope of Law Nr. 6183 and that proceedings will continue in the event of failure to pay the public debts including the taxes and social security premiums.

e) Deadline for submitting the Income Tax Return and payment has been deferred for 1 month.

  • The deadline for submitting the Annual Income Tax returns for calendar year 2019 that is required to be submitted until the end of day on 31 March 2020 as well as the deadline for payment of the taxes accrued based on these returns have been deferred until the end of day on 30 April 2020, Thursday pursuant to the Tax Procedures Law Circular Nr. 125 and dated 17 March 2020.
    • The income taxpayers who are taxed under the real taxation system due to their commercial, agricultural and professional activities shall send their Annual Income Tax Returns for the year of 2019 in electronic environment by the end of April 30th
    • The taxpayers whose income is only composed of rent, salary, marketable security incomes and other incomes or one or several of the other earnings and revenues can easily send their Annual Income Tax Returns via the Online Ready Tax Return System.

f) Deadline for submitting the VAT Returns and payment concerning February-2020 period as well as the deadline for submitting the Ba-Bs Forms and loading Electronic Book Certificates have been deferred.

  • Pursuant to the Tax Procedures Law Circular Nr. 126 and dated 17 March 2020;
    • Deadline for submitting the Value Added Tax Returns that were required to be submitted until the end of day on 26 March 2020 as well as the deadline for payment of the taxes accrued based on these returns have been deferred until the end of day on 24 April 2020, Friday.
    • Deadline for submitting the “Form Ba” and “Form Bs” concerning 2020/February period that was required to be submitted until the end of day on 31 March 2020 has been deferred until the end of day on 30 April 2020, Thursday.
    • Deadline for creation and signing of the e-Books that were required to be created and signed until the end of day on 31 March 2020 as well as the deadline for loading the “Electronic Book Certificates” that were required to be loaded to the Revenue Authority Data Processing System until the same deadline have been deferred until the end of day on 30 April 2020, Thursday.

g) Specific Deferrals have been introduced for the Tourism Industry.

  • Accommodation Tax (tourism tax) that would take effect from the beginning of April will not be implemented until November 2020. Valuable house tax that was planned to be implemented this year had already been deferred for 1 year.
  • Right of easement costs and revenue share payments implemented in the hotels that use state-owned land for May and June have been deferred for a period of 6 months with the Law nr. 7226. A communique is published by the Ministry of Environment and Urbanization about this deferral.
    • Within the scope of the Law, the payments of rent, definite permits, definite allocations, rights of easement, usage rights, utilization permits, additional utilization fees and revenue share between April 1, 2020 and June 30, 2020 were postponed for six months without the operators and investors being required to file applications who were allocated public lands to build tourism facilities by the relevant ministries and have the relevant licenses (such as a Tourism License) from the Ministry of Culture and Tourism. These receivables will be collected after June 30, 2020 without incurring any interest rate increase until the end of the postponement period.
    • The Law also postponed for six months the payment period of the occupancy fee (tr. ecrimisil) for operators and investors licensed by the Ministry of Culture and Tourism who are operating their facilities on public land without permission, without the need to apply for postponement for the period between April 1, 2020 and June 30, 2020.

h) Deadline for submission of incentive programs such as ARDEB, TEYDEB and BIDEB reports has been deferred for three months by TUBITAK.

  • Deadline for submission of the Progress/ Result/ Periodic Reports that were required to be submitted until 30 June 2020 within the scope of the projects that came into force under the sponsorship of Research Support Programmes (ARDEB), Innovation Support Programmes (TEYDEB) and Scientist Support Programmes (BIDEB) has been deferred for three months within the scope of precautions taken due to COVID-19 pandemic.

i) It has been decided to adjourn some official meetings.

    • Circular Nr. 2020/3 was published in the Official Gazette dated 20 March 2020. To avoid loss of right due to the meetings, conferences, general meetings, activities and likewise that cannot be held based on the aforesaid Circular, necessary precautions must be taken and the correspondences with the parties must be filed by evaluating the parties and each incident on its own merits.
    • Furthermore, an enactment has been made for remote and rotational work of the civil servants and considering them as on leave with the Circular Nr. 2020/4.
  • So, will “General Assembly Meetings” be held?
    • Those meetings as well can be postponed even if it is announced to gather in time.
    • According to the statement on the web page of the Ministry of Commerce, Minister of Commerce stated that some precautions had been taken for the aforesaid meetings in this period when the general meetings of companies were held intensively, and said, “It has been allowed to cancel and hold, at some time in the future, the general meetings that were called, but not held yet by the executive bodies of the incorporated and limited liable companies.” In addition, Mrs. Minister Pekcan noted that the companies were allowed to hold general meetings or meetings of board of directors/ managers electronically although there is no stipulation in the articles of association/ incorporation.

j) KGK (Public Oversight & Audit Authority) considered appropriate to defer some declarations.

  • The declarations whose deadline for submission is prior to 31.05.2020 in respect of those that are required to be made within a certain period of time before this date depending on the date of signing / issue/ realization (declaration of contract, declaration of professional liability insurance, declaration of contract termination, declaration of changes to the previous declarations etc.) have been deferred until 05.2020;
  • It has been considered appropriate to make the declarations whose deadline has been stipulated definitely (declaration of income, declaration of transparency report etc.) until 31.05.2020.

k) Ministry of Commerce (General Directorate of Export) resolved on force majeure and extension of time concerning exports, domestic processing and some exceptional procedures until 31.12.2020.

  • Accordingly, it has been considered appropriate to grant extension of time from 6 to 12 months for the following items issued or exercised before March 18th upon Approval Nr. 53330175 dated 18.03.2020 of the Ministry of Commerce through the exercise of powers set forth in the related provisions provided that an application is made to the relevant authorities in the defined periods from the expiry of the duration and that the requests are considered appropriate:
    • Inward processing permit certificates and permissions, the export commitment account of which has not been closed yet,
    • Tax, levy, charge exception certificates and export loans without any certificate, the export commitment account of which has not been closed yet,
    • Inward processing permit certificates with Code D3, the export commitment account of which has not been closed yet.
      • This approval has been sent to all related departments & units with an official letter distributed.
      • The aforesaid Ministerial Approval will be annulled as of the end of 2020 without need to take any further action.

ı) Ministry of Commerce, General Directorate of Customs decided to suspend the deadlines for submitting the declarations and documentations required to be submitted within the scope of YYS (Authorized Declarant Status).

  • In order to ease the YYS applications, the deadlines concerning the procedures required to be carried out by the companies that are in the application process for YYS certificate or that hold the certificate have been suspended as of 19 March 2020 and it is expected to have no loss of right.

m) Pharmacy sales team are not allowed to visit the pharmacies and hospitals with a regulatory announcement.

  • On March 19th, Turkish Medicine and Medical Devices Authority announced the suspension of product promotion representatives’ visits to pharmacies and health organizations because of the COVID-19 pandemic.
  • In light of the measures against the pandemic, the Authority suspended the sales team’s promotional activities of visits to doctors, dentists and pharmacists in all health organizations and institutions, including pharmacies.

 n) Remote work for Technocity and R&D & Design Centre personnel: An announcement has been made about the personnel under incentive who have been allowed to work at home.

  • It has been allowed to make use of the incentives for the works carried out by those working at Technoparks, R&D and Design Centers without being present personally in these centers until the end of April 2020.
  • With the common announcement made by 3 Ministries, it has been considered sufficient when the personnel who are considered appropriate to work at tome in this way are notified to the Ministry of Industry and Commerce, and such personnel will continue to make use of the incentives as stipulated in Laws Nr. 5746 and 4691.

We have summarized our notes on the changes and developments regarding the summary financial / tax legislation in the last one month, in English, in short headings. Please do not hesitate to contact us for further information.

Please send us your comments and suggestions regarding this bulletin format.

Best regards,

 Bulletin No    : 2020-31

Date                : March 31th, 2020

Subject           : Covid-19 New Omnibus Law referring Turkish Economic Stability Shield Package

In a newsletter, we presented a summary of the “Economic Stability Package” announced after the COVID-19 (Corona virus) evaluation meeting held under the chairmanship of the President of the Republic of Turkey on 18.03.2020. You can find details in the Bulletin No: 2020-23.

Most of the measures outlined by the President are regulated by a new Omnibus Law (No: 7226), which includes 53 articles and published in Official Gazette, dated March 26th, 2020.

A summary of key points is presented below. This Omnibus Law, which originally had 38 articles, while it was extended by the new 2 articles added in Plan & Budget Committee and 13 new articles added in General Assembly. The newly added articles relate to the Covid-19 measures.

We will continue closely monitor the situation around the policy response measures and will provide you with timely updates.

We will provide such periodic updates on a regular basis, while taking into account limitations related to of remote work schedule and digital communication format due to the current health crisis. If you would like to continue receiving monthly or weekly summaries in Turkish/English, let us know.

Below you may find details of the new articles.

A: Regulations laid down by the Original Law Proposal

  1. By an article added to the Mining Law (Additional Article 19); in the case of any force majeure, the financial obligations and/or declarations within the scope of the Mining Law will be postponed and the financial obligations will be split into instalments by taking the opinion of the Ministry of Treasury and Finance,
  2. A minimum monthly wage support of TRY 75 TL will be provided to employers throughout 2020 in order to reduce employers’ labour costs to maintain and increase employment,
  3. The President is entitled to decide to postpone the electric and natural gas bills of citizens who are victims of earthquake, fire, flood, landslide or similar disasters, and in the case of postponement, cover the late fee to be collected by the electricity and natural gas distribution companies from consumers due to the postponement, other than the principal, from the budget of the Ministry of Natural Resources,
  4. The Turkish Standards Institute will be entitled to examination staff from outside the Institute under employment contract,
  5. The amount of funds to be transferred to credit guarantee institutions (CGF) will be increased from 25 billion Turkish Lira to 50 billion Turkish Lira, and
  6. The citizens who do not reside in Turkey and the persons included in the scope of the article 28 of Turkish Citizenship Law will be allowed to participate in the private pension system in foreign currency,
  7. If, in the case that one of the parties is deceased or foreign, the other party who is a Turkish citizen or that party’s counsel applies; the decisions for divorce taken by the judicial or administrative authorities of a foreign country must have been taken and made final by the competent judicial or administrative authority pursuant to the laws of that country.
  8. Consumers will be allowed to request for meeting their electrical needs from renewable energy sources, and different tariffs may be determined for them,
  9. Those who are service-disabled or disabled war veteran and continue working will be entitled to a second allowance, provided that they have paid premium for at least 5000 days with a minimum insurance period of 20 years,

B: Regulations brought by the additions made by the Planning and Budget Commission of the Grand National Assembly of Turkey (TBMM)

  • The article 75 of the Income Tax Law is amended to ensure that the exchange rate difference will not be taken into account in determining the amount of the income obtained from the pension mutual funds established in a foreign currency, in which the contribution payments made in foreign currency are deposited.
  • With the additional Article 2 added to the Law for Provincial Administration, the telephone subscriber and location information needed by the Information Technologies and Communications Authority under the following circumstances shall be provided without delay:
    • the telephone subscriber and location information needed by the Disaster and Emergency Management Directorate or the relevant governorship shall be provided without delay within the scope of search, rescue and response activities in disaster and emergency situations, to be limited to people affected by the disaster or emergency,
    • within the scope of calls to the emergency call service 112, the telephone subscriber and location information needed by the emergency call service or the relevant governorship to reach the callers shall be provided without delay.
    • In this context, an access system can be established in accordance with the procedures and principles to be determined by the Ministry and the Information Technologies and Communications Authority. Data obtained under this article may not be used for other purposes.

C.  Additions made during the General Meeting of the Grand National Assembly of Turkey

  1. The Law no 4706 is amended to postpone the fees including the rents, revenue shares and adequate pays that must be paid by tourism investors and establishments for the period from April 1st to June 30th by six months without any application,
  2. The Labour Law is amended to increase the make-up period from 2 months to 4 months,
  3. Social Insurance and General Health Insurance Law is amended and by the Additional Article 18, the lowest salary paid is increased to TRY 1500, and the holiday bonus will be paid according to the month of the holiday, instead of the date of payment,
  4. The Unemployment Insurance Law is amended to alleviate the conditions for short-time working allowance,
  5. The Law on Bad Checks and Protested Bills is amended to provide relief to those whose principal or instalment payment was before 24.03.2020 but delayed allowing them to pay by 12.2020 or restructure the debt,
  6. The Law of Checks is amended to halt execution for crimes committed until March 24th, 2020, and allow for payment in certain instalments,
  7. Accommodation Tax which was introduced by the Law No 7194 and planned to start in April 2020 is postponed to the beginning of 2021,
  8. The Provisional Article 1 added to the Law during the General Meeting regulates the provisions such as periods, procedures, trial, etc. to prevent loss of rights in jurisdiction, and
  9. The Provisional Article 2 added to the Law during the General Meeting stipulates that the failure to pay office rent between March 1st-June 30th 2020 will not considered as cause of evacuation.

D.  Other Amendments: This Law also amends the following Laws:

  1. Identity Reporting Law,
  2. Law on the Making, Buying, Selling and Possession of Rifles, Shooting Guns and Hunting Knives Used in Hunting and Sports,
  3. Tourism Incentive Law,
  4. Private Pension Savings and Investment System Law,
  5. Unemployment Insurance Law,
  6. Higher Education Institutions Organization Law,
  7. Law of Associations,
  8. Revenue Administration Law,
  9. Law on Renewable Energy Resources,
  10. Social Insurance and General Health Insurance Law,
  11. Law on Prevention of Laundering Crime Revenues,
  12. Law on Foundations,
  13. Law on the Regulation of Broadcasts on the Internet,
  14. Electricity Market Law,
  15. Law on Recruitment,
  16. Zoning Law, and
  17. Law on Trade Unions and Collective Bargaining Agreements.
  • What is Happening in the World in terms of Policy Responses and Economic Measures?

Similarly, the European Union, USA and European countries have also been announcing large-scale stability and support packages. The USA, as the locomotive of World economy, has reduced interest rates and allocated a budget of 1.2 trillion USD. Germany has allocated a budget of nearly 500 billion Euro. You can find more: https://www.taxand.com/our-thinking/taxand-firms-respond-to-covid-19-outbreak/

  • It is known that organizations such as IMF and OECD have similar studies and discourses. A wide range of tax and financial facilities are on the agenda for all affected groups in Italy, France and the UK. Considering the interdependence of all economies worldwide, coordination between countries has become more important than ever, especially for minimizing the progress of recession, unemployment and contraction.
  • IMF updates the measures worldwide. You can find more information https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19 IMF gives information regarding with fiscal, monetary and macro-financial and exchange rate and balance of payments for the countries of the World.

 

We hope you benefit from our bulletins. We will keep announcing other developments in this respect.

Please do not hesitate to contact our consultants for any questions regarding any matter in this bulletin.

Best Regards,

Tax-IA Bulletin

Bulletin nr: 2020-29

To       : The clients and company web site

From   : Independent Advisors / Legal & Tax

Date     : March, 26th 2020

Subject: COVID-19 Force Majeure Perspective (Private Law)

 

Coronavirus Disease

From the Perspective of Force Majeure

 Covid-19 Coronavirus (“Coronavirus”) disease, which first appeared in China by the end of 2019, then detected and quite rapidly spreading in Turkey, has been negatively affecting the commercial life. Potential difficulties, and even impossibilities, in fulfilment of the obligations under the contracts have brought into question the application of “force majeure”, which is a notion that exists under most jurisdictions. The main discussion is whether the Coronavirus disease can be treated within the concept of force majeure and how the performance of obligations under contracts will be affected.

1.      What Does Force Majeure Mean?

Force majeure is a situation whereby the execution of the parties’ obligations under a contract becomes objectively impossible for reasons unpredictable to and out of the control of the parties. The Supreme Court has defined the force majeure in its decisions as follows: “this is an extraordinary event that is not possible to predict and resist to and that results in the breach of the debtor’s obligation in an inevitable and absolute manner”. Accordingly, even though the concept of force majeure has not been defined under Turkish laws, there is no disagreement in doctrine or Supreme Court precedents as to the definition and conditions of force majeure.

2.      Qualification of Coronavirus Disease as a Force Majeure Event

Coronavirus disease has very rapidly spread around the Word since the date it first appeared and has been defined as a “pandemic” by the World Health Organization on March 11th, 2020. Coronavirus disease has caused such a global crisis that some European leaders see it as the most major crisis since the 2nd World War.

In Turkey, each day several measures are taken in order to fight against the Coronavirus disease, such as the closure of several workplaces, the curfew for over 65 years old persons, etc. From this perspective, the Coronavirus disease should be treated as an extraordinary event as previously defined by the Supreme Court.

We have assessed under this short note the legal consequences of Coronavirus disease from the perspective of the notion of “force majeure”.

4.      Assessment Under Certain Contracts and Obligations

Having mentioned that an assessment shall be made for cases specific to each contract, we hereby present a few examples[1]  under this Section concerning sale and purchase, supply, rent, service and employment contracts:

–       Assuming that a product is imported from abroad under a supply agreement, in case shipment of the product from the relevant country is prohibited, this event shall be considered a force majeure event and provisions on impossibility of performance shall be applied.

–       As sale of medical masks have recently been subject to prior approval with an administrative decision, if such approval is not obtained for a contract regarding exportation and sale of medical masks, the seller may rely on application of “impossibility of performance”.

3.      Impact of Coronavirus Disease on Contracts

The existence of Coronavirus disease by itself will not result in application of force majeure provisions to each contract. In order to claim force majeure based on the disease, there should be a causal link between the disease and the breach of the contract.  In our view, force majeure will be applied to contractual relationship where it is determined that the performance of the obligation arising out of the contract became impossible. This will only be possible if an assessment is made for cases specific to each contract.

In cases where the contract between the parties includes a force majeure provision, this will be helpful and advantageous for the party affected by the force majeure event. However, we would like to underline that it is not necessary to have a force majeure provision in the contracts in order to make such claim. On the other hand, if the contract between the parties includes a force majeure provision, the relevant parties shall comply with the conditions thereunder, such as notification terms, deadlines, etc.

Concerning commercial contracts, in case the parties cannot comply with their obligations, the provisions on “impossibility of performance” under Article 136 of the Code of Obligations or provisions on “excessive hardship” under Article 138 of the Code of Obligations may apply, depending on the case. The determination whether these provisions shall apply and if so, which provision shall apply shall be subject to an assessment specific to each contract, based on its parties, execution date, qualification of the obligations, applicable law, place of execution, impact of the Coronavirus disease on the exercise of each party’s obligations and the duration of such impact. Any conclusions shall be made following such an assessment. Accordingly;

·         in case the execution of an obligation becomes impossible, the parties’ obligation may be terminated based on impossibility of performance,

·         in case, given the current circumstances, it will not be fair to expect the execution of an obligation by the debtor based on good faith principle, the affected party may request an adjustment based on excessive hardship. Here, the execution of an obligation is not impossible; however, the debtor would face a tremendous difficulty if s/he were to perform her/his obligations under the contract.

Since the existence of an unpredictable extraordinary event is required for the application of both provisions above, these provisions will not be applied in cases where the contract is signed after the emergence of the Coronavirus disease or once it was known to public.

 

[1] Depending on the circumstances of the case, similar cases may be subject to other legal consequences.

–       In a contract for work, if the raw material is imported from abroad and shipment of such material from that country is prohibited, this event will be considered a force majeure and provisions on impossibility of performance can be applied.

–       In a sales agreement, the purchaser who has already received the product shall not benefit from impossibility of performance and shall not be able to refrain from executing the payment because of the nature of the payment obligation.

–       Due to the Coronavirus disease, most people stay at home and the sales figures of many shops have decreased. The lessee of such shops may have difficulties in making the payment of the rent fees. This situation may be defined as an excessive hardship. In such case, the relevant lessee may request an adjustment of the rent fee for the term of the force majeure event. If the relevant shop is in a shopping mall and if shopping malls are closed based on administrative measures, the provisions on impossibility of performance can be applied for the relevant period.

–       In case a store is temporarily closed based on the recommendation of the administration or based on the discretion of its owner, the rent payment obligation shall remain as it is for the term when the store is closed. In such a case, the provisions of excessive hardship may be applied depending on the circumstances of the case.

–       In case stores are temporarily closed based on administrative measures, this will constitute impossibility of performance for the parties of the rent agreement. In such a case, the rent payment obligation of the lessee shall be suspended during the relevant period.

As for employment contracts; they will be subject to following practices/arrangements after an evaluation within the framework of employment legislation in effect:

–       In case stores are temporarily closed based on administrative measures, Article 40 of the Labor Code may be applied. According to this provision, for the period up to one week where the employee did not work due to Coronavirus disease, it will be possible for the employer to pay half of its salary to the employee. If the non-worked period exceeds one week, both the employer and the employee shall have the right to terminate the employment agreement relying on the relevant provisions of Labor Code regulating the termination of employment agreements.

–       In case a store is temporarily closed based on the recommendation of the administration or based on the discretion of its owner, as a rule, the employer’s obligation to pay salaries to the employees shall remain as it is.

–       Workplaces may decide on their own to take certain measures due to Coronavirus disease. asking the employees to use their annual paid leaves, making the employees to take their unpaid leaves after first obtaining their consents and implementing remote teleworking (home office work) practice (as per article 14 of Labor Code) again after obtaining their consents are among these measures.

–       It may also be possible for workplaces that meet the required legal conditions to implement short-time working practice at the workplace due to Coronavirus disease. Turkish Employment Agency declared on its website on March 22, 2020 that the Agency will accept short-time working applications based on periodical act of God caused by external events. Short-time working practice may be applied where weekly working hours at the workplace have temporarily decreased by at least one third or if the activities of the workplace have been fully or partially halted for at least four weeks (even if not continuously). In such a case, if the application of the employer is accepted by the Agency, short-time working allowance may be provided to the employees at the workplace from the Unemployment Insurance Fund for a period up to three months. Necessary conditions for application for short-time working was simplified with art. 41 of Amendment Code nr. 7226 which is published in Official Gazette on March 26th, 2020.

–       You can find more information regarding with this short time working allowance the financial & tax deferrals and issues in our website.

 

We wish that Coronavirus pandemic will disappear as soon as possible with fewest losses of lives. We wish you health and wellness.

Please do not hesitate to contact our consultants for any questions regarding any matter in this bulletin*.

Thanks & Merci to dear Burak Ongan and dear Ceyda Tabak,

Tabak & Ongan Law Office

info@tabakongan.com

Best Regards,

*This note is prepared just to give general information on the matter and we recommend you to seek our legal advice and support before any legal action. Otherwise, our Law Office will not be responsible for the consequences of any action carried out based on the general information herein.

 

Bulletin No    : 2020-26

Date                : 21 March 2020

Subject           : Labor & Employment and SSI Premium Deferrals in Turkey of COVID-19

 

We have presented a summary of the “Economic Stability Package” announced after the COVID-19 (Corona virus) evaluation meeting held under the chairmanship of the President of the Republic on 18.03.2020. You can find details in the Bulletin No: 2020-23.

We will closely follow up the details of the package and the legal & administrative arrangements to be made and timely inform you.

This bulletin aims at summarizing the deferrals of SSI premiums for some specific business sectors, and other legislative changes related with the labor and payment for retired people. This bulletin also describes the abatement, application for installments & deferment methods of the current debts to the SSI.

Let’s go into the details now.

With a package called Economic Stability Shield, a fund set of TRY one hundred billion is introduced in order to reduce the effects of the COVID-19 pandemic.

It is of vital importance to closely follow-up and implement these measures for the business world and consumers to overcome this period without any economic difficulties. Below are listed the measures planned to be launched within this framework in terms of employment and labor issues:

   A. ECONOMIC CAUTIONS RELATED WITH EMPLOYMENT

1- April, May and June payments of the Withholding and Value Added Taxes and SSI premiums (SGK) will be postponed for 6 months for some affected sectors announced by the President. These sectors include Retail, Shopping Malls, Iron & Steel, Automotive, Logistics & Transportation, Cinema & Theater, Accommodation, Food & Beverage, Textile & Garment and Events & Organization sectors. We will touch upon the sectors in following chapters.

2- Minimum wage support applied in previous years will be continued.

3- Flexible and remote working models in our legislation will be made more effective. These methods, which are already included in our labor law but not preferred too much, have become important due to this crisis.

4- Short-Time Working Allowance will be put in place, and the procedures to benefit from this allowance will be facilitated and accelerated. Thus, while temporary income support is given to employees at workplaces that suspend their activities, the cost for employers will be reduced. We explained the benefits of this allowance with some examples as well as its prerequisites in another bulletin (2020-24).

5- The lowest retirement pension will be increased to TRY 1,500.

6- Holiday bonus of retirees will be paid at the beginning of April. Likewise, pension promotions of retirees will be directly paid into their accounts, so that they will not have to actually go to bank branches.

7- An additional fund of TRY 2 billion will be allocated for financial aids to families in need according to the criteria set by the Ministry of Family, Labor and Social Policies.

8- In order to ensure continuity in employment, the 2-month make-up period will be increased to 4 months. This practice is currently used in some sectors with high season intensity based on the Labor Law but the period of 2 months remains insufficient.

9- For elderly people over the age of 80 who live alone, a periodic follow-up program consisting of social and home health-care services will be launched.

    B. POSTPONEMENT OF SSI PREMIUMS TO BE PAID

Postponement of Premium Payments in Some Sectors

First of all, it should be noted that no postponement is applied regarding the declaration terms and deadlines of SSI. Therefore, there is no postponement in declarations regarding the monthly premium and service documents, statements of employment, termination, occupational accident and diseases and temporary incapacity benefits, and such declarations will continue to be made within the periods specified in the provisions of Law No 5510 and sub-legislation.

Payments of SSI premiums for April, May and June will be postponed by 6 months for the sectors listed below according to the President’s speech.

However, in the event that the employer or employer’s representative is infected with the disease (Covid-19 virus), which may be deemed as force majeure, although not general, Social Insurance statements will be postponed until the patient gets better.

In this context, premiums to be paid in April will be paid in October, premiums to be paid in May will be paid in November, and premiums to be paid in June will be paid in December.

  1. Retail Trade and Shopping Centers

Supermarkets, stalls, grocery stores, delicatessens, greengrocers, ice cream shops, haberdasheries, butcher shops, and those who are involved in retail sales of any kind of products including building construction materials, small home appliances and white goods, furniture, home textiles, books and stationery, newspapers and magazines, shoes and clothing retail sales, toys, medical and orthopedic products, pharmacy, jewelry, flower stores, stallholders, fishmongers, patisseries and bakeries, personal care and cosmetic products, etc., as well as shopping malls and those who are engaged in retail sales in shopping malls

  1. Iron, Steel and Metal Industry

Manufacture and sales of iron, steel, aluminum, copper, lead, zinc and tin by manufacturers

  1. Automotive

Manufacture, wholesale and retail sales of all motor land vehicles such as cars, trucks, vans, buses, minibuses, midibuses, tractors, motorcycles, trailers, caravans

  1. Logistics-Transportation

All kinds of logistics and transportation services such as urban and intercity freight and passenger transportation by air, land, railway, sea and all kinds of waterways, and highway, tunnel and bridge operations, storage and warehousing activities, airport ground services, etc.

  1. Cinema and Theater Activities

All kinds of artistic activities such as theater, opera, ballet, cinema, concert

  1. Accommodation

All kinds of accommodation activities and relevant activities such as hotels, motels, boarding houses, holiday villages, and tour operator and travel agency activities, and reservation services

  1. Food and Beverage Services

Services for presentation of all kinds of foods and beverages such as restaurants, cafes, coffee houses, tea shops, canteens, kiosks in transportation vehicles.

  1. Textile and Garment Activities

Manufacture and sale of all kinds of textiles and garments, such as manufacture of fabric and yarns, manufacture of all kinds of cotton, wool, lint, fiber and fabric products, and the manufacture and sale of clothing and home textile products

  1. Events and Organization

Organization of shows, congresses, conferences, trade fairs and events, and all kinds of events and organization activities carried out in places such as internet cafes, game arcades, wedding halls, sports centers

      C. CURRENT SSI PREMIUM DEFERMENT and CANCELLATION PRACTICES in TURKEY

1-Abatement

Pursuant to the item (f) of the article 7 titled “Duties of the Board of Directors” of the Law no 5502 on Social Security Institution, the Board of Directors is authorized to “decide to cancel claims up to an amount shown in the central administration budget law for the current year if it is for the best interests of the Institution”.

The reason for this practice is to delete the portion of the institution’s receivables up to the amount specified by the budget law every year, which will not be worth collecting and which involves costs that would exceed the amount to be collected taking into account the correspondence and postal costs, that is, to give up the collection thereof. The cancellation amount for the claims of the institution has been determined as TRY 330.00.

 2- Deferment-Installment & Difficult Situation

Pursuant to the Social Security and General Health Insurance Law no 5510, all SSI premiums, delay penalties, late fees and similar debts to SSI are followed up and collected pursuant to the Law no 6183 on the Procedure for the Collection of Public Receivables. Even if it is possible to collect the debts by forced collection method in the case that the individuals fail to timely pay their debts, it is also possible to defer the debt and/or split it into installments if the collection of debt, attachment execution or sale of the attached property will put the person in a very difficult situation”

The article 48 of the Law no 6183 states that the competent authorities may defer any receivable for a period up to 36 months by charging an interest, and it is important to determine in which case the debtor will be in a difficult situation. Accordingly, if the payment of an SSI debt in due date, or attachment execution or foreclosure of attached property would put the debtor in a very difficult situation; deferment and installment can be considered. For taxes, this power is exercised by the Ministry of Treasury and Finance.

Liquidity Ratio: Whether or not a debtor is in a difficult situation can be determined only by analyzing the financial statements of the debtor. Situation of the applying company is determined according to the value of the ratio found as a result of determining the “Cash + Bank + Short Term Receivables / Short Term Liabilities” ratio, that is, the Liquidity Ratio, considering;

  • Liquidity ratio above 2, or
  •  Liquidity ratio below 2.

In the event that the liquidity ratio is greater than 2, no deferment or installment will be considered and applications that were made will be rejected.

Number of Installments: The authority will prepare a payment plan for the debts to allow for deferment and equal installments up to 36 months if the ratio is “1.5” or below, or up to 30 months if the ratio is in the range of “1.51” to “2.00”. The specified periods are maximum deferment and installment periods, and the authorities of deferment and installment may decide shorter deferment and installments.

Payment Terms: “Very difficult situation” of a taxpayer will be determined according to the liquidity ratio found by the formula “Cash+Bank+Short Term Receivables/Short Term Liabilities”. In deferment and installment of debts, it is essential to pay the debt in equal installments. However, if the debtor insists on a gradual payment plan and the unit is convinced that the debtors is unable to pay equal installments, only the first six installments may be deferred gradually, provided that they will not be less than 50% of the installment amount in the payment plan split into equal installments.

Competent Authority for Deferrals: The Social Security Institution has imposed authority limitations in deferment and installments. If the amount of debt is in the range of TRY 0 to 1,000,000, it will be evaluated by the Director of the Social Security Center; if the amount of debt is in the range of TRY 1,000,001 to 2,000,000, it will be evaluated by the Provincial Director of Social Security Institution; if the amount of debt is in the range of TRY 2,000,001 to 3,000,000, it will be evaluated by the Head of the Disputed Premium Affairs and Enforcement Department; if the amount of debt is in the range of TRY 3,000,001 to 4,000,000, it will be evaluated by the General Director of Social Security Institution; and if the amount of debt is in the range of TRY 4,000,001 to 5,000,000, it will be evaluated by the President of the Institution; and if the amount of debt is higher than TRY 5,000,001, it will be evaluated by the Board of Directors.

Utilization of Incentives: Another important contribution of this practice to the employer is that after the deferment and installment of a debt, the employer will start to benefit from the 5-point employer share incentives and other incentives as stipulated in the Law No 5510.

       D. PRESIDENT’S SPEECH ABOUT THE STIMULUS PACKAGE ON EMPLOYMENT

Besides, the President of the Republic addressed other issues as follows. Those are very important to keep in mind:

  • The top priority is to avoid interruption of production and employment.
  • The prerequisite for any company that will benefit from the opportunities in the economy package described above is that it will not cause any loss of employment.

So, we assume that the prerequisite for any deferral in the economy package described above is that it must not cause any loss of employment. This is emphasized by the President of Turkey in his speech.

We will keep announcing other developments in this respect.

Please do not hesitate to contact our consultants for any questions regarding any matter in this bulletin.

Hope to recover soon from this pandemic.

Best Regards,

 Bulletin No    : 2020-23

Date                : 20 March 2020

Subject           : Announced Turkish Economic Stability Shield Package

We will briefly present a summary of the “Economic Stability Package” announced after the COVID-19 (Corona virus) evaluation meeting held under the chairmanship of the President of the Republic on 18.03.2020. We will closely follow up the details of the package and the legal & administrative arrangements to be made and timely inform you.

We want to provide you with this type of information more frequently in accordance with the remote working, meeting and communication format due to the current health crisis.

Let’s go into the details now.

  A. DETAILS OF THE ECONOMIC STABILITY PACKAGE

With the package called Economic Stability Shield, a financial fund set of one hundred billion Turkish lira is introduced in order to reduce the effects of the COVID-19 pandemic.

It is of vital importance to closely follow-up and implement these measures for the business world and consumers to overcome this period without any economic difficulties. Below are listed the measures planned to be launched within this framework:

1- April, May and June payments of the Withholding and Value Added Taxes including reverse charge VAT and SSI premiums (SGK) will be postponed for 6 months for some affected sectors. These sectors include Retail, Shopping Malls, Iron & Steel, Automotive, Logistics & Transportation, Cinema & Theater, Accommodation, Food & Beverage, Textile & Garment and Events & Organization sectors. These sectors were announced by the Ministry of Finance & Treasury on its website. Details are in following chapter below.

2- Accommodation tax, which would come into effect at the beginning of April, will not be applied until November 2020. Valuable housing tax, which was planned to start this year, was already postponed by 1 year.

3- Easement fees and revenue share payments applied in hotels using public land are postponed by 6 months for April, May and June.

4- In domestic air transportation, the VAT rate is reduced from 18 percent to 1 percent for 3 months. Currently, VAT is not collected from the services and deliveries corresponding to the international section on flights abroad.

5- For companies with cash flows negatively affected by the measures taken against the COVID-19 pandemic, it is planned to postpone their principal and interest payments of loans to banks by minimum 3 months and provide them with additional financial support if necessary.

6- In order to maintain capacity utilization rates during the temporary slowdown in exports, inventory financing support will be provided to the exporters.

7- For the tradesmen and craftsmen who demands so declaring that their business is negatively affected during this period; the principal and interest payments for April, May and June regarding the loan payables to Halkbank will be postponed by 3 months without interest.

8- The Credit Guarantee Fund (KGF) limit will be increased from 25 billion Turkish lira to 50 billion Turkish lira. In credit allocation, priority will be given to the companies and SMEs who need liquidity and have security gap since they are adversely affected by the events.

9- Measures will be taken to promote introduction of credit packages for social purposes under favorable and advantageous conditions for citizens.

10- For any house with a price below 500 thousand Turkish liras, it is considered to increase the creditable amount from 80 percent to 90 percent and reduce the minimum down payment to 10 percent.

11- The firms going into default for April, May and June due to the effect of the measures taken against the spread of the virus will have a “force majeure” annotation in their credit registers.

12- Minimum wage support applied in previous years will be continued.

13- Flexible and remote working models in our legislation will be made more effective. These methods, which are already included in our labor law but not preferred too much, have become important due to this crisis.

14- Short-Time Working Allowance will be put in place, and the procedures to benefit from this allowance will be facilitated and accelerated. Thus, while temporary income support is given to employees at workplaces that suspend their activities, the cost for employers will be reduced. We will give more information regarding with short-time working allowance in another newsletter.

15- The lowest retirement pension will be increased to TRY 1,500.

16- Holiday bonus of retirees will be paid at the beginning of April. Likewise, pension promotions of retirees will be directly paid into their accounts, so that they will not have to actually go to bank branches.

17- An additional fund of TRY 2 billion will be allocated for financial aids to families in need according to the criteria set by the Ministry of Family, Labor and Social Policies.

18- In order to ensure continuity in employment, the 2-month make-up period will be increased to 4 months. This practice is currently used in some sectors with high season intensity based on the Labor Law but the period of 2 months remains insufficient.

19- For elderly people over the age of 80 who live alone, a periodic follow-up program consisting of social and home health-care services will be launched.

20- Submission and payment deadlines for the annual Income Tax returns, which must be submitted by March 31, 2020, have been postponed to the end of April 30, 2020.

21- Facilitation has been made for Technocity (Teknokent) and R&D & Design Center staff and an announcement has been made about the encouraged staff who have the opportunity to work from home.

22- Exports of some important goods such as ethyl alcohol, cologne and disinfectants have been export-listed.

23- Ministry of Finance designed all e-system for the taxpayers not to come to the Tax Offices until April 10th, 2020.

      B. POSTPONEMENT OF VAT, WITHOLDING AND SSI PREMIUMS TO BE PAID FOR SOME BUSINESS SECTORS

Payments of SSI premiums, VAT, reverse charge VAT and withholding taxes for April, May and June will be postponed by 6 months for the sectors listed below accounting to the President’s speech.

In this context, those taxes and premiums to be paid in April will be paid in October, taxes and premiums to be paid in May will be paid in November, and the ones to be paid in June will be paid in December in this year.

  1. Retail Trade and Shopping Centers

Supermarkets, stalls, grocery stores, delicatessens, greengrocers, ice cream shops, haberdasheries, butcher shops, and those who are involved in retail sales of any kind of products including building construction materials, small home appliances and white goods, furniture, home textiles, books and stationery, newspapers and magazines, shoes and clothing retail sales, toys, medical and orthopedic products, pharmacy, jewelry, flower stores, stallholders, fishmongers, patisseries and bakeries, personal care and cosmetic products, etc., as well as shopping malls and those who are engaged in retail sales in shopping malls

  1. Iron, Steel and Metal Industry

Manufacture and sales of iron, steel, aluminum, copper, lead, zinc and tin by manufacturers

  1. Automotive

Manufacture, wholesale and retail sales of all motor land vehicles such as cars, trucks, vans, buses, minibuses, midibuses, tractors, motorcycles, trailers, caravans

  1. Logistics-Transportation

All kinds of logistics and transportation services such as urban and intercity freight and passenger transportation by air, land, railway, sea and all kinds of waterways, and highway, tunnel and bridge operations, storage and warehousing activities, airport ground services, etc.

  1. Cinema and Theater Activities

All kinds of artistic activities such as theater, opera, ballet, cinema, concert

  1. Accommodation

All kinds of accommodation activities and relevant activities such as hotels, motels, boarding houses, holiday villages, and tour operator and travel agency activities, and reservation services

  1. Food and Beverage Services

Services for presentation of all kinds of foods and beverages such as restaurants, cafes, coffee houses, tea shops, canteens, kiosks in transportation vehicles.

  1. Textile and Garment Activities

Manufacture and sale of all kinds of textiles and garments, such as manufacture of fabric and yarns, manufacture of all kinds of cotton, wool, lint, fiber and fabric products, and the manufacture and sale of clothing and home textile products

  1. Events and Organization

Organization of shows, congresses, conferences, trade fairs and events, and all kinds of events and organization activities carried out in places such as internet cafes, game arcades, wedding halls, sports centers

 

    C.  IMPORTANT ISSUES OF PRESIDENT’s SPEECH TO THE NATION

Besides, the President of the Republic addressed other issues as follows:

  • The Central Bank of Turkey takes some very important steps in terms of markets and guarantees that there will be no liquidity
  • In this context, the Central Bank has initiated very important practices for exporters too.
  • The open rediscount credit principal and interest payments with due dates in April, May and June are postponed to October, November and December, and the maximum maturity is extended by 1 year.
  • The committed closure period of rediscount credits, which fall due in April, May or June, is also postponed by 1 year.
  • Thus, exporters are supported to overcome the uncertainty in this period.
  • The top priority is to avoid interruption of production and employment.
  • The prerequisite for any company that will benefit from the opportunities in the economy package described above is that it will not cause any loss of employment. 
  • It is important to quickly meet the liquidity and cash needs of firms with credit line in financial institutions and organizations, and not to impose any restriction on the use of credit lines.
  • Financial institutions are expected to take steps to stretch credit conditions in order to maintain employment and economic growth under these circumstances.
  • All financial institutions are requested to carefully avoid credit recall, non-extension of existing credit lines, price increase, or making the security conditions difficult.
  • It is also requested to respond promptly and positively to the installment, postponement, restructuring and arrangement demands of corporate firms, SMEs, individuals, those who experience loss of income due to temporary loss of work or turnover or similar reasons, regarding their credit debts.
  • All financial institutions are expected to follow the recommendations of the Banks Association of Turkey made in this respect.

     D.SIMILAR STIMULUS & CURE PACKAGES OF THE OTHER COUNTRIES

  • What is Happening in the World in terms of Stimulus Packages? Similarly, the European Union, USA and European countries also announce large-scale stability and support packages. The USA, as the locomotive of World economy, has reduced interests and allocated a budget of 1.2 trillion USD. Germany has allocated a budget of nearly 500 billion Euro. It is known that organizations such as IMF and OECD have similar studies and discourses. A wide range of tax and financial facilities are on the agenda for all affected groups in Italy, France and the UK. Considering the interdependence of all economies worldwide, coordination between countries has become more important than ever, especially for minimizing the progress of recession, unemployment and contraction.

We will keep announcing other developments in this respect.

Please do not hesitate to contact our consultants for any questions regarding any matter in this bulletin.

Best Regards,

 Bulletin No    : 2020-24

Date                : 23 March 2020

Topic              : (Covid 19) Short-Term Work Allowance

 

 Short – Term Work Allowance

Due to the virus surrounding our country, a new economic package of 100 Billion TRY was announced. In the economic package, the good news came for employers, employees and retired people. (https://ia.com.tr/2020-23-newsletter-turkish-economy/)

One of the measures for employees whose workplaces closed due to Coronavirus. It was announced that the short work allowance initiated by the İŞKUR General Directorate, which is affiliated to the Ministry of Family, Labor and Social Services, will be activated.

In this circular, we summarised the Short Work Allowance, how to benefit from the system especially by having the frequently asked questions (FAQ) dated March 24th, 2020. Here are the details:

  • Short Work Application
  • In the event that the weekly working hours in the workplace are temporarily reduced by at least one third for general economic, sectoral, regional crisis or challenging reasons, or if the activity is stopped completely or partially for at least four weeks without seeking a continuity condition, the workplace should not exceed three months (6 months by the decision of the President). It is an application that provides income support to the insured for the period they cannot work.
  • Within the scope of Short Work;
  • Short-time working allowance to workers,
  • Payment of General Health Insurance premiums, services are provided.
  • Even the companies who has unpaid tax and premiums can apply.
  • In order to be able to apply Short Work at the Workplace;
  • The employer; it is necessary to apply to İŞKUR that the working time in the workplace has decreased or stopped due to general economic, sectoral, regional crisis or compelling reasons, and it has to be determined that the workplace has been affected by these situations as a result of the compliance determination made by the Labor Inspectors.
  • In order for the worker to benefit from the Short Work Allowance;
  • The employer’s short work request is found to be appropriate as a result of the examination by the labor inspectors,
  • The worker was entitled to unemployment benefit in terms of working hours and unemployment insurance premium payment days at the start of the short work (Those who have paid unemployment insurance premium for at least (450 days)* in the last three years from those who have been subjected to service contract for the last (60 days)* before the start of the short work),
    • (*) On 24.03.2020, the Turkish Grand National Assembly was accepted at the general assembly and announced by the Minister of Labour, Social Services and Family. However, the Official Gazette has not been published yet
  • The information of the worker on the list of those who will participate in the short study as a result of the examination by the labor inspectors, following conditions are required.
  • Employers can apply for short employment by filling out the Short Work Request Form and information about the workers to be short worked online due to general economic, sectoral, regional crisis or compelling reasons. The companies whose activities are shut down by the Government should submit those governmental desicions to have fast result.
  • The companies stopping or diminishing the activities should submit those management decisions as well.
  • After completing the determination of conformity as a result of the examination by the labor inspectors, the employer’s requests for changing the list of workers to be short-worked and / or increasing the short working time applied at the workplace are evaluated as new applications.
  • All the related documents should be submitted online and the labor inspectors are supposed to review them all online. There will be no site visit or inspection.
  • Short Work Allowance Period, Amount and Payment
  • Daily short-time working allowance: It is 60% of the average daily gross earnings calculated by taking into consideration the insured’s earnings for the last twelve months The amount of short-time working allowance calculated in this way cannot exceed 150% of the gross amount of the monthly minimum wage.
  • The short-time work allowance is paid to the worker himself and fifth day of every month for periods of Payments are made through PTT Bank. The Minister of Family, Labor and Social Services is empowered to bring the payment date forward.
  • Short Termination of Short Study
  • In the event that the employer decides to start his normal activity while the practice of short work continues, it is obligatory to notify the institution and the workers in writing six working days ago.
  • As of the date specified in the notification, short work ends. Unwarranted payments regarding late notifications are collected from the employer along with their legal interest.
  • Below is the monthly short-time working allowance for 2020.

 

Monthly Average of Prime Earnings of the Last 12 Months Calculated Short Work Allowance Amount Stamp Tax Short Work Allowance to be Paid
Last 12 Months Minimum Wage 2.943,00 TRY 1.765,80 TRY 13,40 TRY 1.752,40 TRY
Last 12 Months Working with 4.000 TRY 4.000,00 TRY 2.400,00 TRY 18,22 TRY 2.381,78 TRY
Working with the Last 12 Months 7,000 TRY 8.000,00 TRY 4.414,50 TRY (*) 33,51 TRY 4.380,99 TRY
(*) Since the calculated amount of short-time work allowance cannot exceed 150% of the gross amount of the monthly minimum wage, the monthly short-time work allowance amount to be paid has been calculated in this way. In 2020, the gross minimum wage is 2,943.00 TRY.

 

  • Withdrawal of Short Work Allowance
  • Short-time working allowance as of the date of the health report, which is the subject of the temporary incapacity benefit, in case those who receive short-time work allowance, start to get an old-age pension, get arrested for any reason, or leave the job due to any work due to any law or if the temporary incapacity benefit begins cut.
  • Employer’s Obligation to Keep Records
  • The employer, who does short work, must keep records of the working time of the workers and submit them if requested.

 

We will keep announcing other developments in this respect.

Please do not hesitate to contact our consultants for any questions regarding any matter in this bulletin.

Hope to recover soon from this pandemic.

Best Regards,

Bulletin nr: 2020-20

To       : The clients and company web site

From   : Independent Advisors / Accounting & Tax

Date     : March 5th, 2020

Subject: Latest Financial/Tax Regulations in Turkey (February 2020 Summary)

Distinguished readers,

February was very busy in terms of financial agenda, lots of expected arrangements were made and we are expecting March to be a very busy month as well in tax agenda. We would like to submit for your attention as a summary the important tax-related and financial issues that occurred within the last month.

Let’s briefly start with the headings and then examine the details. We will submit information about;

  • Long-awaited Presidential Decree regarding Transfer Pricing in Turkey to be in line with OECD standards,
  • Valuable Housing Tax deferred to 2021, fundamental changes made in this tax,
  • Application of appreciation fee, which requires taxation of the increasing property value within the scope of land development change for a very long period of time in our country,
  • Draft General Communiqués prepared by the Ministry of Treasury & Finance about accommodation tax, digital service tax and vehicle expense restriction actualized with the Law no 7194 and other issues,
  • Application of Waiver of Legal Remedy, which came into force with the Law no 7194 and which is for the purpose of reducing the disputes between the taxpayer and the Tax Administration,
  • 6-point additional SSI incentives have been extended by the end of 2020,
  • VAT and withholding VAT rates, which will be applied in certain procedures at the city hospitals,
  • Application of VAT exemption & refund regarding the construction works performed within the scope of the investment incentive certificate for the manufacturing industry,
  • Important amendments made in the Banking and Capital Market Law,
  • Actions to be taken by Turkey with regard to Brexit and ongoing agreements between our country and England,
  • Maximum service fees and amounts, which the banks can charge to the clients,
  • Application of combined withholding tax and premium return, the pilot scope of which is expanded,
  • Amendments made in the legislation for facilitating the customs procedures,
  • Environmental recovery fee arrangements, the application of which is expanded.

We hope that you have taken advantage of and have taken pleasure in our bulletins and we express our respects.

  1. The Income Tax Return Period has started for the Income Taxpayers.
    • The income taxpayers who are taxed under the real taxation system due to their commercial, agricultural and professional activities shall send their Annual Income Tax Returns for the year of 2019 in electronic environment by the end of 31 March 2020 Tuesday.
    • The taxpayers whose income is only composed of rent, salary, marketable security incomes and other incomes or one or several of the other earnings and revenues can easily send their Annual Income Tax Returns via the Online Ready Tax Return System.
  1. Long-awaited Presidential Decree regarding Transfer Pricing in Turkey put in force.
    • This new piece of legislation covers the amendments on the definition of related parties and the master file and Country by Country Reporting (CbCr) documentation requirements in addition to the current local file reporting.
    • In line with the Law Nr. 6728 the %10 rules are needed in order to be considered as “related parties” in transfer pricing rules set.
    • Turkey uses the arm’s length principle: Under Article 13(3) of CITL, it is stated that “Arm’s length principle means that the price or consideration charged for the purchase or sale of goods or services between related parties should be the price or consideration which would have been occurred in the absence of such a relationship between them.” The arm’s length principle also applies for intra group services transactions.
    • Local File: The transfer pricing form attached to the corporate tax return and local filing still exist. Annual Transfer Pricing Report (Local File) which must be prepared by all corporate income taxpayers until the deadline for filing the annual CIT return and, upon request, submitted to Turkish Revenue Administration or other tax authorities entitled to make tax examination.
    • CbCr (Country Report): Turkish resident ultimate parent company of an MNE group having consolidated revenue exceeding Euro 750 Million is needed to submit this report. This annual report will be uploaded online until the end of a fiscal year.
      • Reporting should include the sales, profits, capital, retained earnings, headcount and other information.
      • The first country file will be submitted for the FY 2019.
      • Considering the fact that the value created, the employment and the export value of Turkey is created by MNE’s, it is strongly advised that the reporting, the structure and analysis of the value chain is so important.
      • The firms obliged to prepare country report should inform the Tax Office about the ultimate firm and reporting firms, and fiscal year of the companies until June of each fiscal year. This information should reported this year until the end of August 2020 as well.
      • Those reports will be shared with other countries reciprocally in line with the international tax treaties. The Ministry of Finance & Treasury of Turkey will update and publish those countries’ list.
      • This new filing requirement has huge effects on Turkey originated multinational firms as well.
  • Master File: With the amendments in legislation, corporate MNE taxpayers having TRY 500 million in both asset and net sales figures for the previous year need to prepare a master file and submit to the Tax Office and tax auditors upon request.
    • Master files should include the organizational structure of the multinational company, the activities of the business, IP’s, the group wise financial transactions and tax status.
    • The first master file will be submitted for the FY 2019.
    • Reporting full and timely manner save the firms %50 tax penalty if any for all of those 3 reports.
    • We are expecting country profile of Turkey will be updated after this new legislation. This link is the old country report for Turkey: http://www.oecd.org/tax/transfer-pricing/transfer-pricing-country-profile-turkey.pdf
    • These country profiles focus on countries’ domestic legislation regarding key transfer pricing principles, including the arm’s length principle, transfer pricing methods, comparability analysis, intangible property, intra-group services, cost contribution agreements, transfer pricing documentation, administrative approaches to avoiding and resolving disputes, safe harbours and other implementation measures. The information contained in these profiles is intended to clearly reflect the current state of countries’ legislation and to indicate to what extent their rules follow the OECD Transfer Pricing Guidelines.
  1. The Valuable Housing Tax was postponed to 2021 and Fundamental Changes were made in this tax.
    • The mentioned new tax regulation stipulated in the Real Estate Tax Law was fundamentally amended with the Law no 7221.
    • It was stipulated that the tax will be deferred to 2021, no tax return will be submitted for the year of 2020 and no accruement will be made, the real estate tax value will be taken as basis instead of the valuation made by the General Directorate of Land Registry and Cadastre as the tax base and a house with the lowest value of those who have one house and those who have more than one taxable house will be exempted from tax.
    • The progression in tax was maintained and the progression by slice procedure was accepted in place of the progression by class procedure, which causes injustice.
  1. The Application of Appreciation Fee is being started in Turkey.
    • The appreciation fee, which is an issue that has being discussed for decades in Turkey, has been enacted.
    • Briefly introduction of so called “appreciation fee”, which requires a contribution to the government budget out of the increase (appreciation) of the property value due to the changes in the environmental and construction regulations applicable to that property is passed by the Parliament.   This regulation was started with the additional article 8, which was added to the Land Development Law no 3194.
    • The act came into force on 20 February 2020 Thursday, which is the date of publication.
    • All of the increased value of the land, the value of which is increased as a result of the change in the land development plan, shall be considered as the appreciation share.
  1. SSI Incentives: The application was extended by the end of 2020 with the Presidential Decision providing additional SSI incentive.
  1. Changes in Banking Law: The Law Nr. 7222, which requires important amendments in many Laws that make regulations on banking and monetary issues, was published in the Official Gazette dated 25 February 2020.
    • In the Law, amendments were made in the Capital Market Law, Central Bank Law, Bank Cards and Credit Cards Law, Financial Leasing, Factoring and Finance Companies Law, Law on the Protection of the Consumer as well as the Banking Law.
    • Briefly, regulations were made about the precaution plan to be prepared by the banks, Wealth Fund (Turkey Wealth Fund), customer secret and personal data, provisions to be applied for the participation banks, penal sanctions stipulated, manipulation and misleading transactions in the financial markets, authorizations passed from BDDK (Banking Regulation and Supervision Board) to TCMB (Central Bank of Turkey), minimum capital amount stipulated for the factoring companies, guarantee management agreement with the board of debt instrument owners stipulated in the capital markets and guarantee manager application, crowd funding and project financing and project-based securities.
    • The relevant institutions are expected to make secondary regulations after the legal regulations made.
  1. The Presidential Circular on Brexit was published.
    • At the stage of transition period stipulated until 31.12.2020 with respect to the resignation of the United Kingdom from the European Union membership with the Circular no 2020/1, all Governmental agencies should pay attention to this issue on the matters included in their areas of duty and authorization and should properly inform and direct the public.
    • We currently have a Double Taxation Agreement signed with England in terms of taxation and it is still in force.
    • The oldest Social Security Agreement signed on 09.09.1959 between England and Turkey in terms of social security is still in force.
    • The Agreement on Mutual Incentive and Protection of Investments signed on 15 March 1991 is still in force.
  1. Turkish-Moldovan Social Security Agreement: The Presidential Decree dated 24 February 2020 was published with regard to the approval of the Social Security Agreement signed between Moldova and Turkey. Thus, the number of the bilateral social security agreements of Turkey has reached to 32.
    • These agreements regulate very important issues concerning the insured such as equal treatment of the citizens of the party countries, insurance consolidation, utilization of health, family, old age, death and similar benefits, insurance branches to be applied, calculation of the salaries, service consolidation and settlement of disputes.
  1. VAT Exemption & Refunds: The General Communiqué on Value Added Tax serial no 30 was published. The Communiqué includes the determinations regarding the VAT and withholding rates for the health facilities constructed by the public-private partnership model, the application of VAT refund regarding the construction works performed within the scope of the investment incentive certificate for the manufacturing industry and the regulations and clarifications regarding the new machinery and equipment deliveries for the manufacturing industry extended by the end of 2022.
    • VAT Refund for Manufacturing Industry: It was decided to apply the refund of the value added tax, which was undertaken by the Presidential Decision no 1950 due to the construction works regarding the investments made within the scope of the investment incentive certificate for the manufacturing industry and which could not be deducted also to the value added tax which will be undertaken within the years of 2020 and 2021 and which cannot be deducted .
    • VAT Exemption in Machinery and Equipment Deliveries: As the duration of the VAT exemption applied in the new machinery and equipment deliveries to the VAT taxpayers having the industrial registration certificate in order to be used exclusively in the manufacturing industry in accordance with the Industrial Registration Law set forth in the provisional article 39 of the VAT Law was extended until 31.12.2022, the necessary regulations for this issue were made in the VAT Communiqué.
  1. Taxpayer Rights: A new period is starting in terms of the tax conflict process management with the General Communiqué on Tax Procedural Law serial no 517, which regulates the issue regarding the Waiver of Legal Remedy.
    • Both reducing the work load of the courts and ensuring the charging of the tax were aimed and discount is stipulated with the regulation in the taxes and penalties to be paid in the case of waiver of legal remedy against the decisions taken by the Tax Court in the capacity of court of first instance or by the District Administrative Court in the capacity of court of appeals in the actions filed against the tax/penalty notifications.
  1. The Draft General Communiqués regarding the application of the Law no 7194 were published on the GIB (Revenues Authority of Turkey) website in order to obtain the opinions of the public.
    • All of three General Communiqués are in Draft version and you can forward your opinions and suggestions. These draft Communiqués have not officially come into force because they have not been published yet.
    • Draft General Communiqué on the Application of Accommodation Tax
    • Draft General Communiqué on the Application of Digital Service Tax
    • Draft General Communiqué on Income Tax serial no 311
      • This Communique explains the changes with the Law No. 7194. One of the changes is expense rules for company cars. Some limitations are imposed on the total amount of the monthly rental fee paid for each of the cars (binek oto) acquired by renting, and the amount of special consumption tax (ÖTV) and value added tax (KDV) that can be considered as an expense over the taxable income, and the amounts that can be calculated as a depreciation for passenger cars;
      • Firstly, up to 5,500 Turkish Liras of the monthly rental value for each of the passenger cars acquired by renting and up to 115,000 Turkish Liras of the total special consumption tax and value added tax on the acquisition of company cars can be considered as expense in the determination of taxable income.
      • Add to that, maximum 70% of the expenses related to those cars can be deducted from taxable income.
      • In the determination of taxable income, excluding special consumption tax and value added tax, the first acquisition price is 135,000 Turkish liras, in cases where taxes are added to the cost value or if the passenger car is acquired as second hand, each of the passenger cars whose depreciation amount exceeds 250,000 Turkish liras, depreciation can be calculated at the most over this amount.
      • With the Tax Procedure Law General Communiqué (Rank No: 512) published in the Official Gazette dated 23/12/2019 and numbered 30987, revaluation rate for 2019 is 22.58% to be effective as of 1.1.2020, in this context;
        • The total amount of special consumption tax and value added tax that can be subject to deduction as an expense is from 115.000 TL to 000 TL,
        • The total amount to be subject to deduction as depreciation; excluding special consumption tax and value added tax, it has been increased from 135.000 TL to 000 TL,
        • In cases where taxes are added to the cost value or if the passenger car is acquired as second hand, from 250.000 TL to 000 TL.
        • Income taxpayers and corporate taxpayers with commercial earnings and self-employment earnings will consider these new amounts increased in the determination of earnings for 2020.
        • However, the rental amount of 5.500 TL, which can be considered as an expense for passenger cars, has not been revaluated, and the monthly rental price that the income taxpayers and corporate taxpayers can consider will be 5,500 TL in 2020.
  1. Customs Legislation Update: Important amendments were made in the Regulation on Facilitation of Customs Procedures.
    • These amendments, which were made by the Ministry of Trade in the first Regulation published in 2014, were published on the Official Gazette dated 21 February 2020 and there are different enforcement dates. (For the articles that came into force on the date of publication, at the beginning of 2021, on 31 March and 30 June, refer to the article 92 of the Regulation.).
    • The purpose of this Regulation is to establish the procedures and principles for the conditions necessary for the authorized declarant status, the certificates to be required in the application, granting the certificate, the duration, renewal, replacement, suspension, withdrawal and cancellation of the certificate and the facilitations for authorized sender, authorized receiver, customs clearance on the premises for importation, approved exporter, understatement, partial guarantee, lump sum guarantee application, control of the declaration, which will be taken advantage of within the scope of such certificate, the facilitations for safety and security and suspension, withdrawal and cancellation of the authorizations for taking advantage of such applications and facilitations and other simplified applications arising from the customs legislation.
    • This Regulation regulates the requirements necessary for the certificate of Authorized Declarant Status (YYS) in the customs procedures and the issues regarding obtaining the certificate, the conveniences provided, the transaction processes and the withdrawal of the certificate.
    • Comprehensive regulations were made in relation to YYS-I and YYS II separation, subsequently being subjected to control, preparation of the activity report, periods regarding on-premise follow-up.
    • 7 annexes were added to the list of annexes in the attachment of the Regulation and changes were made in 12 Additional documents.
  1. The Application of Recovery Contribution Fee was expanded. The period for submitting tax returns was extended for one month.
    • The procedures and principles for the declaration and charging of the recovery Contribution Fee to be paid for the other products except for the plastic bags that are included in the list no (1) attached to the Environmental Law were established with the General Communiqué No 2 on the Recovery Contribution Fee Return, which was published on the Official Gazette dated 5/2/2020 and no 31030.
    • The Ministry of Environment and Urbanization put into force the Procedures and Principles for the Application of the Regulation dated 7 February 2020 on Recovery Contribution Fee with the Approval of the Minister. In the mentioned Procedures and Principles, declaration and payment, netting, exempted products and circumstances were clarified with detailed examples with regard to;
      • Responsibilities of the environmental official in the companies,
      • Put upon the market, import, supply, point of sale and similar concepts,
      • Products complying with the packaging definition subjecting to the recovery Contribution Fee, packages according to the material, from which they are produced,
      • Primary, secondary and tertiary packaging types,
      • Those who put packages upon the market, those who import packaged products, package suppliers, plastic bags and other bags,
      • Vegetable oils subjecting to recovery,
      • Electrical and electronic goods, rubbers, batteries and accumulators, mineral oils and medications subjecting to recovery.
  1. Negotiations for New International Tax Treaties
    • The first tour negotiations for the signature of a Double Taxation Agreement between the Republic of Turkey and the Democratic Socialist Republic of Sri Lanka were made in Ankara between the dates of 21-23 January 2020.
  1. Government Incentives: A Circular regarding the Support Management System (DYS) that is applied in the governmental incentives was issued.
    • Within this scope, the components regarding;
      • Supports for good export,
      • Supports for service export,
      • Inward Processing Regime,
      • Outward Processing Regime,
      • Tax, Levy, Charge Exemption and
      • Clean Export Credits shall be carried out within the scope of Support Management System.
    • The new applications to be forwarded from 31/03/2020 are accepted only via the Support Management System.
  1. Changes were made in the Fees Charged for the Banking
    • TCMB and BDDK made a regulation regarding the procedures and principles for the fees that will be charged from the financial consumers and the fees that can be charged from the commercial customers by the banks.
    • The purpose of the Communiqué is to determine the types and qualities and the maximum amounts or rates of the fees that can be charged in return for the products or services provided and to establish the relevant procedures and principles in order to increase the predictability and transparency in the transactions that the banks will make with their commercial customers, to ensure the unity of concept and term and to prevent surcharging.
  1. Combined Withholding and Premium Return Pilot Application: Bursa, Eskisehir and Konya were added to the scope of pilot provinces, in which Combined Withholding and Premium Return is applied with the Communiqué no 7 published on the Official Gazette dated 9 February 2020, and the application was postponed to March 2020 for other provinces.

We have summarized our notes on the changes and developments regarding the summary financial / tax legislation in the last one month, in English, in short headings. Please do not hesitate to contact us for further information.

Please send us your comments and suggestions regarding this bulletin format.

Best regards,

Tax-IA Bulletin

Bulletin nr: 2020-10

To       : The clients and company web site

From   : Independent Advisors / Accounting & Tax

Date     : February 3rd, 2020

Subject: Important Financial/Tax Regulations (January 2020 Summary)

December and January are the months when financial regulations and amendments for the new year are made most.

Considering the requests from you, our dear customers and readers, we would like to send important financial issues as daily newsletters by e-mail, as well as weekly/10-day periods or monthly summary newsletters in Turkish/English under short headings.

We respectfully hope you benefit from and enjoy our newsletters. (If you only want to get Turkish or English monthly or weekly/10-day periods Turkish abstracts, please simply inform us.) We forward this newsletter to all our readers for your selection. Monthly English newsletters will be sent to everyone who wants.

Please find our notes on the changes and developments regarding the summary of financial / tax regulations made in the last month under short headings below in English. Please do not hesitate to contact us for further information.

  1. Scope of Recovery Contribution Application has been extended: With the Annex-11 added to the Environmental Law, arrangements have been made regarding the country-wide returnable packaging application for certain products, the use of nylon bags and payment of a recovery contribution for certain products.
    • Basic regulations are made with respect to “recovery contribution” for tires, batteries, accumulators, oils (vegetable and mineral), electrical and electronic goods (television, lighting, small appliances, white goods), packages and drugs with this Bylaw.
  1. The Central Government Budget Law of 2020 came into force by being published in the Official Gazette dated 31.12.2019.
    • According to the Budget, the amount of appropriation granted to the general budget public administrations is foreseen as TRY 1,082,021,197,000 and the relevant revenues as TRY 941.9 billion TL. TRY 912.5 billion of the said budget revenues consists of tax revenues.
    • It is planned that 31.4% of tax revenues will be composed of taxes on income (income tax and corporate tax), 35.7% will be composed of VAT and 19.3% will be composed of Special Consumption Tax (SCT).
  1. The Presidential Decision dated 2 January 2020 and no 2015 sets out the procedures and principles regarding the extension of low interest rate investment and business loans for agricultural production.
  1. VAT Rates: The Presidential Decision no 1994 published in the Official Gazette dated 2 January 2020 reduces the VAT rates applied on whole sales of chicken eggs and fish and sales of furniture.
  1. Green Passport: The right to obtain green passports granted to exporters has been extended to “four years.”
  1. The invoice issuance limit for jewellers is determined as TRY 4,200 (General Communiqué on Tax Procedure Law (GC TPL) no 514).
  1. Fees for various professions and jobs were published in the Official Gazettes dated 31 December 2019 and 2 January 2020, determining the minimum fees and wages to be paid for 2020.
    • Bankruptcy administration fee, writing and notification fee tariff,
    • Licensed trustee warehouse fee tariff,
    • Mediation minimum fee tariff,
    • Minimum fee tariff for public practice accounting, certified public accountants and sworn-in certified public accountants,
    • Customs brokerage and authorized customs brokerage tariff,
    • Fees to be applied by the Turkish Patent and Trademark Office in 2020, and
    • Minimum Attorneyship Fee Tariff.
  1. Waiving the Right to Appeal: The Draft General Communiqué on Tax Procedure Law, which explains the details about waiving the right to appeal has been opened to public consultation. This application, which has recently been introduced by the Law No 7194, provides taxpayers the opportunity to make their payments with deduction of taxes and penalties during the Tax Court phases.
  1. The Circular no 122 on Tax Procedure Law has been issued, which allows the Withholding Tax Return and Premium & Service Returns to be sent with separate passwords by the companies that are concerned about wage privacy. The application is voluntary and taxpayers may send their returns with a single password if they will so.
  1. The Communiqué on Trade Registry Offices entered into force being published in the Official Gazette dated 17 January 2020.
    • The Communiqué includes important regulations on the personnel who will work in 238 Trade Registry Offices and their affiliated branches and agencies in our country, as well as establishment and organizational structure of the offices.
  1. Limitation of the Number of Instalments in Consumer Loans: The Banking Regulation and Supervision Agency made amendments to the Regulation published in the Official Gazette dated 14 January 2020 to change the allowed numbers of maturity (instalment) in certain consumer loans. Accordingly, for the following purchases, the number of instalments may not exceed;
    • 60 months in consumer loans other than certain loans such as housing, education, etc.,
    • 48 or 60 months according to the final invoice amount in vehicle loans,
    • 12 months in purchases of computers or 6 months in purchases of tablets, or
    • 3 to 12 months for purchases of mobile phones according the price.
  1. Lawyers who have completed 15 years at profession have been granted the right to obtain a green passport.
  1. Minimum Payment Amount for Cheques: The Central Bank of the Republic of Turkey (CBRT) has redetermined the minimum payable amounts of checks, that must be paid by banks (TRY 2,225) (Central Bank Circular dated 17 January 2020).
  1. Circular on Export: With the amendment to the Communiqué, the obligation to bring the export proceeds to the country has been made permanent, and the obligation to sell the brought money to the banks was removed. This time, the Circular on Export dated January 16, 2020 sets out the procedures for implementation.
  1. International Double Taxation Agreements of Turkey: The below-listed international agreements were published in the Official Gazetted dated 17 January and 31 January 2020. In summary,
    • The Laws on Approval of the Ratification of the Ivory Coast, Chad, Somali, Rwanda and Argentina Agreements were published in the Official Gazette.
    • Meanwhile, the Law on Approval of the Protocol revising the Uzbekistan Agreement was published in the Official Gazette dated 31.01.2020.
    • 85 out of the 93 agreements signed by the Republic of Turkey are still in full force and effect.[1]
    • 27 of these valid Agreements were entered into with European Union (EU) member countries.
    • Double Taxation Agreements under Negotiation: Negotiations are ongoing to revise the current Agreements with the Netherlands, Sweden and Luxembourg and to sign Double Taxation Agreements with Afghanistan, Ghana, Cameroon, Cuba, Libya, Mali, Mozambique, Nigeria and Tanzania.[2]
  1. Our Bilateral Social Security Agreements Increase in Number.
    • Ratification of “Social Security Agreement between Turkey and Moldova” has been approved via the Law no 7200 published on 24 December 2019.
    • Turkey is currently a party to 30 bilateral social security agreements.
    • These agreements regulate very important issues concerning the insured, such as equal treatment for the citizens of the contracting party countries, unification of insurance, utilization of health, family, old age, death benefits, etc., insurance branches to be applied, calculation of pensions, unification of services, and settlement of disputes.
    • The Law dated 31 January 2020 approves “Social Security Agreement between Turkey and Poland” and “Notes” regarding the Amendment to the Agreement.
  1. The President ratified the Agreement on Automatic Exchange of Information on Financial Accounts among Countries.
    • This Agreement sets out share of information on financial accounts arising from the Double Taxation Agreements and “Convention on Mutual Administrative Assistance in Tax Matters”, which was also signed by Turkey, under a certain framework.
    • Entry into Force: Turkey signed the Agreement as the 88th The number of signatory countries is 107 in November 2019. For Turkey, implementation technically started in September 2018 and obligation on September 2019 according to the nature of accounts. It is anticipated that the exchange of information will begin in September 2020 at the earliest depending on the course of the process in the agreement ratified by the President.
    • Course of Action: Exchange of outlined information will be performed using certain infrastructure technically among the countries. Common Transmission System for AEOI is a method on automatic data transmission, which is studied by OECD.[3]
  1. It has been made easy for the taxpayers benefiting from the secure mobile payment and electronic document management system to issue e-archive invoices (General Communiqué on Tax Procedure Law – GC TPL no 515).
  2. Fuel SCT Amounts which are subject to Application of Sliding Scale System were updated.
    • Based on the Adaptation Mechanism of Special Consumption Tax as determined by the Council of Ministers’ Decision dated 14.05.2018 and no 2018/11818 for the first time, SCT Amounts were redetermined to be valid as from January 16, and then, January 28, 2020.
  1. Interest, late fee, default rate, revaluation rate, increase rate or applicable statutory upper limits as specified in the various Laws have been redetermined.
    • Deferment Interest Rate: deferment interest rate has been redetermined as annually 15%.
    • Delay Interest and Late Fee: Monthly late fee, remorse increase and delay interest rates were reduced.
    • Credit Card Interest Rates: Monthly maximum conventional interest rate applied on credit card transactions was reduced.
    • CBRT Discount and Advance Interest Rates were redetermined.
    • Legal Interest and Default Interest rates were readjusted.
    • Revaluation Rate has been determined as58%. This rate is important in terms of stamp duties, charges, fines, certain taxation-related tariffs, tax-related obligations, and some applicable limits we will pay in 2020.
  1. SCT Amounts Received on Tobacco and Alcohol have not been Increased: According to the President’s Decision published in the Official Gazette dated 31 December 2019 and no 30995, the annual projected increase in certain products subject to SCT (tobacco and alcohol products) will not be applied for the first half of 2020.
  1. Monthly and quarterly options are offered to install E-Book Licenses to the System.
  1. Force Majeure: Due to the bitter earthquake in Elazığ, force majeure has been declared with respect to taxes in the region.
  1. Exchange Rates: General Communiqué on Tax Procedure Law no 516 determined the rates to be taken as a basis for valuations of the foreign currencies without a fair value to be made for 2019 in accordance with the Tax Procedure Law no 213.
  1. The Revenue Administration initiated studies for reviewing and simplifying all returns, notifications and forms, and filling out more easily and quickly in the framework of a taxpayer-oriented, participatory and transparent service approach.
  1. A Project for Mitigation of Informal Economy has been carried out. For the “Technical Assistance Project for Strengthening the Audit Capacity and Increasing Data Exchange among the Agencies in the scope of Mitigation of Informal Economy” financed by the European Union and Turkey, the second workshop was held with the broad participation of the public bodies and agencies, private sector, non-governmental organizations and academic representative in Afyon province between December 21st and 25th, 2019.

We have summarized our notes on the changes and developments regarding the summary financial / tax legislation in the last one month, in English, in short headings. Please do not hesitate to contact us for further information.

[1] https://www.gib.gov.tr/sites/default/files/fileadmin/faaliyetraporlari/2018/2018_faaliyet_raporu.pdf

[2] Activity Report of the Revenue Administration for 2018, p.114.

[3] http://www.oecd.org/tax/automatic-exchange/international-framework-for-the-crs/