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Cooperation From Turkish Exporters Assembly and Turkish Airlines To Break New Export Records

TİM CHAIRMAN GÜLLE: THE SHARE OF THE AIRLINE INCREASES IN EXPORT

The scope of the cooperation agreement of the Turkish Exporters Assembly (TİM) with Turkish Airlines (THY) for discounted cargo transportation has been expanded to reduce the logistics costs of the exporter. According to this, in the air cargo discount campaign, the number of destinations was increased to 46, additional tone capacity was provided, the discount rate was increased, and product ranges were expanded.

TİM Chairman İsmail Gülle said, “In the first 8 months of the year, our air cargo export increased by 28 percent from $5.3 billion to $6.8 billion. In the protocol signed today, the scope of export products was expanded with eggs, fresh fruits and vegetables, and fish. The destination was increased from 28 to 46. The discount available to exporters through list prices has been updated to 10-35 percent. Hopefully, with this new protocol, we will increase the share of air export much higher. Türkiye will rise with export. The export will also rise in the wings of THY.”

Turkish Exporters Assembly (TİM), the only umbrella organization of 100,000 exporters with 61 exporter associations and 27 sectors, continues its efforts to increase its export by reducing the costs of air cargo transportation. In this context, TİM and THY had signed a cooperation last year that gives a great advantage to Turkish exporters in global trade. Turkish Cargo was discounting between 10 percent and 30 percent for additional capacity and 28 destinations heavily used by exporters. Thanks to the cooperation that contributed greatly to Türkiye’s export mobilization, a total of nearly 1.2 billion dollars of high value-added products were exported in 4 months, while the scope of the agreement was expanded.

46 destinations in 35 countries

With the new protocol signed between TİM and THY; ten percent to 35 percent discount will be applied for air cargo transportation of Turkish export products covered by general cargo, eggs, fresh fruits and vegetables, and fish in 46 destinations in 35 countries. An additional capacity of 6,050 tons was allocated with the campaign, while the product ranges were expanded. The campaign will continue until December 31, 2021, when product contents are provided not only in tone but also under tons. “Air Cargo Cooperation Signing Ceremony”, held at Ankara ministry of commerce regarding the new protocol, was carried out with the participation of Minister of Commerce Mehmet Muş, Minister of Transport and Infrastructure Adil Karaismailoğlu, TİM Chairman İsmail Gülle, and Turkish Airlines Chairman of the Board and Executive Committee İlker Aycı.

“Export teamwork”

Speaking at the ceremony, İsmail Gülle, chairman of the Turkish Exporters Assembly, emphasized that THY is the country’s pride. Stating that THY was the most flying network carrier in Europe with 1333 daily flights between August 16 and 22, Gülle said, “While discussing the sinking of the global giants of the sector during the pandemic period, THY continued its way by opening new flights despite all the negative situations. When the borders were closed and transportation from the roads became almost impossible, Turkish Cargo, with its solid infrastructure in air logistics, delivered Turkish products safely and quickly to numerous destinations and stood by its export family. So much so that in May 2020, when the impact of the pandemic was most intensely felt, the share of exports by air exceeded 10 percent. Export is a team business. Every order received by the exporter is a serious process that requires an organization with its financing, production, marketing, and logistics. I would like to take this opportunity to congratulate our flag carrier aviation brand in the presence of Mr. İlker, chairman of the Board of Directors, for its contribution to export. Hopefully, with this new protocol, we will increase the share of exports by air much higher.”

Air cargo export reached $6.8 billion

Stating that the cooperation between TİM and THY regarding the cargo discount made in December 2020 contributed significantly to exports, Gülle continued: “It has started to offer a 10 percent to 30 percent discount on the transportation of Turkish export products by air cargo. We determined the destinations in such a way that our exporter would get maximum efficiency by analyzing which points are used intensively in logistics and the number of exports to these points. The figures clearly show the positive results of our TİM-THY Air Cargo Protocol. In the first 8 months of the year, our air cargo exports increased by 28 percent from $5.3 billion to $6.8 billion. These figures have further encouraged us to expand our cooperation. Today, we are expanding our cooperation with a new protocol for our exporters.

“Our export to the countries to be discounted exceeded 86 billion dollars in 8 months”

Noting that they exported 86 billion 376 million dollars to the countries under the new protocol in the first 8 months of 2021, an increase of 38 percent compared to the same period last year İsmail Gülle said, “With the signed protocol, our exporters will be able to deliver Turkish export products to 46 destinations in 35 countries with discount rates in the range of 10 percent to 35 percent the scope of General Cargo (GEN), Egg (HEG), Fresh Fruit and Vegetable (PEP) and Fish (PES). Among these 35 countries, it is also important that all of the top 5 countries we export to are included.”

“Turkish exporter turned crisis into opportunity”

Stating that the Turkish exporter, who evaluated the global demand increase and the transformation process in global supply chains very well after the shock environment created by the first wave of the pandemic, turned this crisis into an opportunity, TİM Chairmen Gülle said, “We are carefully interested in all levels of export to make these opportunities gained permanent and sustainable. In this context, we have received many requests at the point of transportation by air in consultations with our exporters. To respond quickly to these demands, the TİM THY Air Cargo Cooperation Protocol, which emerged as a result of our consultations with İlker Aycı, was presented to our exporters for five months on December 4th. In the protocol signed today, the scope of export products was expanded with eggs, fresh fruits and vegetables, and fish. The destination was increased from 28 to 46. The discount available to exporters through list prices has been updated to 10-35 percent. I believe that we will achieve many successes in exports with THY. I would like to thank THY for this important cooperation. Türkiye will rise with export. The export will also rise in the wings of THY.”

Aycı: Turkish Cargo has established export bridges around the world

İlker Aycı, chairman of the Board of Directors and Executive Committee of Turkish Airlines, said of the cooperation: “Our flag carrier cargo brand continues to be a lifeline for our exporter to reach strategically important markets with its wide service network. It is a proud occasion for the Turkish Airlines family to reinforce our contribution to our exports, which are the engine of our economy with one of the highest growth rates in the world. While the cargo sector contracted worldwide during the pandemic period, Turkish Cargo continued to grow and proved its success during the challenging period. During this difficult period, it has established export bridges for our exporters all over the world. With our soon-to-be-opened SmartIst cargo facility, our growth momentum will accelerate and a new era of air cargo transportation will begin.  We believe that Turkish Cargo and TİM cooperation will continue to be the triggering force for both our country and our companies.

46 destinations to move on sale

In cooperation with TİM-THY, Turkish Cargo will apply discounts on the air cargo transportation of Turkish export products to Algeria, Amman, Amsterdam, Stockholm, Bahrain, Belgrade, Berlin, Beirut, Baghdad, Bangkok, Bangalore, Mumbai, Brussels, Basel, Cairo, Guangzhou, Paris, Dhaka, Delhi, Dusseldorf, Dubai, Hamburg, Hanoi, Hong Kong, Houston, Seoul, Islamabad, Kabul, Kiev, Karachi, Kuala Lumpur, Kuwait, Lahore, London, Linz, Chennai, Miami, Munich, Milan, Oslo, Ho Chi Minh City, Tel Aviv, Tunisia, Vilnius, Warsaw, and Zurich lines.


Source: Turkish Exporters Assembly
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.


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The new economic program expects Turkey’s GDP to grow 9 percent this year, 5 percent by 2022

Turkey Unveils 2022-2024 Medium-Term Program

Turkey’s Medium-Term Program (MTP) for 2022-2024, co-developed by the Ministry of Treasury and Finance and the Presidency of Strategy and Budget (SBB) has been published in the Official Gazette on September 5.

The new economic program expects Turkey’s GDP to grow 9 percent this year, 5 percent by 2022, 5.5 percent by 2023, and 5.5 percent by 2024. Moreover, per capita income is predicted to surpass USD 10,000 threshold in 2023, reaching USD 9,489 in 2021, USD 9,947 in 2022, USD 10,703 in 2023, and USD 11,465 in 2024.

Despite the increasing labor force participation, unemployment rate is expected to gradually decrease  12.6 percent this year, 12 percent in 2022, 11.4 percent in 2023, and 10.9 percent in 2024.

While annual inflation in Turkey is projected to reach 16.2 percent by the end of this year, it is expected to fall into single digits starting from next year receding 9.8 percent in 2022, 8 percent in 2023, and 7.6 percent in 2024.

Turkey will continue to set new export records in the coming years. While the country’s export target for 2022 is USD 230.9 billion, it aims to gain USD 255 billion by 2024.

Following the Covid-19 pandemic, tourism revenues were revised to reasonable levels, with the goal of gaining USD 25 billion in 2022, USD 30 billion in 2023, and USD 33 billion in 2024.

The MTP is a tool that initiates the budget process and allocates resources in line with public policies and practices along with priorities in the Development Plan. The major aim of the program is to develop new economic targets for the country and maintain domestic and external budget balance.​​


Source: Republic of Turkey Investment Office
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.


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Turkish Economy Grows 21.7 percent in Q2 2021

The robust recovery in the Turkish economy continued at full speed and Turkey’s GDP grew by 21.7 percent year-on-year in the second quarter of 2021, posting its highest-ever expansion since 1999 and ranking second in the world after the UK.

The Turkish Statistical Institute (TurkStat) also revised upwards Turkey’s growth in the first quarter of 2021 to 7.2 percent from 7.0 percent. The data released on September 1 revealed that the GDP at current prices reached USD 188,566 million in the second quarter and the Turkish economy expanded by 0.9 percent on a quarterly basis, showing that it kept its strong growth momentum despite the lockdown in May.

A close analysis of GDP’s activities indicated all the components positively contributed to the economic growth except stock changes. Private and government consumption have contributed to Turkey’s growth by 13.7 and 0.7 ppt., while investment expenses and net exports contributed by 5.4 and 7.0 ppt., respectively. 


Source: Republic of Turkey Investment Office
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.


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Turkey’s Employment Data Reaches 33-Month High in June

​Turkish Statistical Institute (TurkStat) revealed the labor force statistics of June 2021. Accordingly, the number of people employed reached 28.6 million in June, the highest level in the last 33 months. Thus, employment in Turkey reached and exceeded the levels before the pandemic.​

The data revealed that the employment rate in Turkey increased to 44.9% in June, while the unemployment rate fell by 2.5% when compared to the previous month and receded to 10.6%, the lowest level since May 2018.

Despite the negative effects of the coronavirus, Turkey has demonstrated strong economic performance, thanks to the great transformation made in the fields of services and infrastructure during the past 18 years. Policymakers, regulators, and all economic actors vigilantly followed the developments and took all necessary measures to reassure the markets.​​​

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Source: Republic of Turkey Investment Office
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.


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Fitch Ratings Raises Turkey’s Growth Forecast for 2021

​In its recent review, Fitch Ratings increased its growth forecast for Turkey to 7.9 percent for 2021 from 6.3 percent in its June assessment, due to the remarkable performance in 1Q21 and continued resilience in economic activity.
“Low government deficits and debt, stronger growth performance and structural indicators, such as GDP per capita and human development” were lined up as the upsides of the Turkish economy.
Fitch has affirmed Turkey’s rating at “BB-“ with a “Stable” outlook in the last assessment.

Source: Republic of Turkey Investment Office
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.


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Some legal provisions regarding Limited Liability Company in Turkey

23.08.2021

1- Definition of Limited Liability Company

(1) A limited liability company is established by one or more natural or legal persons under a trade name, basic capital is determined and this capital consists of the sum of basic capital shares.

(2) The shareholders are not responsible for the debts of the company, they are only obliged to pay the basic capital shares they have committed and to fulfill the additional payment and ancillary performance obligations stipulated in the company contract.

(3) A limited liability company can be established for any economic purpose and subject that is not prohibited by law.

2- Number of Shareholders

(1) The number of shareholders cannot exceed fifty.

(2) If the number of shareholders decreases to one, the situation is notified in writing to the directors within seven days from the date of the transaction for this result. From the date of receipt of the notification to the end of the seventh day, it is registered and announced the directors register, that the company is a sole proprietorship, the name, place of residence and citizenship of this shareholder. Otherwise, they will be responsible for the resulting damage. The same obligation applies where the company is established with one shareholder.

(3) The company cannot acquire the basic capital share in such a way that it will transform into a company whose sole shareholder will be itself.

3- Articles of Association

The articles of association must be made in writing and signed by the founders in the presence of authorized personnel in the trade registry directorate. In the establishment of the company, valuable paper price is not collected from the papers containing the articles of association.

(1) The following records must be clearly stated in the company agreement:

a) The company’s trade name and place of headquarters.

b) Business subject of the company, with its essential points specified and defined.

c) Nominal amount of basic capital, number of basic capital shares, nominal values, privileges, if any, groups of basic capital shares.

d) Names, surnames, titles, citizenships of the directors.

e) The form of the announcements to be made by the company.

m) Provisions regarding termination reasons other than those specified in the law

4- Capital

– Capital in Cash

The main capital of the limited company is at least ten thousand Turkish Liras.

– Capital in Kind

Assets including intellectual property rights, virtual environments and names, which do not have limited real rights, liens or measures, which can be evaluated and transferred in cash, can be invested as capital in kind. Acts of service, personal labor, commercial reputation and unpaid receivables cannot be capital.

In the articles of association, the nominal values of the basic capital shares can be determined as at least twenty-five Turkish Liras. This value may be lowered to improve the company’s condition.

5- Responsibility of shareholders

The company is liable for its debts and liabilities only with its assets.

6- Dividends and reserves

(1) Dividend can be distributed only from the net profit for the period and the reserves set aside for this. Dividend distribution can only be decided if the legal reserves required to be set aside in accordance with the law and the Articles of Association and the reserves stipulated in the Articles of Association are set aside.

(2) Unless otherwise stipulated by the Articles of Association, the dividend is calculated in proportion to the nominal value of the declared capital share. In addition, the amount of additional payment obligations fulfilled is added to the nominal value in the calculation of the profit share.

(3) The general assembly of the company can decide to allocate reserves in amounts that are not foreseen or exceeded in the law or company contract,

a) If necessary to cover damages,

b) If the need to invest for the development of the company has been seriously demonstrated, if the interests of all shareholders justify such a reserve fund, and if these issues are clearly stated in the Articles of Association.

7- Obligation of loyalty and prohibition of competition

(1) Shareholders are obliged to protect company secrets. This obligation cannot be removed by the articles of association or the resolution of the general assembly.

(2) The shareholders can not engage in acts that can harm the interests of the company. In particular, they cannot engage in transactions that provide a special benefit to them and harm the purpose of the company. With the Articles of Association, it can be foreseen that the shareholders have to avoid transactions and behaviors that compete with the company.

(3) The provisions of Article 626, which stipulates the prohibition of competition for directors, are reserved.

(4) If all the remaining shareholders give their written consent, the shareholders can engage in activities contrary to the obligation of loyalty or the prohibition of competition. The Articles of Association can stipulate the approval decision of the general assembly of the shareholders instead of the approval in the first sentence.

 8- Right to get information and examine

(1) Each shareholder can ask the directors to provide information about all the business and accounts of the company, and can examine certain issues.

(2) If there is a danger that the shareholder will use the information they have obtained to the detriment of the company, the directors can prevent the obtaining and examination of information to a necessary extent, and the general assembly decides on this issue upon the application of the shareholder.

(3) If the general assembly unjustly prevents obtaining information and examination, the court decides on this matter upon the request of the shareholder. The court decision is final.

9- Powers of the general assembly

(1) The inalienable powers of the general assembly are as follows:

a) Changing the Articles of Association.

b) Appointment and dismissal of directors.

c) Appointment and dismissal of the group auditor and (…) (1) auditors.

d) Approval of the Group’s year-end financial statements and annual activity report.

e) Approving the year-end financial statements and annual activity report, deciding on the profit share, determining the profit shares.

f) Determination of the wages of the directors and acquittance

g) Approval of the transfer of declared capital shares.

h) Requesting the court to remove a shareholder from the company.

i) Authorization of the director for the acquisition of the company’s own shares or approval of such an acquisition.

j) Dissolution of the company.

k) Deciding on matters that the general assembly is authorized by law or company contract or on matters submitted by the directors to the general assembly.

(2) The following are the inalienable powers of the general assembly if they are stipulated in the Articles of Association:

a) The cases where the approval of the general assembly is sought in accordance with the Articles of Association and the approval of the activities of the directors.

b) Making a decision on the use of the right to be the subject of a proposal, pre-emption, redemption and purchase.

c) Approval regarding the establishment of a pledge right on the declared capital shares.

d) Issuing an internal directive on ancillary performance obligations.

e) In case the shareholders do not find the approval sufficient in accordance with the fourth paragraph of Article 613 of the Articles of Association, giving the necessary permission for the approval of the directors and shareholders to engage in activities incompatible with the obligation of loyalty to the company or the prohibition of competition.

f) Dismissal of a shareholder from the company due to the reasons stipulated in the Articles of Association.

(3) In limited liability companies with one shareholder, this shareholder has all the powers of the general assembly. The decisions to be taken by the sole shareholder as the general assembly must be in writing in order for them to be valid.

10- Meeting of the general assembly

(1) The general assembly is called for a meeting by the directors. Ordinary general assembly meeting is held every year within three months following the end of the accounting period. In accordance with the Articles of Association and when necessary, the general assembly is called for an extraordinary meeting.

(2) The general assembly is called to the meeting at least fifteen days before the meeting date. The Articles of Association can extend this period or shorten it up to ten days.

(3) Provisions regarding joint stock companies on convocation, minority’s right to call and propose, agenda, proposals, general assembly without invitation, preparatory measures, minutes, unauthorized participation, except for the Ministry representative, are applied by comparison. Each shareholder can have himself represented in the general assembly through a shareholder or non- shareholder.

(4) Unless any shareholder requests an oral meeting, general assembly resolutions can also be made by obtaining the written approval of the other shareholder for the proposal of one of the shareholders regarding the agenda item. Submitting the same proposal to the approval of all shareholders is essential for the validity of the decision.


Source: Revenue Administration of Republic of Turkey – Translated by Karen Audit – The rights of this translation belong to KarenAudit and unauthorized use is prohibited.
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.


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Joint Venture in Terms of Turkish Corporate Tax

19.08.2021

Joint Ventures

  1. Definition and Scope

Joint ventures in the seventh paragraph of article 2 of the Turkish Corporate Tax Law, is defined as those who demand the establishment of an obligation in this way from the partnerships they have established in order to jointly undertake a certain work together and to share their earnings, between the institutions mentioned in the other paragraphs of the same article, or with personal partnerships or real persons.

Joint ventures are partnerships established for the purpose of sharing profits and the partners undertake to do a certain job together.

About sole proprietorships or ordinary partnerships formed by real persons with those listed in Article 2 of the Law or among those listed in Article 2 of the Law, if desired, corporate tax liability can be established as a joint venture. In this case, joint ventures can become corporate taxpayers, regardless of whether they have legal personality or not, if requested by taxpayers.

  1. Components

In order for the joint venture to be established to be considered as a corporate taxpayer, it must have at least the following components.

– At least one of the partners is a corporate taxpayer,

– Establishment of the partnership with a written contract to conclude a certain business,

– The subject of the joint venture is a certain business,

– Predicting that the work to be done together will be carried out within a certain period of time,

– The existence of an underwriting contract between the joint venture and the employer,

– The parties are responsible to the employer for the whole of the jointly undertaken work, not for a certain or more than one part,

– Sharing the profit at the end of the work,

– Completion of the jointly undertaken and jointly undertaken work and the completion of all obligations related to the liability specified in the Tax Procedure Law.

Considering the above-mentioned general components, consortia in which each partner undertakes the construction of a certain part of the business are excluded from the definition of joint venture. In such partnerships (consortium), the work of each partner must be clearly stated in the underwriting contract. However, although it is not specified in the contract of undertaking, if the work to be undertaken by each partner is determined by the contract to be made among the partners and this contract is accepted by the employer administration, such partnerships will also be considered as “consortium”.

The joint ventures will be established for a business that will be completed within a certain period of time and will be subject to full liability, not for a business or business that is continuous and of the same nature.

Joint ventures can be established for any kind of business, provided that they carry the above-mentioned components.

Having more than one employer in a joint venture established for a particular business does not necessitate more than one joint ventures. However, if more than one job is undertaken against an employer within the framework of the joint ventures described above, each business will require the establishment of separate joint ventures.

For example, a single joint venture can be established for a hydroelectric power plant construction business. If a separate tender is held by the same employer for the establishment of the electricity transmission system in connection with the said power plant, a separate joint venture must be established for this work.

The tax office to which the joint venture is affiliated in terms of corporate tax is the tax office where the headquarters of the partnership indicated in the establishment agreement is located. If the partnership center is not specified in the contract, the tax office where the business center is located will be the tax office to which it is affiliated.

In the joint venture to be established for a certain business, the end date of the business will be determined according to the principles determined in the contract of commitment. However, the end of the business does not indicate the end of the joint venture. Due to this job, all the duties related to the obligation must be fulfilled   (For example, full payment of accrued taxes). After the completion of all tax obligations, the joint venture is deemed to be terminated.

On the other hand, the liquidation of joint ventures will be carried out in accordance with the provisions regarding the dissolution of ordinary partnerships in the Code of Obligations.

  1. Status of losses at the end of the work

Corporations can operate by forming partnerships in the form of ordinary partnerships according to the Code of Obligations or joint venture according to the Corporate Tax Law.

Although ordinary partnerships are not corporate tax payers, they can keep separate books because they are value added tax payers. Partners share the profit or loss at the end of the period in proportion to their shares in the partnership and include them in their own accounts.

Joint ventures are considered as separate corporation in the Corporate Tax Law and are considered as corporate taxpayers. Income arising from the activities of joint ventures is subject to corporate tax and after-tax earnings are distributed to the partners according to the shares of the partners.

The losses of corporate taxpayers cannot be deducted by the partners of these taxpayers, and the same applies to the losses of corporate taxpayer joint ventures.


Source: Revenue Administration of Republic of Turkey – Translated by Karen Audit – The rights of this translation belong to KarenAudit and unauthorized use is prohibited.
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.


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Explanations on the tax withholding to be made on the incomes of limited taxpayers operating in Turkey

12.08.2021

  1. Income and revenues subject to tax withholding

In Article 30 of the Corporate Tax Law, the incomes and revenues obtained by limited taxpayers are counted one by one. Accordingly, the following incomes and revenues to be obtained by limited taxpayers companies will be subject to tax deductions according to the aforementioned article.

  • Progress payments made to institutions dealing with construction and repair works for more than one calendar year.
  • Self-employment earnings,
  • Real property incomes,
  • Securities revenues, excluding those listed in subparagraphs (1), (2), (3) and (4) of the second paragraph of Article 75 of the Income Tax Law,
  • Regardless of whether they are included in commercial or agricultural income, the amounts paid or accrued in cash or on account in return for the sale, transfer and assignment of copyright, privilege, passion, business, trade name, brand and similar intangible rights,
  • Dividends (except those who receive dividends through a workplace or permanent representative in Turkey) distributed by full taxpayer corporations to limited taxpayer corporations or limited taxpayers exempted from corporate tax and listed in subparagraphs (1), (2) and (3) of the second paragraph of Article 75 of the Income Tax Law
  • Profits exempted from corporate tax as specified in subparagraph (c) of the first paragraph of Article 5 of the Corporate Tax Law and dividends distributed to limited taxpayer corporations in the nature of joint stock or limited liability companies from the profits of the companies specified in subparagraph (c) meeting the conditions in subparagraph (b).
  • Income of limited taxpayers who do not have a workplace or permanent representative in Turkey, from their commercial activities at exhibitions and fairs opened with the permission of the competent authorities,
  • Amounts transferred to the head office by limited taxpayers, which submit annual or special declarations, from the corporate income before deduction of discounts and exceptions, after deducting the calculated corporate tax,
  • Whether the tax system of the country where the income is obtained provides a taxation opportunity at the same level as the taxation capacity created by the Turkish tax system and considering the information exchange, all kinds of payments made or accrued in cash or on account to institutions residing or operating in countries (including the workplaces of full taxpayer corporations in such countries) declared by the Council of Ministers

1.1. Progress payments made to limited taxpayer companies dealing with construction and repair works for more than one calendar year

In subparagraph (a) of the first paragraph of Article 30 of the Corporate Tax Law, tax deductions are made on the progress payments made to limited taxpayer companies dealing with construction and repair works for more than one calendar year, in accordance with the principles specified in the Income Tax Law, and in the same article, the Council of Ministers has been authorized regarding the deduction rate for tax deductions to be made pursuant to this article.

Accordingly, pursuant to the Council of Ministers Decision No. 2009/14593(***)(phrase amended with Article 21 of the Corporate Tax General Communiqué Serial No. 6), over the progress payments made for the construction and repair works spread over more than one calendar year, as of (phrase amended with Article 21 of the Corporate Tax General Communiqué Serial No. 6) 3/2/2009(****), 3% tax deduction will be made.

1.2. Self-employment earnings

In subparagraph (b) of the first paragraph of Article 30 of the Corporate Tax Law, it is foreseen that tax deductions will be made over the self-employment earnings of limited taxpayer companies, and as of 1/1/2007 in accordance with the Council of Ministers Decision No. 2006/11447:

  • A tax deduction of 5% will be made from the earnings to be derived from oil exploration activities.
  • A tax deduction of 20% will be made from other self-employment earnings.

1.3. Real property incomes

In subparagraph (c) of the first paragraph of Article 30 of the Corporate Tax Law, it is foreseen that tax deductions will be made over the real property incomes of limited taxpayer companies, and as of 1/1/2007 in accordance with the Council of Ministers Decision No. 2006/11447:

  • A tax deduction of 1% will be made from real property incomes to be obtained from activities within the scope of the Financial Leasing Law.
  • A tax deduction of 20% will be made from other real property incomes.

1.4. Security incomes

In subparagraph (ç) of the first paragraph of Article 30 of the Corporate Tax Law, it is foreseen that tax deductions will be made on other security incomes, excluding the dividends to be obtained by limited taxpayer companies.

In the second paragraph of the provisional article 1 of the aforementioned Law, in accordance with the temporary article 672 of the Income Tax Law, it is stipulated that no further deduction will be made on the income and revenues subject to tax deductions pursuant to this Law.

(Paragraph changed with Article 22 of Corporate Tax General Communiqué Serial No. 67) With securities revenues written in the provisional article 67 of the Income Tax Law, paragraph (5) of the second paragraph of article 75 of the same Law, (except those obtained from securities issued before 1/1/2006) it has been decreed that a 15% deduction will be made on the securities capital revenues in subparagraphs (7), (12) and (14). (*****)

Accordingly, over all kinds of bonds and Treasury bill interests and securities issued by the Housing Development Administration, Public Partnership Administration and (The phrase amended with Article 22 of the Corporate Tax General Communiqué Serial No. 6) Privatization Administration, and revenues from lease certificates issued by asset leasing companies, deposit interests, interest-free dividends paid to lenders, dividends paid in return for profit and loss sharing certificates (6), and repo income, tax withholding will be made, in accordance with the provision of temporary article 67 of the Income Tax Law.

(Paragraphs added with Article 22 of Corporate Tax General Communiqué Serial No. 6) The explanations made in the General Communiqué on Income Tax with serial number 279 must be taken into consideration in the taxation of the interests obtained from bonds issued abroad by full taxpayer corporations.

As of 29/6/2011, pursuant to the Council of Ministers Decision No. 2009/14593 amended by the Council of Ministers Decision No. 2011/1854, revenues from lease certificates issued abroad by full taxpayer asset leasing companies;

  • A tax deduction of 10% will be made from the incomes provided to those whose maturity is up to 1 year.
  • A tax deduction of 7% will be made from the incomes provided to those whose maturities are between 1 year and 3 years.
  • A tax deduction of 3% will be made from the incomes provided to those whose maturity is between 3 years and 5 years.
  • A tax deduction of 0% will be deducted from the incomes provided to those with a maturity of 5 years or longer.

On the other hand, as of 3/2/2009 in accordance with the Council of Ministers Decision No. 2009/14593, from all kinds of receivables interest,

  • It is authorized to give loans from foreign states, international institutions or foreign banks or in the country where it is customarily located, and 0% tax deduction will be made from the interest to be paid (including dividends paid by participation banks for funds and similar resources obtained from abroad according to their own procedures) for all kinds of loans received from institutions that give credit not only to the institutions they are related to but also to all real and legal persons.
  • A tax deduction of 1% will be made on the interest to be paid for eligible secondary subordinated loans and loans obtained by banks and other institutions through securitization abroad based on a current or asset portfolio, in accordance with the Banking Law No. 5411 of the Banks.
  • Except for the dividends paid by the participation banks, a tax deduction of 5% will be made on the maturity differences arising from the supply of goods.
  • A 10% tax deduction will be made from others.

Moreover, in the application of tax withholding to be made on the interest to be paid for eligible secondary subordinated loans and loans obtained by banks and other institutions through securitization abroad based on a current or asset portfolio, in accordance with the Banking Law No. 5411 of banks, interest amounts to be paid must be subject to tax withholding in accordance with the Council of Ministers Decision No. 2006/11447, in case the contracts for the loan supply transactions in question were drawn up before the effective date of the Decree, 3/2/2009.

(Paragraph abolished with Article 22 of Corporate Tax General Communiqué Serial No.6)(7)

In accordance with the aforementioned Decision, a 10% tax deduction will be made from the securities capital gains written in the sub-paragraph (10) of the second paragraph of Article 75 of the Income Tax Law.

1.5. Sale, transfer and assignment of intangible rights

In the second paragraph of Article 30 of the Corporate Tax Law, regardless of whether they are included in commercial or agricultural income, for the amounts paid or accrued in cash or on account in return for the sale, transfer and assignment of copyright, concession, passion, business, trade name, brand and similar intangible rights of non-resident companies, it is stipulated that those who pay or accrue in cash or on account will be subject to withholding tax.

In accordance with the Council of Ministers Decision numbered (The phrase amended with Article 23 of the Corporate Tax General Communiqué Serial No. 6) 2009/14593(***), 20% tax deduction will be made on the said amounts as of (The phrase amended with Article 23 of the Corporate Tax General Communiqué Serial No. 6) 3/2/2009(****).

1.6. Dividends distributed to limited taxpayer corporations or limited taxpayers exempt from corporate tax

By full taxpayer corporations, limited taxpayer corporations or in the status of an institution, based on the profit shares listed in subparagraphs (1), (2) and (3) of the second paragraph of Article 75 of the Income Tax Law distributed to foreign corporations exempted from corporate tax by this Law or special laws, tax withholding will be made in accordance with the third paragraph of Article 30 of the Law. No deduction will be made on the dividends distributed to limited taxpayer companies operating in Turkey through a workplace or permanent representative.

On the other hand, adding the profit to the capital by the institutions will not be considered as profit distribution.

With the decision (8) dated (The phrase amended with Article 23 of the Corporate Tax General Communiqué Serial No. 6) 12/1/2009 and numbered 2009/14593 published pursuant to the authority granted to the Council of Ministers, the tax withholding rate regarding profit distribution was determined as 15%. Therefore, a tax deduction of 15% is required on dividends distributed to limited taxpayer corporations or foreign corporations exempted from corporate tax by this Law or special laws.

In accordance with Article 30, no additional tax deduction will be made from the earnings written in subparagraph (d) of the first paragraph of Article 5 of the Law, which is subject to tax deduction in accordance with the third paragraph of Article 15 of the Corporate Tax Law.

The explanations in the section (15.6) of the Communiqué are also valid for the dividends distributed to limited taxpayer companies or to limited taxpayers exempt from corporate tax.

1.7. Dividends distributed to limited taxpayer companies over foreign subsidiary incomes

In subparagraph (c) of the first paragraph of Article 5 of the Corporate Tax Law, as of the date of earning, corporate incomes arising from the disposal of foreign participation shares joint stock or limited liability companies of which 75% or more of the total assets excluding cash assets for a continuous period of at least one year, whose legal or business center is not located in Turkey, and subject to full liability consisting of at least 10% participation in the capital of each, that have been in its assets for at least two full years are exempt from corporate tax.

Moreover, the participation earnings of joint stock companies that are subject to full liability specified in the aforementioned paragraph, which meet the conditions in subparagraph (b) of the first paragraph of Article 5 of the Law, are also exempt from corporate tax.

Pursuant to the fourth paragraph of Article 30 of the Corporate Tax Law, tax deductions will be made from the profit shares that are exempted from the above mentioned corporate tax, and from the profit shares distributed to the limited taxpayer institutions in the nature of joint stock companies or limited liability companies, and the said deduction rate will not exceed half of the rate to be applied in accordance with the third paragraph of the aforementioned article.

The tax withholding rate to be made from the aforementioned dividends will be applied as half (7.5%) of the rate determined in the Council of Ministers Decision No. (The phrase amended with Article 23 of the Corporate Tax General Communiqué Serial No. 6) 2009/14593(9), in accordance with the fourth paragraph of Article 30 of the Law.

1.8. Exhibition and fair profits

In the fifth paragraph of Article 30 of the Corporate Tax Law, it has been decreed that tax deductions will be made within the corporation over the profits of limited taxpayers who do not have a workplace or permanent representative in Turkey, from their commercial activities at exhibitions and fairs opened with the permission of the competent authorities.

In accordance with the Council of Ministers Decision No. (The phrase amended with Article 23 of the Corporate Tax General Communiqué Serial No. 6) 2009/14593(***), 0% tax deduction will be made from the said earnings as of (The phrase amended with Article 23 of the Corporate Tax General Communiqué Serial No. 6) 3/2/2009(****).

1.9. Amounts transferred to the headquarters from the earnings considered as securities capital income of limited taxpayer companies that submit annual or special declarations

In the sixth paragraph of Article 30 of the Corporate Tax Law, it has been decreed that corporate tax deductions will be made within the corporation, over the amount transferred to the headquarters by the limited taxpayer corporations, which submit annual or special declarations, from the corporate income before the deductions and exceptions are deducted, after the calculated corporate tax is deducted.

Accordingly, in accordance with the Corporate Tax Law, during the transfer of the remaining part of the corporate income before deduction of discounts and exemptions, after deducting the calculated corporate tax, to the headquarters of the non-resident taxpayer institutions that submit annual or special declarations, they are required to withhold tax on these amounts they transfer. The deduction rate was determined as 15% with the Council of Ministers Decision No. (The phrase amended with Article 23 of the Corporate Tax General Communiqué Serial No. 6) 2009/14593(9).

On the other hand, if limited taxpayer companies do not transfer the profits obtained in Turkey to their headquarters, no tax withholding will be made.

1.10. Tax withholding in derivative transactions made by limited taxpayer companies

1.10.1. Forward transactions

The nature of the income obtained from forward transactions by limited taxpayer companies that do not have a workplace and permanent representatives in Turkey is commercial income and no tax deduction will be made on these earnings in accordance with Article 30 of the Corporate Tax Law.

1.10.2. Swap transactions

1.10.2.1. Money swap

The nature of the income obtained from money swap transactions by limited taxpayer companies that do not have a workplace and permanent representatives in Turkey is commercial income and no tax deduction will be made on these earnings pursuant to Article 30 of the Corporate Tax Law.

1.10.2.2. Interest swap

For limited taxpayer companies that do not have a workplace or permanent representative in Turkey, the income from interest swap transactions will be considered as receivable interest, and in accordance with subparagraph (ç) of the first paragraph of Article 30 of the Corporate Tax Law No. 5520, it will be taxed in Turkey through tax deduction.

Pursuant to the Council of Ministers Decision No. 2009/14593 published pursuant to the authority given by the aforementioned article to the Council of Ministers, in this context, it is authorized to give loans from foreign states, international institutions or foreign banks or in the country where it is located, and it will be necessary to withhold a tax of 0% on interest payments to be made to institutions that give loans not only to the institutions they are related to, but also to all real and legal persons, at the rate of 10% on interest payments to be made to other institutions.

Accordingly, Tax withholding is required in accordance with sub-paragraph (ç) of the first paragraph of Article 30 of the Corporate Tax Law and the aforementioned Council of Ministers Decision, over the income of banks and financial institutions subject to limited liability that do not operate in Turkey through a workplace or permanent representative, arising from these transactions.

On the other hand, pursuant to paragraph (14) of the temporary article 67 of the Income Tax Law, in case the profits obtained from interest swap transactions by limited taxpayer companies, other than foreign banks and financial institutions and do not have a workplace or permanent representative in Turkey, are subject to tax deduction in accordance with the aforementioned article, no tax deduction will be made for these transactions, in accordance with Article 30 of the Corporate Tax Law.

1.10.3. Options contracts and option premium

In option contracts executed in over-the-counter markets, the incomes obtained from both the option contract and the option premium will be considered as commercial income by a limited taxpayer corporation and no tax deduction will be made on these earnings pursuant to Article 30 of the Corporate Tax Law.

It will be necessary to take into account the explanations in the following section regarding the option contracts executed in the organized exchanges established in Turkey.

1.10.4. Futures and options exchange transactions

Income from futures and options contracts executed on the Futures and Options Exchange is subject to tax withholding, within the scope of paragraph (1) of the temporary article 67 of the Income Tax Law, and in accordance with Article 30 of the Corporate Tax Law, no additional tax deduction will be made on these incomes, and the incomes obtained by limited taxpayer companies due to these transactions will not be declared with a special declaration.

1.10.5. Covered warrant

Profits from intermediary company warrants (covered warrants) will be considered as commercial gains by limited taxpayer companies that do not have a workplace or permanent representative in Turkey, and no tax deduction will be made on these earnings pursuant to Article 30 of the Corporate Tax Law.

(Added with the Corporate Tax General Communiqué Serial No. 17. Additional section: Official Gazette-15/02/2019-30687)

1.11. Tax deductions in payments within the scope of the seventh paragraph of Article 11 of the Tax Procedure Law

Pursuant to subparagraph (d) of the first paragraph of Article 30 of the Corporate Tax Law, tax deductions must be made from the payments within the scope of the seventh paragraph of Article 11 of the Tax Procedure Law.

1.11.1. Payments covered by the deduction

As explained in the section (15.3.11.) of the Communiqué, with the President’s Decision No. 476, the advertisement services provided on the internet to those listed in the first paragraph of the 94th article of the Income Tax Law and the first paragraph of the 15th article of the Corporate Tax Law are included in the scope of the tax deduction, and with regard to these services, a regulation has been made that tax deductions must be made from the payments made to those who provide the service or to those who mediate the provision of advertising services on the internet, regardless of whether the payees are taxpayers or not.

With the third article of the aforementioned Decision, subparagraph (15) has been added to the first paragraph of the 1st article of the Council of Ministers Decision no. 2009/14593 on the tax withholding rates to be made from the income and revenues subject to the tax deductions of the corporations subject to limited liability in Article 30 of the Corporate Tax Law and regarding the advertisement services provided on the Internet, the tax withholding rate to be made over the payments made to those who provide this service or to those who mediate the provision of advertisement services on the Internet has been determined as 15%.

1.11.1.1. Tax withholding on payments for advertising services provided on the Internet

Pursuant to the amendment made in the Presidential Decision No. 476 and the Decree of the Council of Ministers No. 2009/14593, regarding the advertisement services provided on the Internet, a tax deduction of 15% is required on the payments made to limited taxpayer companies that provide this service or mediate the provision of advertisement services on the Internet.

Accordingly, those responsible for withholding tax listed in the section (15.1) of the Communiqué are liable to withhold 15% of tax on the payments they will make to a limited liability institution in return for the advertisement service it provides on the internet. Those other than those responsible for withholding tax listed in the section (15.1.) of the Communiqué are not obliged to withhold tax on the payments they make to this institution in return for the advertisement services they receive from a limited taxpayer corporation.

In case the payments for the advertisement services provided on the internet by a limited taxpayer corporation, which is the main service provider, are made to a full taxpayer institution that mediates these services, the explanations made in the section (15.3.11.) of the Communiqué must be taken into account.

However, in the payment of the fees collected for the advertisement services provided on the internet by the resident taxpayer institution intermediating the service to the limited taxpayer corporation, which is the main service provider, which provides advertisement services on the internet, a 15% tax deduction must be made by the full taxpayer corporation mediating the service over these payments.

Furthermore, a 15% tax withholding rate will be applied to payments made to limited taxpayer real persons who provide advertisement services on the internet or mediate the provision of these services.

Tax deductions must be made from the payments related to these services, regardless of whether those who provide advertising services on the Internet or mediate the provision of these services are taxpayers.

The Presidential Decision No. 476 entered into force on the date of its publication to be applied to the payments to be made as of 1/1/2019, and even if the service is provided before this date, tax deduction will be made on the payments made from the mentioned date (including this date).

In terms of the implementation of the said tax deduction, if payment is made in cash or on account before the effective date of the aforementioned Decision, to those who provide advertising services on the internet or mediate the provision of these services, no tax deduction will be made from payments to be made after 1/1/2019 regarding the services that constitute the subject of these payments.

For example, (C) A.Ş. received online advertisement services from (L) Ltd, whose legal and business center is located in Ireland, in November 2018 through Mr. (E), who is dealing with advertising. (C) A.Ş. paid 25% of the service fee, which is USD 100.000 to Mr. (E) as an advance in November 2018 as per the agreement.

(L) Ltd. issued the invoice for this advertising service on behalf of Mr. (E) in December 2018 and Mr. (E) recorded the invoice in his legal books during this period. Mr. (E) also issued an invoice on behalf of (C) A.Ş. in December 2018 regarding the advertising service fee and (C) A.Ş. booked the said invoice in its legal books in the same period.

(C) A.Ş. paid the remaining portion of the service fee to Mr. (E) on 20 January 2019, and Mr. (E) transferred the entire service fee to (L) Ltd.’s account on 31 January 2019.

With the advance payment made in November 2018, some of it in cash and in December 2018, the invoice is recorded in the books of (C) A.Ş. for the service paid on account, no tax withholding will be made on the payments made to Mr. (E) on January 20, 2019.

There is no need for Mr (E) to withhold tax on the cash payment made on 31 January 2019, since the invoice for advertising service issued by (L) Ltd., whose legal and business center is located in Ireland, was recorded in Mr. (E)’s legal books in December 2018, the payment was made on account.


Source: Revenue Administration of Republic of Turkey – Translated by Karen Audit – The rights of this translation belong to KarenAudit and unauthorized use is prohibited.
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.


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Total foreign currency assets of the banking sector in Turkey increased by 0.2% to USD 316.8 billion

05.08.2021

BIS-Locational and Consolidated Banking Statistics Developments – 2021Q1

BIS – Locational Banking Statistics

Total foreign currency assets of the banking sector in Turkey increased by 0.2 percent to USD 316.8 billion compared to end-2020, while the total foreign currency claims from the non-bank sector decreased by 0.3 percent to USD 195.3 billion.

Total foreign currency liabilities of the banking sector in Turkey decreased by 2.6 percent to USD 337.4 billion compared to end-2020, and total foreign exchange liabilities to the non-bank sector decreased by 4.5 percent to USD 250.3 billion.

BIS – Consolidated Banking Statistics

Total cross border claims of the banks in Turkey, on immediate borrower basis, increased by 27.4 percent compared to end-2020 and reached USD 34.8 billion while the cross border claims from the banks increased by 43.8 percent to USD 26.5 billion.

Total foreign claims of the banks in Turkey, on ultimate borrower basis, increased by 34.8 percent compared to end-2020 and reached USD 25.0 billion.


Source: Central Bank of the Republic of Turkey
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.


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Manufacturing PMI in Turkey Records 6-month High in July

05.08.2021

​Turkey’s Manufacturing Purchasing Managers’ Index (PMI) peaked to its highest level in six months in July, announced IHS Markit’s monthly PMI report prepared in collaboration with the Istanbul Chamber of Industry.

The figure rose to 54 in July 2021 from 51.3 in June and the report said the result signals an improvement in customer demand with the relaxation of COVID-19 restrictions, giving rise to a positive impact on manufacturers with new orders rallying across the sector.


Source: Republic of Turkey Investment Office
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.


Read more