No : 2020-77
Date : July 6th, 2020
Subject: Monthly Financial/Tax Regulations Summary in Turkey (June 2020)
June 2020 was a busy month in terms of financial agenda more than previous months, lots of expected arrangements were made because of the pandemic.
We would like to submit for your attention as a summary for firms and taxpayers the important tax-related and financial issues that occurred within the last month in Turkey.
In addition, you can visit our website designed to support and inform the business society, employees and all stakeholders. We hope that you will benefit and enjoy our newsletters. You receive this bulletin in a different form from our new web (taxia.com.tr) address.
In this context, we would like to cover the topics you want to be analyzed as well. 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 proposals and such expertise to a wider audience.
In addition, as announced before we organized a case study for university students on “creative fiscal and tax policies to combat with Covid-19”. We selected to mention one of the papers in this study.
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, postponed obligations, R&D and incentives below.
A. Tax Issues
- Tax rate increases on free funds
- Withholding Tax: Amendments were made within the framework of the authorization in the seventeenth paragraph of the provisional article 67 of the Income Tax Law, and the rate of withholding to be made over the portfolio management earnings of free (foreign exchange) funds was determined as 15%.
- 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 (which will be published pretty soon)
- Draft Communique regarding with the abandonment of the tax registration.
- Draft Communique of Invitation for Disclosure was prepared.
- The New Omnibus Law 7247 including Covid-19 measures on financial transactions.
- The Proposal of the New Law (Principle No in Parliament: 2/2945), which includes many facilitating arrangements, including Covid-19, was discussed in the TGNA (TBMM) and published in the Official Gazette dated June 26, 2020 as Law No. 7247.
- This new law aims to ensure compliance with the distancing needs because of the pandemic and to keep pace with today’s technology for contracts and needed services. Now, the banks and similar ones (credit and debit card institutions and financial leasing, factoring and financing companies) are now authorized to build relationships with clients without requiring any physical paperwork and written signature.
- The Turkish Revenue Administration announced a New Brochure on the “Starting / Cessation and Change Notification of Taxpayers” dated June 15, 2020.
- Update on the MLI-Multilateral Tax Treaty in Turkey
- Multilateral compliance agreement envisaging Turkey is a signatory to the automatic adjustment mechanism of the International Tax Agreements (MLI-Multilateral Legal Instrument) was presented as a Law proposal to Parliament legislation to be enacted.
- New Brochure of Online Transactions for Taxpayers is published
- With the announcement of Revenue Administration dated 01.06.2020, “Interactive Tax Office Brochure” was updated and published within the scope of new service channels. Turkey is one of the advanced countries to use e-systems for any sort of tax declarations and transactions.
B. Social Security Issues
- With the announcement of Turkish Revenue Administration dated 02.06.2020, the declaration and payment obligations that have to be fulfilled due to the removal of the curfew restriction have been redefined by some taxpayers aged 65 and over under the force majeure.
- The Social Security Administration issued a Circular in parallel with the practice of the Revenue Administration for the payment of social security premiums for taxpayers who are within the scope of the force majeure as well.
- The Amending Communiqué indicating the Minimum Labor Rates of Various Businesses determined by the Social Security Institution Minimum Labor Determination Commission
- The regulation was published in the Official Gazette. This is an important piece of legislation as the execution of the aforementioned projects and works cannot have labor percentage below the defined rates.
- Government support is extended for short term working allowance.
- Decision No. 2707 of the President extended the termination prohibition and the employers’ option to make their employees on an unpaid leave during such period, until August 17, 2020.
- In addition, Presidential Decision No. 2706 extended for an additional month the short-time working allowance for firms that applied for such allowance due to compelling reasons arising from the pandemic until June 30, 2020 (inclusive), without the need for a new application and a compliance review, for the same employees who have been benefiting from the short-term working allowance and based on the same terms.
- The President is allowed to renew these extensions until the year-end. With these 2 decisions, 1-month extension is preferred.
C. 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:
- 6-month additional period has been granted for some obligations in Government Supports for Turquality, Brand, R&D support programs, design offices and Tech Transfer Centers.
- Update on a New Incentive Program in Turkey
- “The Communiqué on the Amendment to the Technology Focused Industry Mobility Program Implementation Principles Communiqué” was published in the Official Gazette dated 19 June 2020. This is a quite new program focusing in some specific sectors such as technology, machines, chemistry and transportation vehicles etc.
- Incentives for Machine Sector was announced so far, others are not.
- New Calls for R&D Projects
- 1501-Industrial R&D Support Program and 1507-SME R&D Initial Support Program, which can be applied by Small and Medium-sized Enterprises (SME) scale, opens the second Call of 2020.
- Changes on Super Incentive Regime in Turkey
- Significant changes were made in the Project Based Incentive Decree. This is the most generous Government Programs for Investments including big FDI in Turkey and updating with new incentives focusing on R&D.
- Communiqué No. 2020/17 supporting and giving incentives on processed seafood has been published.
D. Banking & Finance
- The CBRT (TCMB) Monetary Policy Committee (the Board) decided to keep the one-week repo auction rate, which is the policy rate, constant at 8.25%.
- Within the framework of the SWAP agreement renewed in 2019 between the CBRT and the People’s Republic of China, the Chinese Yuan funding was made on 18 June 2020.
- Extension of reserve requirements of the CBRT.
- In order to meet the demands of companies and individuals whose credit demand increased due to cash flows during the normalization process, and to provide flexibility to banks; CBRT has decided that the adapted real loan growth rate of less than 15%, which the banks with an annual loan growth rate of over 15%, to be able to benefit from the required reserve incentives, should not be applied temporarily until the end of the year.
- CBRT lowered the advance and rediscount interest rates.
- The Board of Capital Markets in Turkey (CMB) updated the Communiqué on Significant Transactions.
- Following transactions of public companies will be deemed material transactions with the new legislation:
- Certain mergers and spin-offs defined under the Material Transactions Communiqué.
- Certain types of transferring assets or facilitating disposition transactions,
- Change of the company type of public companies.
- Introduction of a new privilege or modification of the existing privileges of the shareholders.
- Following transactions of public companies will be deemed material transactions with the new legislation:
- Public Procurement for State Organizations: With the Decision No. 2645 of the President, it was decided to meet the needs of public institutions and organizations by the State Procurement Office (DMO).
- Weekly notification obligation has been imposed on the CBRT Systemic Data Entry.
- This is a challenging subject that the firms report some financial metrics to the CBRT weekly basis rather than quarterly reporting as it used to be.
- Payment and Electronic Money Association of Turkey Statute was issued. This is good news for the fin-tech companies and electronic financial companies in Turkey.
- The scope of the Single Treasury Account System has been expanded. The Government obliges all public institutions put their cash plus in a central Treasury account.
- The CBRT published the notes regarding the Monetary Policy Committee meeting held on May 21, 2020 on 01.06.2020.
E. International Trade & Customs
International trade requires, in theory, each country to utilize its own scarce resources in the most efficient way and to produce, sell and specialize based on the comparative advantage of nations. This order, which is the basic proposition of international capitalism and economy, was severely shaken during Covid-19 and most countries were closed with vital reflexes. The economist and politicians have been heavily discussing the issues of new-era and normalization, but the countries and firms depend each other more than ever in this century. Here are the details of the new customs and taxes in order for the local economies to recover and make sure:
- 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.
- A legislative change has been made in the table where additional customs duties for “textiles, garments, leather and shoes and similar products” have been imposed before.
- The “Communiqué on the Amendment to the Customs General Communiqué (Transit Regime)” was published in the Official Gazette dated 18 June 2020.
- A new amendment was given to the General Directorate of Export by making amendments to the Communiqué on the goods that are forbidden and export-related, and goods subject to prior authorization from the Government.
F. Other Measures and Postponements
- Turkish GDPR Update
- With the Decision dated 20.06.2020 and numbered 2020/482 published by the Personal Data Protection Authority, the obligations were once again delayed.
- The amendment period was extended until the end of the year as of 31 December 2020 instead of 30 June 2020 by making amendments in the Parking Regulation for buildings.
- Update on Withholding Tax and SSI Declaration Combination Project
- The concise and service premium declaration will come into force in July 2020 and there is no postponement so far. The application is currently continuing in 7 cities. If no postponement is made again, the implementation will start as of 1 July 2020 for the whole country.
- E-way bill starts in July 2020 for eligible taxpayers in Turkey.
- It will enter into force in July 2020 for taxpayers who provide the terms of e-dispatch. Taxpayers who are registered to the e-Invoice application and whose gross sales revenue is 25 Million TL or more in 2018 or subsequent accounting periods will use e-Waybill as of July 2020.
- Update on OHS in Turkey (no postponement yet)
- If there is no postponement, the obligation of OHS (occupational safety and health) specialists and workplace physicians will take effect in July 2020 in workplaces with less than 50 employees in the less dangerous class.
- Ease of payment related to the State Contributed Dowry Account was provided. Similarly, it has been made easier to pay government-sponsored housing accounts. The Government gives incentives for disadvantageous group of people to get married and have houses in Turkey.
- Rural Development Supports have extended periods.
G. Other Legislative Changes in Turkey
- Important changes on the Competition Law in Turkey.
- The Proposal for the Law, which envisages important changes in the Competition Law, was discussed at the General Assembly of the Turkish Grand National Assembly, and was published in the Official Gazette dated 24 June 2020 as Law No. 7246 and entered into force.
- Changes in the State Organization in Turkey
- Some administrative changes were made with the Presidential Decree regarding the organization of the Ministries of Environment and Urbanism and the Family, Labor and Social Services.
- New Guarantee Fund at Private Universities is in place.
- In order to prevent students from losing their rights in some cases, a Regulation was issued to issue a special Guarantee Account.
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.