Are Penalty Clauses in Contracts Executed by Companies in Türkiye Subject to Stamp Duty?

Do commitments such as penalty clauses, termination compensations, or withholding of fees trigger stamp duty? When are they exempt, and when are they taxable?

Penalty clauses included in commercial contracts executed by companies in Türkiye are sanction provisions that stipulate the amount payable in case of a breach of obligations by the parties. Such clauses are commonly included in commercial agreements. However, not all penalty clauses are treated the same under stamp duty legislation.

What Does the Legal Framework in Türkiye Say?

With Article 24/b of Law No. 6728, the following paragraph was added to Article 6 of the Stamp duty Law:
“Undertakings that constitute a sanction of a contract, such as earnest money, termination compensation, withholding of fees, and penalty clauses, shall not be subject to stamp duty unless they are the subject of a separate and independent contract.”
– Effective date: August 9, 2016
– From this date onwards, undertakings with sanctionary content (such as penalty clauses) are not always subject to stamp duty under certain conditions.

In Which Cases Are Penalty Clauses Exempt from Stamp duty?
Penalty clauses are not subject to stamp duty if the following conditions are met together:

• The undertaking is included within the main contract,
• It is arranged in the same document,
• It does not constitute a separate and independent contract.

→ In such cases, the penalty amount is disregarded, and stamp duty is calculated only on the principal transaction.

In Which Cases Are Penalty Clauses Subject to Stamp duty?
Penalty undertakings are subject to stamp duty in the following cases:

• If they are executed in a separate document,
• If they constitute a standalone agreement.

→ In this situation, the penalty amount becomes the tax base, and proportional stamp duty is applied accordingly.

Examples of Application

10 Questions & 10 Answers on Stamp duty for Penalty Clauses

1. Is a penalty clause in a contract subject to stamp duty?
   No, not if it is included within the main agreement.
2. Is stamp duty triggered if the penalty clause is arranged in a separate document?
   Yes, stamp duty applies if it is in a separate document.
3. Since when is this application in effect?
   Since August 9, 2016.
4. How is stamp duty calculated if only the main contract exists?
   It is calculated only based on the principal transaction amount.
5. Is a notarized penalty clause document subject to stamp duty?
   Yes, it qualifies as a separate document and triggers stamp duty.
6. Does the penalty amount constitute the tax base?
   Yes, if it is the subject of a separate agreement, the amount is considered the tax base.
7. Do the same rules apply to termination compensation?
   Yes, identical principles apply to termination compensations.
8. Is the stamp duty rate fixed?
   No, a proportional rate applies, and the rate is determined annually.
9. Can stamp duty be charged solely for the penalty clause?
   Only if it is in a separate agreement. If it is part of the main agreement, it is not separately taxed.
10. Who is liable for the stamp duty on a document containing a penalty clause?
    Both parties are jointly and severally liable; payment by one party is sufficient.

Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither Karen Audit nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.