Turkey: Protection of the foreign investors after the coup attempt

After the unfortunate coup attempt took place on July 15, 2016 in Turkey, the Turkish Government has taken some rapid measures for the foreign and national investors in order to ensure a safe environment for them. The following regulations are of particular importance for our clients: 

Press Release of Capital Markets Board regarding Share Buybacks

On July 21, 2016 Turkish Capital Markets Boards (the “CMB”) issued a press release and decided to remove the share buybacks (share repurchases) ratio, which was allowed up to 10% of the share capital or paid capital of the company in accordance with the Turkish Commercial Code No. 6102. 

Within this decision; 

• Public companies, whether they have any buyback program depending on a decision of its general assembly or not, may acquire their own shares from the stock exchange without any limitation provided that they publicly disclose the trade on the Turkish Public Disclosure Platform (Kamuyu Aydınlatma Platformu).

The CMB’s expedited decision is intended to prevent the market from any artificial decrease, avoid any fluctuations that may negatively affect the shares traded in the Stock Exchange Istanbul (Borsa Istanbul) and minimize and mitigate the adverse effects on shares for small business owners and investors. 

Measures to Improve the Investment Environment

August 9, 2016 a new Law Amending Certain Laws for Improvement of the Investment Environment No. 6728 (the “Law No. 6728”) was published in the Official Gazette. Amendments introduced by the Law No. 6728 contain, among other areas of the law, new regulations on the Bankruptcy and Enforcement Law No. 2004 regarding postponement of bankruptcy. 

• Bankruptcy and Enforcement Law No. 2004
  According to the amendments, which will be applied after the three month state of emergency has been lifted:  
  • Required information and documents which need to be supplied by the companies when applying to the postponement of bankruptcy have been specified and if the applicant fails to do so within a two week grace period, the request will be rejected and the applicant will be immediately declared bankrupt.
  • Applicants who have already benefited from the postponement of bankruptcy cannot reapply within one year after the expiration of the postponement period.
  • Postponement periods may be extended only for one year, contrary to the current provision which allows four years postponement.
  • Applicants may submit only one revised recovery project during the extension proceeding.

• Stamp Duty Law No. 488
  • A future increase in the value of a contract for which stamp duty has been paid at the ceiling amount will not be subject to stamp duty.
  • If a document contains more than one suretyship and guarantee, the stamp duty is levied once on each category of collateral.
  • Monetary amounts constituting earnest money, forfeitures, and deductions from wages and penalty clauses in agreements will not be subject to stamp tax unless they are the subject of an independent agreement.

• Income Tax Law No. 193
• The wage income of employees of regional management centers which do not have headquarters and centers of business in Turkey is exempt from income taxation, provided that their wage payments are made in foreign currency for their earnings.

New Law on Tax Amnesty in Turkey

On August 19, 2016 a new Law on Restructuring of Certain Receivables No. 6736 (the “Law No. 6736”) was published in the Official Gazette. The Law contains comprehensive restructuring for resolving tax disputes without litigation, tax penalties, custom taxes, insurance premiums, group insurance premiums, pension deductions, unemployment insurance premiums, social security support premiums, general health insurance premiums and all other taxes, duties, charges and fees. The Government wants to reduce the burden of public debt by enabling taxpayers to restructure their debt.

It should be noted that the Law covers taxes, premiums, penalties etc. related to the time before June 30, 2016.  Taxpayers willing to benefit from the provisions of the Law have to apply by October 30, 2016 and the applications submitted after the deadline will not be restructured under this Law. 
Major changes introduced in the Law are as follows: 

• Discount on motor vehicle tax and traffic fines,
• An extra 50% discount in addition to the amount to be calculated based on the Producer Price Index (PPI) if the tax liabilities are paid in advance,
• Update of PPI margin on late payment charges accrued as of June 30, 2016,
• Relief of 50% of the irregularity and special irregularity fines not related to the underlying tax or other principal,
• Taxpayers (real persons or legal entities) who repatriate money, gold, foreign exchange, securities and other capital market instruments to Turkey by December 31, 2016 may dispose of the assets freely,
• Discount of up to 80% if the tax dispute is resolved amicably,
• Correction of companies’ records without being subject to any penalty and interest,
• Companies wishing to benefit from voluntary tax base increase available for corporate (income) tax, withholding tax and value-added tax declared in previous years starting from 2011 will have right to close their accounts of the previous years without a tax audit,
• Companies may declare their undeclared income and gains without being subject to any penalty and interest if they pay the tax on that income,
• Payment of restructured debts via credit card,
• Cancellation of the debts equal to or lower than TRY 50 and due before December 31, 2011. 

Dr. Gökce Uzar Schüller, Attorney at Law
Munich and Istanbul

Canan Girgin, Attorney at Law – Trainee
Munich