Date : February 4th, 2021
Subject: Monthly Financial/Tax Regulations Summary in Turkey (January 2021)
We would like to submit the important tax-related and financial issues that occurred within the last month in Turkey as we did since 2018. We are glad to share those summaries with English speaking clients and our network abroad.
You can visit our website (www.taxia.com.tr) created 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 share information about Turkish economy in general, and the latest figures in labor, inflation, growth, main tax developments, customs and foreign trade, social security obligations, trade legislations, banking and financial issues, postponed obligations, R&D and incentives below.
A. Economy and Public Budget
- 2021 Central Government Budget Law has been published as Law nr. 7258.
- New Deputy Ministers of Finance and Treasury were appointed after the new Minister of Finance and Treasury.
- Central government gross debt stock was TL 1,812.1 billion as of December 31st, 2020 according to the announcement dated January 20th
- TL 794.4 billion of the debt stock is denominated in local currency and TL 1,017.7 billion is denominated in foreign currencies.
B. Main Economic Indicators
- Quarterly Gross Domestic Product is positive in 3rd quarter in Turkey and expected to have a positive growth rate in the last quarter as well.
- Turkish Statistical Institute announced that GDP with chain linked volume index (2009=100) increased by 6.7% in the third quarter of 2020 compared with the same quarter of the previous year.
- Ministry of Trade announced the figures for export/import of January 2021.
- In January 2021 compared to the same month of the last year;
- Exports increased by 2.5% to 15 billion 48 million dollars,
- Imports decreased by 5.6% to 18 billion 123 million dollars,
- Foreign trade volume decreased by 2.1% to 33 billion 171 million dollars. The ratio of exports to imports was 83.0%.
- The Central Bank of the Republic of Turkey announced the capacity utilization rate of the manufacturing industry for January 2021.
- The seasonally adjusted rate increased to 75.6% in January 2021 from 75.4% in December 2020.
- 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 was published on the Official Gazette as Law nr. 7256. Draft Communiques regarding with the tax changes are on the way.
- You can find more information regarding with the changes brought by the New Package in our bulletins nr. 2020-122 and 2020-123.
- 2 major explanatory Tax Communiques were prepared and submitted for public opinion by the Turkish Revenue Administration.
- Draft Income Tax Communique nr. 314 explaining new e-commerce incentives and other amendments.
- Second one is Draft Corporate Tax Communique explaining withholding taxing on the shares bought by the same firm in some conditions and tax reduction for public companies which go public for the first time for the first 5 years.
- VAT rate is reduced for some certain construction works.
- VAT rate is reduced to 1% for the construction works to the rehabilitated areas (urban transformation districts)
- VAT rates in some services were reduced before temporarily till the end of 2020 in order to promote the economy mostly for SME’s and general public. Then, this reduction was extended to the end of May, 2021. Those reductions are intented to make the economy running.
- Special communication tax rates have been redefined as 10%.
- The increase of the rate entered into force on the date of publication of the Decision which is published on January 30th, 2021.
- SCT (special consumption tax) amounts charged on fuel products were updated.
- Country-by-Country Reporting (CbCR) Obligation in Turkey started and first report should be submitted in February 2021.
- Based on the circular published by Turkish Tax Authorities on December 18th, the reporting period for Country-by-Country Reporting (CbCR) has been postponed to 26th of February, 2021.
- After extension of the reporting deadline, Turkey ratified the country list of CbCR on OECD website. So, Turkey will receive the reports 47 countries and will be able to share with 37 countries.
- 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 you can ask your questions our TP experts.
- Tax returns and payments are postponed for the firms in force majeure.
- With the General Communiqué of the Tax Procedure Law No. 524 published in the Official Gazette dated 25 January 2021 and numbered 31375, statements were made regarding the taxpayers who would benefit from force majeure.
- A new exception regulation has been defined within the scope of the foreign currency transaction ban.
- As a rule, it is forbidden to contract with foreign currency, except for the exceptional transactions listed.
- Residents in Turkey will be able to conclude contracts for accommodation services in Turkey with the exchange rate. (Notification No: 2021-32 / 59)
- Valuable Housing Tax Implementation General Communiqué was published.
- Tax return should be submitted to the Tax Office until February 22nd, 2021.
- It is a new estate tax in addition to the estate tax paid to the Municipalities.
- Tax payment restructuring application period was extended.
- The application and payment periods for the structuring of tax debts have been extended based on the authority specified in the Law.
- The authority set forth in the law was used by the President with the Decree No. 3343 dated December 29, 2020, and the application and payment periods were extended by one month.
- Tax Treaty Updates: Double Tax Treaty between Turkey and Ukraine is updated.
- Protocol amending the Double Taxation Agreement signed between Turkey and the Ukraine was approved by the President Decision No. 3412.
- The Protocol was decided to enter into force on 30 November 2020. The Protocol amending the agreement was published on September 25, 2020.
D. Social Security Issues
- A Circular was issued by the Turkish Social Security Institution (SSI) regarding the Law No. 7256 on the structuring of tax and SSI debts. (Circular Number 2020/45)
- Talks and negotiations for signing the Agreement on Social Security between Ukraine and Turkey are continuing.
- New incentives for employees and employers to increase and promote employment were announced with new Law and Communiques.
- Minimum Wage Determination Commission Decision has been published.
- Minimum wage is mandatory in Turkey as a country-wide daily salary for both men and women.
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.
- R&D – Technology Development Zones Law was accepted in the Turkish Grand National Assembly, and important changes are foreseen regarding R&D and Technopolis The Law nr. 7263 is enacted and it was published in Official Gazette on February 3rd, 2021.
- 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.
- A specific portion of R&D credits (2%) should be invested in venture capital fund after a threshold. (TRY 1.000.000) This new application will be for the R&D credits and technopark earnings for 2022.
- 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.
- Agriculture and Rural Development Support Institution Published the Tenth Application Call for IPARD II Program on January 7th
- Applications for rent and income support for tradesmen and craftsmen have been extended.
- Support Management System (DYS) has been put into practice as of 2021.
- The DYS application is a one-stop shopping project, which the Ministry of Commerce has been working on intensively and announced in the Internal Circular No. 2019/7 published in the Official Gazette dated 3 December 2019 and could not be fully implemented because it was postponed.
- Different dates are set for different types of support. (As 1 January 2021 and 1 April 2021)
- The Decree Amending the Decision on Supporting Digital Activities in Market Entry entered into force with the Presidential Decree No. 3462, published in the Official Gazette No. 31380 dated 30 January 2021.
- Amendments made in the Regulation on Supporting the Cinema Sector were published in the Official Gazette dated 28 January 2021 and numbered 31378.
F. Banking & Finance
- At the Monetary Policy Committee (Board) meeting held on January 21, 2021, the CBRT (TCMB) decided to keep the policy rate (one-week repo auction rate) constant at 17%.
- Preferential Trade Agreement signed with Azerbaijan and Turkey was approved.
- President Decree No. 3429 on approval was published in the Official Gazette No. 19 January 2021.
- An additional time regulation has been introduced for the notifications required to be made by the Banks regarding the bringing of export money to the country.
- Firms are supposed to transfer revenues for export in 180 days to Turkey in general.
- One temporary article has been added to the Law No. 1567 on the Protection of the Value of the Turkish Currency, according to the Article 9 of the Law No. 7263 adopted by the Turkish Grand National Assembly.
- Minimum payment amount in checks: Central Bank of the Republic of Turkey (CBRT) redefined the minimum payment figure of checks by banks (2.670TL).
- BRSA (BDDK) has opened a Draft Regulation on Measure Plans for comments and suggestions.
- The procedures and procedures to be determined by the Board (BDDK) in order to determine in advance, the measures to be taken in the event that any of the situations that will cause deterioration in the financial structure of the banks determined as systemically important by the BRSA according to the Law or due to non-compliance with the protective provisions of the Law and the regulations issued pursuant to the Law or otherwise.
- It is obliged to prepare a measure plan within the framework of the principles and to send it to the Agency.
G. Commercial Arrangements
- The deadline for the Activity Reports, which must be prepared by the companies, has started.
- According to the Turkish Commercial Code (TCC), companies are required to prepare their annual reports in February.
- According to the 1530th article of the Turkish Commercial Code, the interest rate to be applied is determined as 18.25% per annum by TCMB (Central Bank of Turkey).
- The profit distribution limitation envisaged in the Covid-19 period, which started for the distribution of 2019 profits extended until the end of 2020, has ended as of the beginning of 2021 for the firms.
- Unfortunately, no statistical information has been published on the subject, and we believe that an academic study to conduct a behavioral analysis in companies will be very helpful.
- BRSA (Banking Regulatory and Supervisory Authority), on the other hand, did not allow profit distributions in 2018 and 2019 in order for banks to have a strong equity structure.
- However, it has been deemed appropriate to meet potential profit distribution demands up to 10% of the net profit of the year 2020 within the framework of the special circumstances of the banks, especially the capital adequacy ratio.
H. Foreign Trade & Customs
- The Ministry of Commerce published the Communiqués on very important issues regarding product safety and inspection and some specific products in the 4th Official Gazette on 31 December 2020.
- The Turkish Customs Tariff Schedule to be implemented in 2021 was published in the Official Gazette as the President’s Decree No. 3345.
- The standard tariff, which has been applied since 1958, has been followed by our country since 1964 and is important in foreign trade regulations and especially in determining the amount and rates of SCT.
- Free Trade Agreement (STA) is a very important agreement was signed between Turkey and the UK.
- Law No. 7266 was adopted on 29 January 2021 on the subject. The law was entered into force as it is published in the Official Gazette on February 3rd
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.
Please tell us if you have any comments or questions on any of the subjects above. As this is a summary, we did not give too much details, we can answer your questions when you have.
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