In Brief
To increase Turkey's qualified workforce, increase foreign capital inflows by using its geopolitical advantages, to provide sustainable and healthier financial resources to production, encourage new entrepreneurs by creating a peaceful competition environment, and to contribute to the country's economy where establishment of Istanbul Finance Center (IFC) is crucial.
Pursuant to the bill submitted to the Presidency of the Turkish Grand National Assembly on 1 June, the purpose of this Law is to increase the financial competitiveness of the Republic of Turkey in the international arena, contribute to the development and deepening of financial markets and products and services, to strengthen integration with international finance and capital markets, and thus to make Istanbul Financial Center one of the leading global financial centers.
Information on Articles 5, 6 and 7, as well as temporary article 1 and 2, which refer to the tax advantages of the said bill, are given in the following section of our bulletin.
Scope
Financial Services Export
ARTICLE 5- (1) Financial services provided by institutions operating financially to persons residing abroad by obtaining a participant certificate are considered as financial service exports, provided that the service is ultimately utilized abroad. (2) Derivative transactions carried out by financial institutions on their own behalf and account, transactions of buying or selling assets from their portfolios, and activities, services and transactions of domestic residents that take their savings abroad are not considered as financial service exports. |
In IFC it is aimed to carry out, deposit acceptance, participation fund acceptance, cash and non-cash loans, custody services, factoring and forfaiting transactions, financial leasing transactions, insurance, portfolio management, investment consultancy, issuance of debt instruments related to capital markets, all kinds of financial activities that are not allowed or prohibited by the relevant legislation, such as crowdfunding, and project financing.
Exceptions and Discounts on Taxes and Other Financial Liabilities
ARTICLE 6- (1) Financial service exports realized at IFC by financial institutions that have received participation certificates. a) 75% of the earnings obtained within the scope of the activities are deducted from the corporate income in the determination of the corporate tax base, if it is separately shown on the corporate tax return. b) Transactions and money received in favor of these transactions are exempt from banking and insurance transactions tax. c) Transactions related to activities are exempt from all kinds of fees, and papers issued regarding these transactions are exempt from stamp tax. (2) The actual net value of the monthly wage paid to the personnel employed by the financial institutions that have obtained the participation certificate at IFC; 60% of people with at least five years of professional experience abroad and 80% of people with at least ten years of professional experience abroad are exempt from income tax. The exception stated in this paragraph is applied to the wage income of the personnel who did not work in Turkey in the last three years before they started to work at IFC. (3) Transactions regarding the leasing of immovable properties in IFC-Istanbul are exempt from all kinds of fees and the documents issued regarding these transactions are exempt from stamp tax. (4) The provisions of this article are also applied to the regional treasury and financial management centers of the participants who are active in at least three countries. |
With the provision of this article, it is aimed to reduce the issues that can be considered as costs in transactions related to financial service exports and to increase the financial services ratio in the gross national product by contributing to the financial service exports of the Republic of Turkey by encouraging financial service exports.
Coregulations
ARTICLE 7- (1) Subject to the provisions of the Tax Procedure Law No. 213 of 4/1/1961 and the Turkish Commercial Code No. 6102 of 13/1/2011, regarding the ability to keep and issue the books that the participants have to keep and the documents they will issue in foreign currency. Ministry of Treasury and Finance is authorized to make regulations. (2) Articles 1 and 3 of the Law on Compulsory Use of Turkish in Economic Institutions dated 10/4/1926 and numbered 805 shall not apply to all kinds of transactions, contracts, communications, accounts and books arranged within the scope of the activities carried out by the participants among themselves and at IFC. (3) Within the scope of the activities carried out by the participants among themselves at IFC. Provided that the activities of the participants are not contrary to the legislation to which they are subject, a free choice of law can be made in all kinds of transactions and contracts made under private law. (4) The provisions of this article are also applied to the regional treasury and financial management centers of the participants who are active in at least three countries. |
It was aimed to provide the participants operating in IFC with the freedom to keep records in a foreign language required by international organizations with the provision of the mentioned article. And also, it was foreseen that organizations which have received a participant certificate can freely choose their law in all kinds of transactions and contracts subject to private law within the scope of their activities at IFC, provided that they do not contradict the provisions of the legislation to which the relevant participants are subject.
Additional Exemption for Corporate Tax and Fees
PROVISIONAL ARTICLE 1- (1) The 75% rate in subparagraph (a) of the first paragraph of Article 6 is applied as 100% for the corporate earnings of the corporations for the taxation periods of 2022 and 2031. These periods cover the accounting periods starting within the relevant years for the institutions designated as special accounting periods. (2) Financial activity fees, which are required to be collected from the headquarters and branches of financial institutions in IFC, which have obtained a participant certificate, pursuant to the Fees Law No. 492 of 2/7/1964, for a period of 5 years from the effective date of this Law. As of the effective date of the law, the accrued fees are not cancelled, and the collected ones are not refunded. |
It was aimed to encourage relocations and to make IFC globally competitive during the first period of the operation with the article.
Real Estate owned by the Capital Markets Board and the Banking Regulation and Supervision Agency
| PROVISIONAL ARTICLE 2- (1) The immovable whose ownership is specified in the attached list (2) of the Capital Markets Board and the immovable whose ownership is specified in the attached list (3) of the Banking Regulation and Supervision Agency are registered in the name of the managing company, free of charge. The immovables registered in the name of the managing company are also abandoned free of charge and without seeking the approval of the right holders, and the ownership is recorded in the declarations section in the name of the managing company. Transfers and transactions to be made within the scope of this paragraph are exemp |
It is foreseen that some immovables in IFC will be registered in the name of the managing company and certain exemptions and exceptions will be granted to the transactions regarding these registration procedures by the provision of the mentioned article.
