The impact of Covid-19 is continuing to evolve in Turkey and businesses need to update their knowledge to keep up with the ever-changing regulations. For this purpose we provided various reports in our earlier newsletters concerning legal changes in Turkey relating to the pandemic. Our new update includes the recent shifts in legislation after our last report and other legal developments.

We mentioned in our first report that corporations were prohibited from distributing more than 25% of their profit generated in 2019. The period of limitation in question had most recently been extended until 31 December 2020. In the absence of any new legislation, this restriction on dividend distribution expired on 1 January 2021.

With the “The Law No. 7318 on the Amendment of the Tax Procedure Law and Certain Laws” (The Law) published in the Official Gazette numbered 31470 on 30 April 2021, it was provided that execution and bankruptcy proceedings were suspended until 31 May 2021 with the presentation of the checks to the banks. According to the new amendments, execution and bankruptcy proceedings will not be initiated between 30 April 2021 and 31 May 2021 for receivables of public administrations arising from public law or private law. In the absence of any new legislation, execution and bankruptcy proceedings can be initiated from 1 June 2021.

Referring again to our earlier reports, ordinary notices of termination of employment relationships were prohibited initially until 17 July 2020. Since then, the period of this prohibition has been extended many times. Termination prohibition and unpaid leave were extended once again for an additional two months by Presidential Decree No. 3930, which was published in the Official Gazette No. 31470 dated 30 April 2021. Termination prohibition and employers' option to put their employees on unpaid leave during this period was extended – according to the new regulations – until 30 June 2021.

The period of short-time working allowances, which had already been extended many times pursuant to the related Presidential Decrees, was extended until 30 June 2021 following the publication of Presidential Decree No. 3910 in the Official Gazette dated 23 April 2021, based on the principles of the previous extensions.

Furthermore, following the effect of the pandemic on the Turkish employment environment, the Regulation on Remote Working latterly entered into force on being published in the Official Gazette No. 31419 on 10 March 2021. The regulation defines the details, procedures, and processes for remote work, and it also requires employees to take certain procedural, preventative and principle-based measures before entering into a remote work contract.

The Banking Regulation and Supervision Agency (“BRSA”) previously took temporary measures to eliminate the negative effects of the COVID-19 outbreak on the banking sector. In a statement on 8 December 2020, the BRSA announced an extension of some of these measures and an end to others. According to the Board Decisions, some measures regarding capital adequacy, equity, calculation of foreign currency position, Credit Card Instalments and classification of loans will be remain in place until 30 June 2021, while the BRSA terminated the measures (i) concerning the transfer to account, the availability for disposal, and the physical delivery of daily FX purchases (including cash) equal to or exceeding USD 100,000 (or the equivalent amount in another currency) by real persons with value dates of one business day; and (ii) concerning the transfer to account, and the availability for disposal of daily gold purchases equal to or exceeding 100 grams by real and legal persons with value dates of one business day.

On 11 March 2021, the deadline for registering for the Data Controllers’ Registry Information System (“VERBIS”) was also extended again to 31 December 2021 according to an announcement by the Turkish Personal Data Protection Board (“KVKK”). VERBIS is an online system provided by the Board with which data controllers are required to register according to Article 6 of the Personal Data Protection Law No. 6698. Please see our related articles in our previous newsletters of July 2016, July 2018 and January 2020 for more information. 

The Turkish Competition Authority (“TCA”) had announced on 23 March 2020 that potentially abusive price increases taking advantage of the conditions of the pandemic will be closely scrutinized by the Authority. According to the announcement, various excessive price increases in the food markets, especially for fresh fruits and vegetables, had been observed.  The Authority initiated several preliminary and in-depth investigations regarding price hikes in different industries in the first months of the Covid-19 outbreak. The first reasoned decision came from the preliminary investigation regarding fabric producers of surgical masks.

The Board also stated that total demand also increased by 34% based on total sales of the undertakings in question. The main reason for price increases by the undertakings in this period was found to be related to the increase in demand. As a result, the Board concluded that there are no grounds for initiating an in-depth investigation.

According to Temporary Article 13 inserted into the Turkish Commercial Code, companies were subject to a restriction on the distribution of their net profits, and the term for the restrictions on the distribution of dividends was extended from 30 September 2020 to 31 December 2020. As Temporary Article 13 limited the President’s authority to extend the restrictions by only three months, a new extension after 31 December 2020 was not possible without an amendment of said article by the parliament. Since no such amendment has taken place, the restrictions on companies’ distribution of their profits were eliminated as of 1 January 2021. That means it is now possible for companies to distribute their previous year's profits and free reserves and to authorize their board of directors to distribute advance profits.

The Law on the Restructuring of Certain Receivables and Amendments to Certain Laws No. 7256 ("Law No. 7256") was published in the Official Gazette No. 31307 on 17 November 2020 (“Law“) and entered into force. The Law No. 7256 introduced a new asset peace incentive. Under the new regulation, income and corporate income taxpayers can notify the tax authorities about their money, gold, foreign exchange, securities, other capital market instruments and immovables held in Turkey but not recorded in their legal books by 30 June 2021. These assets can be recorded into taxpayers' legal books without being included in the assessment of their current income until 30 June 2021. They can also be withdrawn from the companies without being included in the assessment of their taxable income or distributable income.

Dr Gökce Uzar Schüller, Lawyer, Frankfurt a.M.
Cigdem Ileri, Research Associate