2020-128 Monthly Financial/Tax Regulations Summary in Turkey (October 2020)


Date     : November, 3rd, 2020

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


Distinguished readers,

We would like to submit the important tax-related and financial issues that occurred within the last month in Turkey.

We are here with the financial / tax regulations that took place in October. First of all, we could say that a very rapid financial agenda occurred with the opening of the Turkish Grand National Assembly. The legislative agenda started intensively with the Employment Omnibus Law Proposal, amendments in Technopolis and R&D Laws, tax amnesty proposals including tax debt restructuring in order to ease tax payment capacity decrease because of the Covid-19.

In addition, in October for our readers, important developments in public procurement legislation, country-based reporting notification form (CbcR) that should be submitted in October 2020, industry doctoral program incentives, medium-term budgetary documents and what the 2021 Central Government Budget Law submitted to the Parliament brings for taxpayers, employment omnibus law and humanitarian and the social dimension of the changes and statistical predictions, attractions and program changes were summarized by experts in Taxia.

In addition, you can visit our website (www.taxia.com.tr) designed to support and inform the business society, employees and all stakeholders. We hope that you will benefit and enjoy our newsletters.

Let’s briefly start with the headings and then examine the details. We will submit information about economics in general, tax, customs, social security obligations, banking and financial issues, postponed obligations, R&D and incentives below.

A.Economy and Public Budget

  • 2021 Central Government Budget Law was submitted to the TGNA (Turkish Grand National Assembly) on October 19, 2020.
    • According to the proposal, budget expenditures are estimated to be 1 trillion 346.1 billion, non-interest expenditures as 1 trillion 166.6 billion, budget revenues as 1 trillion 101.1 billion TL and tax revenues as 922.7 billion TL. In 2021, the budget is expected to have a deficit of 245 billion TL.
  • After the Medium-Term Program and the New Economy Plan covering the years 2021-2023, the Circular No. 2020/12 for the Medium-Term Fiscal Plan and Budget Call and Budget Preparation Guidelines were published. General scope of these programs covers topics such as economic growth, unemployment, tax, R&D and inflation.
  • The General Investment and Financing Programs of the state economic enterprises (SEEs) and their affiliates for 2021 have been approved by the Decree of the President.
  • The Law Proposal, which foresees amendments to the Public Financial Management and Control Law 5018, was accepted by the Turkish Grand National Assembly and entered into force by being published on October 16, 2020 as Law No. 7254.
    • With the proposal, issues such as the transition to performance-based budgeting in the public budget process and updating the attached charts, administrative regulations, determination of rural settlements in local administrations and tax benefits were foreseen.

B.Main Economic Indicators

  • October 2020 Economic Capacity Utilization rate rises
    • The Central Bank of Turkey announced the capacity utilization rate of the manufacturing industry for October 2020. The rate increased to 75.4% in October 2020 from 74.6% in September 2020.
  • Inflation figures in Turkey rise.
    • Turkish Statistical Institute announced inflation figures for September 2020. Consumer price index increased by 11.75% and domestic producer price index increased by 33% on an annual basis.
  • Balance of Payments Statistics
    • The Central Bank released the balance of payments statistics for August 2020. The current account posted USD 4,631 million deficit compared to USD 3,314 million surplus observed in the same month of 2019, bringing the 12-month rolling deficit to USD 23,203 million.
  • Treasury cash realization statistics were published with the announcement of the Ministry of Treasury and Finance dated October 7, 2020.
    • With the analysis covering the years 2005-2020, public revenues and expenditures and cash realizations are regularly reported by the Ministry.
  • Labour force statistics for the period of July 2020 was issued.
    • Turkish Statistical Institute announced the labour force statistics for the period of July 2020. The unemployment rate in Turkey realized as 13.4% with 0.5 percentage point decrease compared to the same period of the previous year.
  • More information can be found at the web page of the Ministry of Finance and Treasury. https://en.hmb.gov.tr/investor-relations-office

C.Major Tax Issues

  • New Stimulus Package is in the Parliament.
    • The Law on Employment Package Including the Restructuring of Tax Liabilities has been accepted by the Commission in the Turkish Grand National Assembly and is expected to be discussed in the General Assembly in the beginning of November 2020.
    • The Long-awaited Employment Package, which has been consulted for months, has come to the agenda of the Turkish Grand National Assembly as an Ommibus Law. The law stipulates not only labor and employer law and measures and provisions to increase employment, but also numerous regulations and amendments to the Income, Corporate and Value Added Tax Laws that concern income and corporate taxpayers, and once again restructuring of public receivables and foreign based assets.
    • Applying a low corporate income tax rate instead of 22% in corporate tax, a reduction in the corporate tax rate, albeit temporarily, for those who are listed to the public, an income tax exemption for real persons who are e-exporters, the opportunity to be taxed by a simple withholding procedure within the scope of tax-free tradesmen, tax amnesty for assets held abroad, postponement of accommodation tax once again, extension of the taxation regime under the temporary article 67 of the Income Tax Law until the end of 2025 for capital gains, interests and secuirites will, continuation of the income tax withholding of horse racing personnel, short work, cash wages, extension of employment incentives for women and youth.
    • You can find more information regarding with the changes in our bulletins nr. 2020-122 and 2020-123
  • An update has been made in the e-declaration system to be implemented for BITT (banking and insurance tax) taxpayers as of January 2021.
    • The announcement of the e-declaration system dated 05.10.2020 regarding BITT (Banking and Insurance Transactions Tax) taxpayers has been published by the Revenue Administration.
  • Country-by-Country Reporting (CbCR) Obligation in Turkey started.
    • Based on the Presidential Decree No. 2151, CbCR reporting requirement is brought for the ultimate parent company of Turkish multinational groups, which has a consolidated turnover of 750 Million EUR.
    • Companies in this scope are required to file the first reporting until December 31, 2020 (within 12 months of the end of the accounting period for companies with special accounting periods).
    • Finally, it is clear that recent changes in Turkish transfer pricing legislation will affect many companies very closely. For that reason, it is useful to initiate the necessary work on the transfer pricing documentation including Masterfile, local file and CbCR. You can find more information about the recent changes in our bulletin nr. 2020-118 in English and ask our TP experts.

D.Social Security Issues

  • The short-time working allowance, cash wage support and termination ban has been extended again, this time for two months.
    • In the Official Gazette dated 27.10.2020, “Presidential Decree on Extending the Duration of Short Work Allowance for Workplaces with Compelling Reason under Periodic Situations Arising from External Effects Due to New Coronavirus (Covid-19)” has been published.

E.R&D and Incentives

Turkey proposes lots of different incentives for the majority businesses such as SME, R&D firms and exporters. There are some legislative changes summarized below on those issues:

  • The Industrialization Executive Committee (SAIK) was established and the Presidential Decree on the issue was published. This is an important application in Turkey for firms.
    • The purpose of this Presidential Decree is to ensure the development of domestic production and technological capabilities in different ways, including public procurement, in line with the policies and targets included in the development plans and programs, to facilitate the investment, production and financing processes of the producers and to take decisions in order to increase their competitiveness. It regulates the principles and procedures regarding the establishment of the Industrialization Executive Committee and its duties and powers.
    • If we take a look at the core areas of this Committee, to take measures that will ensure that tender specifications and contracts are prepared in a way that will not prevent localization and ensure the localization of the technological components needed by the sectors, to make decisions that will ensure investment in strategic areas where domestic production is limited, in the partnership structures of companies with critical importance making decisions regarding the changes that may risk the continuity of domestic production and national security, strengthening the capital structures of manufacturing industry companies, encouraging company mergers when necessary, designing policies to increase productivity and making decisions that guide public practices to increase product diversity are outstanding topics.
  • Technology Development Zones Law Proposal is being discussed in the Turkish Grand National Assembly, and important changes are foreseen regarding R&D and Technopolis
    • Including the time spent outside in R&D-design centers and techno parks (applications within the scope of flexible work including the pandemic) within the scope of incentives (between 20% and 50%), including the employment of doctoral students within the scope of support, the R&D / Design tax discount amounts subject to tax exemption (2% and an upper limit) to be kept in the fund for a certain period of time and to be allocated to other venture companies as capital, to expand the scope of basic sciences graduate support provided by the state, to support the mentoring and lectures of the Ph.D. ) and to increase the amounts related to Venture Capital support are important steps taken specifically.
    • Extending R&D tax incentive supports to 2028 (originally 2023), increasing the rate of support personnel from 10% to 20% in companies with fewer personnel, clarifying whether income tax withholding incentives are exemptions, accrual / cancellation, and to whom this incentive is given, master license etc. The elimination of the condition of having worked for at least one year during the time spent outside for the trainings and the fact that the inspections will be carried out every 3 years instead of 2 years have been facilitating regulations. Explanatory and additional arrangements were made in some articles in the commission.
    • You can access these changes and all the details on the subject in our bulletin 2020-114 and 2020/121 or ask our innovation and incentives experts.
  • The Regulation on Supporting the Cinema Sector has been amended.
    • According to the amendment made in the regulation, an application can be made to be evaluated at the Board or Commission to be held next year for projects that are not eligible to be supported during the year.
  • Agreement with Uzbekistan on Mutual Promotion and Protection of Investments was published with the President’s Decree No. 3091 dated 15 October 2020.
  • The Agreement with the People’s Republic of China on the Mutual Promotion and Protection of Investments and its annexed Protocol were approved by the President.
  • The Program of Attraction Centers (promote the undeveloped regions by giving extra incentives program) has been changed.
  • Regulation on the Principles of Experimentation and Inspection of Agricultural Machinery and Agricultural Technology Vehicles was published.
    • The purpose of this Regulation is to test, certification and market inspections of agricultural machinery and agricultural technology vehicles used in agricultural activities within the scope of the applications of the Ministry of Agriculture and Forestry, the determination of the procedures and principles for the effective management of support, grants and projects for these tools, which are subject to the Ministry’s practices and the authorization and audits of the experimental institutions.
  • President Decision No. 3080 on Supporting Foreign Logistics Centers (YDLM) has been published.
  • Presidential Decree No. 3099 dated October 20, 2020 on Supporting Animal Husbandry Investments has been published.
    • The decision will cover investments to be made within the scope of buffalo heifer breeding, support for the purchase of sheep, breeding goose, turkey and commercial goose breeding, beekeeping and silkworm breeding.
  • TUBITAK 2244 Industry Doctorate Program Call was opened on October 1, 2020.
    • Within the scope of this program, cooperation models that can be established between the university / research infrastructure and private sector organizations are explained.
  • Regulations regarding the use of qualified electronic certificate, registered electronic mail account (KEP- REM) and e-TUYS were announced by amending the Implementation Regulation of the Foreign Direct Investment Law.
    • The Regulation was published in the Official Gazette on October 16, 2020, and provisional application has been permitted for authorization applications that can be made with original documents until November 15, 2020.
    • Similarly, a similar arrangement has been made in the Communiqué on Regulation of Investment Incentive Documents in Electronic Environment. Investors will have to obtain a REM address for e-TUYS application and will be obliged to keep the documents for 10 years.

F.Banking & Finance

  • The Organizational Regulation of Insurance and Private Pension Regulation and Supervision Agency (Institution) was published with the President’s Decree No. 3093 dated 15 October 2020.
    • The Authority is one of the 11 regulatory and supervisory institutions in Turkey. The institution consists of 5 members. With the regulation, the administrative organization of the institution was made in the form of vice president, department head and group president. In addition, the Insurance and Private Pension Regulation and Supervision Agency (the Institution) issued a Regulation on the Working Principles of the Pension Monitoring Center.
  • Mutual Funds, Venture Capital Investment Funds and Real Estate Investment Trusts Communiqués and Corporate Governance Communiqué were amended by the Capital Markets Board (SPK).
  • With its decision announcement dated 26.10.2020, the BRSA (BDDK) facilitated the implementation by making arrangements for the asset ratio (AR)
  • Interest rates: CBRT (TCMB) kept the interest rates same and did not increase.

G.International Trade & Customs

  • By making amendments to the Customs Law Enforcement Decision, flexibility has been provided in the time required for increasing the tolerance rate in natural gas transportations for lack of declaration proceedings, imports of aircraft and fulfilling the requirement of being present abroad.
  • An amendment was made in the Decision on the Prevention of Unfair Competition in Imports and an explanation was made about the past practices.
  • With the Regulation on the amendment of the Customs Regulation, a period of 6 months has been given as of 20 October 2020 for submitting the certificate of origin for the certificate of origin.
  • The undertaking regarding the Import Certificate is abolished as of 12 November 2020.
  • A regulation has been made in the “Cash Foreign Currency” article of the Circular on Bringing Export Income to Turkey. The exporters need to bring the export income in the country.
  • Amendments have been made to the Regulation on the Production and Trade of Ethyl Alcohol and Methanol. (The Amendment Regulation was published in the Official Gazette on 1 October 2020.)

H.Other Measures and Postponements

  • With the two clauses added to Article 2 of Law No. 7244, with Article 11 of Law No. 7254, adopted by the Turkish Grand National Assembly on October 16, 2020, interest-free postponement was made for receivables such as rent and income.
  • In the Communiqué of the Ministry of Industry and Technology on the Criteria to be Based on the Assignment, Monitoring and Inspection of Notified Bodies, explanations have been made regarding the remote transactions.
  • By amending the Regulation on the Transport of Dangerous Goods by Road, some dates and deadlines have been

İ.Other Legislative Changes in Turkey

  • Changes were made to the Internet Domain Names Notification.
    • With the Communiqué, the domain name management work done by METU so far will be carried out by the Information Technologies and Communication Authority (BTK). The new operation and transition process are explained in detail in the communiqué.
  • TC. ID Card Electronic Authentication System Regulation has been published.
    • With the Regulation, the procedures and principles regarding the electronic verification system performed by the Ministry of Internal Affairs with an ID card are determined.
  • Elevator Market Surveillance and Inspection Regulation has been renewed and a new one is published in Official Gazette.

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. We will continue to announce to you all the developments made in other months in Turkish and English.

We are planning to organize a webinar on “Monthly Updates in Tax” both in Turkish and English.

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

Tax & International Advisory 

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