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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.


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Implicit Profit Distribution through Transfer Pricing in Turkish Corporate Tax

30.07.2021

According to Article 13 of the Corporate Tax Law, if the corporations purchase or sell goods or services at the cost or price they have determined with related parties in violation of the arm’s length principle, the earning will be deemed to be distributed in whole or in part through transfer pricing implicitly.

Buying or selling goods or services refers to the transactions of buying, selling, manufacturing and construction, leasing and renting, borrowing and giving money, and other transactions that require bonuses, fees and similar payments.

  1. Related person concept and arm’s length principle

Related person refers to the real person or corporation to which the corporations or their partners are related, and the real person or corporation to which they are directly or indirectly affiliated or under their influence in terms of administration, control or capital. The spouses of the partners, the descendants and descendants of the partners or their spouses, and the third-degree minor relatives and in-law relatives are also considered related persons. The spouses of the partners, lineal kinship of the partners or their spouses, third-degree relatives and collateral relatives are also considered related persons.

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 or not, all transactions made with persons in the countries or regions declared by the Council of Ministers will be deemed to have been made with related persons.

The arm’s length principle means that the price or cost applied in the purchase or sale of goods or services with related parties is in accordance with the price or cost that would occur in the absence of such a relationship.

It is obligatory to keep the records, tables and documents of the calculations regarding the price or prices determined in accordance with the arm’s length principle as proof papers.

  1. The methods to be applied in determining the arm’s length price or cost

Corporations will determine the price or cost to be applied in transactions with related parties by using the most appropriate method for the nature of the transaction among the following methods.

1) Comparable price method: means the determination of the arm’s length sale price to be applied by a taxpayer by comparing it with the market price to be applied by real or legal persons who purchase or sell comparable goods or services and are not related in any way.

In order for this method to be applied, the transaction with related parties must be comparable to the transactions made by persons who are not related to each other. The concept of comparable quality means that the goods or services subject to the transaction and the conditions of the transaction are similar both in transactions between related parties and between persons who are not related.

2) Cost-plus method: refers to the calculation of the arm’s length price by increasing the costs of related goods and services by a reasonable gross profit rate.

The appropriate gross profit rate refers to the profit rate reflecting the price to be applied if the goods or services in question are sold to unrelated persons at the time of purchase or sale. If the conditions are suitable, the general gross profit margin applied by the taxpayer in the transactions with unrelated persons regarding these goods or services will be the ideal rate. If the number of transactions required for comparison is insufficient, the appropriate gross profit rate criterion will be taken into account as the profit rate reflecting the price applicable if the good or service in question were sold to unrelated persons. It is foreseen that this method will find an application area especially in the transactions related to raw materials, semi-finished products and manufactured goods.

3) Resale price method: means that the arm’s length price is calculated by deducting a reasonable gross sales profit from the price to be applied in case the goods or services that are the subject of the transaction are resold to real or legal persons who are not related in any way.

In this method, the basis for reaching the comparable price or value is the probable sale to be made to real or legal persons who have no connection between them, and the price or price to be applied in this sale. An appropriate gross sales profit will be deducted from the said price or price determined based on assumptions, to arrive at an arm’s length price for the relevant transaction.  The appropriate gross sales profit here refers to the profit that can be applied for the said goods or services at the time of the transaction, determined or determined by an objective rate that can be determined according to the market conditions. After this profit is deducted, the comparable price that can be applied in the sale of the good or service to the related parties will be reached.

4) Other methods: If it is not possible to reach any of the above methods at an affordable price, the taxpayer can use other methods to be determined by himself/herself in accordance with the nature of the transactions.

In order to reach the comparable price or value, in choosing the most appropriate method among the above-mentioned methods, first of all, the price or cost used by the taxpayer in the transactions with unrelated persons will be taken as the basis for comparison as an internal precedent. In case the price or price used in this way is not available or unreliable, the transactions of taxpayers or institutions that are directly similar can be taken as a basis as an external precedent. Moreover, the important thing here is to determine the price or cost in the most accurate and reliable way, and it is possible to use domestic and foreign counterparts together.

13.3. Counting the implicit earnings distributed through transfer pricing as dividends and the adjustments to be made

Income, which is deemed to be distributed implicitly through transfer pricing in whole or in part, is considered as the distributed profit share or the amount transferred to the head office for limited taxpayer taxpayers as of the last day of the accounting period in which the conditions in this article are fulfilled, in the application of the Income and Corporate Tax Laws. However, the taxes levied on behalf of the implicit profit distribution made in institution must be finalized and paid in order for this adjustment to be made in the institutions with which implicit profit distribution is made.

In case the said profit share has been transferred to another institution, this income will be considered as participation income. In case the profit share is transferred to a limited taxpayer institution, natural persons, any person or institution that is not subject to tax or exempt from tax, it will be necessary to withhold tax based on the profit distribution over the amount found as a result of the net profit share of this profit share and the completion of this amount to the gross.

13.4. Treasury loss in implicit profit distribution through transfer pricing

With the Law No. 5766, the following seventh paragraph has been added to the 13th article of the Corporate Tax Law, which regulates the issue of “implicit profit distribution through transfer pricing”, and the current seventh paragraph has been supplemented as the eighth paragraph.

(7) The acceptance that the income is distributed implicitly due to the domestic transactions between the full taxpayer corporations and the foreign corporations’ workplaces or permanent representatives within the scope of the related person is conditional on the occurrence of a treasury loss. What is meant by treasury loss is the incomplete or late accrual of all kinds of taxes that must be accrued on behalf of the institution and related persons due to the prices and costs determined in violation of the arm’s length principle.


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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Information and Explanations on Annual Paid Leave in Turkey

 27.07.2021

How Long Does a Worker in Turkey Have to Work at Least in order to be entitled to Annual Paid Leave?

The legal regulation regarding annual paid leave has been made in the articles 53 to 61 of the Turkish Labor Law No. 4857, and with the Annual Paid Leave regulation published in the Official Gazette dated March 3, 2004, the procedures and principles of annual paid leaves were determined.

In this article, in the light of the explanations made in the Turkish Labor Law and the Regulation, we will discuss the main issues and some specific situations regarding annual paid leave under the headings.

1- At least how long does an employee have to work in order to be entitled to annual paid leave?

In order to be entitled to annual paid leave, the employee must have worked for at least one year, including the probationary period, from the day s/he started working at the workplace. We understand that there are hesitations about whether the probationary period is included in the calculation of the annual leave or not in some questions. Since it is clearly stipulated in Article 53 of the Labor Law that the probationary period will also be taken into account in the calculation of annual paid leave, this issue is not open to interpretation and the probationary period must be taken into account in the calculation of annual paid leave. 

2- Can the right to annual paid leave be renounced?

It is not possible for the annual paid leave to be renounced or deleted by the workplace.

The provisions of the Labor Law regarding annual paid leave do not apply to those working in seasonal or campaign jobs lasting less than one year due to their qualifications.

The employee cannot waive his right to annual paid leave, and cannot ask for his/her money instead.

Pursuant to the provision of Article 50 of the Constitution, it is stated that “……. Resting is the right of employees. The rights and conditions of paid week and festive holidays and paid annual leave are regulated by law.” In accordance with this provision of the Constitution, when the regulations in the Labor Law No. 4857 are considered collectively, the employer and the employee are obliged to rest without working on the Week Holidays, National and Official holidays and annual paid leave days, except for the extraordinary situations listed in the laws.

The exception to this rule under normal conditions is the payment of the wage corresponding to the unused annual leave right, if any, at the time of termination of the employment contract. Apart from this, it is not legally possible for the employer to offer the employee the wage of the leave instead of taking annual paid leave in order not to disrupt the work, or employee can’t ask for the leave money instead of taking the leave to increase his/her income.

The law is based on the use of annual paid leave rights by the employee for the purpose of rest. According to the law, the employee and the employer cannot offer each other to pay their accumulated leave rights in cash while the employment contract continues. However, if the employee resigns from the job or the employer terminates the employment due to dismissal or other reasons, unused leave entitlements must be paid to the employee in cash. One of the issues that are confused here is whether the accumulated annual paid leave rights will be paid if the worker resigns or not. It doesn’t matter whether the payment of unused annual paid leave entitlements is resigned or the employment contract is terminated by the employer. The accumulated annual paid leave rights of the employee whose employment contract is terminated must be paid in cash to him/her, if any. These payments made during the termination of the employment contract should be considered as wages and deductions from taxes and SSI premiums should be made.

3- Annual paid leave periods vary according to the seniority of the employee.

The annual paid leave period to be given to the workers is determined according to the seniority of the employee, that is, the total working time at the workplace.

Annual paid leave period according to working time (seniority) at the workplace;

a) It cannot be less than 14 working days for those who are working for 1 to 5 years (including five years)

b) It cannot be less than 20 working days for those who are working more than 5 years and less than 15 years.

c) It cannot be less than 26 working days for those who are working for 15 years (including) and more. 

Since Saturdays are determined as working days in the Labor Law, they are counted as working days in the annual paid leave calculation. It does not matter whether there is work on Saturdays or not in the calculation of annual paid leave. The workplaces where the week holiday is applied as two days on Saturday and Sunday should make the annual paid leave calculation on Saturday as if it were a working day. In the above section, the annual paid leave days determined according to the employee’s seniority will be calculated as working days on Saturday.

For example, in a workplace where there is no work on Saturdays and Sundays, the annual paid leave period that will start on August 1, 2021 and will last 14 working days for an employee who has completed 2 years of working period and therefore is entitled to 14 working days of annual paid leave will be as follows.

Leave start      : August 2, 2021

Leave days     : 14 working days

Starting date to work : August 18, 2021

The days of 8 and 15 August 2021, which coincide with the employee’s leave period, are added to the 14 working days leave period and the leave period is calculated as 16 calendar days (14+2). Although there is no routine work at the workplace on Saturdays -7 and 14 August 2021- are taken into account as working days in the annual paid leave calculation.

Annual paid leave periods of workers working in underground works will be increased by 4 working days. (4857/53.art.)

The annual paid leave period to be given to workers aged 18 and younger and workers aged 50 and over cannot be less than 20 working days. (Article 4857/53)

Annual leave periods can be increased by employment contracts and collective labor agreements concluded between the employer and the employee. (Article 4857/53)

4- Period of entitlement and use of annual paid leave

In the calculation of the period required to be entitled to annual paid leave, the periods that the employees worked in one or several workplaces of the same employer are taken into account by combining them. In so far, the period of time spent by the employees working at an employer’s workplace within the scope of the Labor Law, at the workplaces of the same employer without being covered by the Labor Law, is also taken into account. In the valid article 4 of the Labor Law, it is stipulated in which jobs the Labor Law is not valid. Accordingly, the working hours of a worker in the workplaces under the control of the same employer will be considered as a single workplace in the calculation of annual paid leave.

For example, in a limited company under the control of the same employer and in a workplace where three people work in accordance with the definition of Article 2 of the Tradesmen and Craftsmen Law No. 507, in a workplace where there is bag trading business, the annual paid leave period of the worker who works alternately and part-time at different times, but continues to work in two places without interruption, will be calculated as if he was working in one place.

5- From what date does the calculation of the entitlement to the next year begin?

The one-year service period required for the worker’s future leave entitlements is calculated from the day the previous leave entitlement arises, to the next service year.

Example:

Employment starting date                 : August 1, 2020

Date of entitled to annual leave        : August 1, 2021

The date on which the permit was granted for the following year  : August 1, 2022

6- Circumstances to be taken into account in the annual leave calculation

Some situations that are considered to be worked in the calculation of the annual paid leave entitlement are given below.

a) The days when the worker cannot go to work due to an accident or illness (However, no more than the period stipulated in the sub clause (b) of clause (I) of Article 25.)

b) The days when female workers are not employed before and after giving birth in accordance with Article 74.

c) The days when the worker cannot go to work during assignment due to maneuvers or any law other than regular military service (more than 90 days per year of this period is not counted).

d) Fifteen days of the time the worker spends without working as a result of the work being suspended for more than one week due to compelling reasons at the workplace (provided that the worker starts working again).

e) The times mentioned in Article 66 of the Labor Law titled as the cases counted as working time.

f) Weekends, national holidays, general holidays

g) According to the regulation issued on the basis of the Law No. 3153, the half-day leaves to be given to those working in x-ray clinics other than the Sunday

h) The days when they cannot continue their work due to their participation in mediation meetings, their participation in arbitral committees, and their representation of workers in these committees, in the assembly, board, commission and meetings established in accordance with the legislation on working life or in conferences, congresses or boards of international organizations related to labor issues as a worker or union representative

ı) (Amendment: 4/4/2015-6645/35 art.) Leave periods listed in Annex 2,

j) Other leaves granted by the employer and short working periods in Article 65.

Fifteen days of the time that the worker spends without working as a result of the work being suspended for more than one week due to compelling reasons at the workplace (provided that the worker starts working again)

One of the issues that has been frequently wondered recently is whether the Short-Time Working Times applied during the pandemic period will be taken into account in the annual paid leave calculation or not. According to Article 55 of the Labor Law, 15 days of the time spent in the Short-Time Working Allowance are taken into account in the calculation of annual leave. Let’s continue by stating that there is a court decision to the contrary in this regard.

k) The annual paid leave period granted to the worker as a result of the implementation of this Law.

7- Can annual paid leave be divided?

As a rule, the annual paid leave cannot be divided by the employer, and it must be given by the employer on a continuous basis within the period of time due according to seniority. However, if the employee and the employer agree, leave periods can be used in sections, some of which are not less than 10 days.

Example:

The annual paid leave period can be determined as follows, with the employee and employer’s mutual agreement.

First leave period        : 2 August 2021 – 13 August 2021 (10 working days and 1 Sunday)

Second leave              : 26 August 2021 (1 Business Day)

Third leave period      : 31 August 2021-1 September 2021 (2 Business Days)

Third leave                 : 7 September 2021 (1 Business Day)

8- Can unpaid leaves during the year be deducted from annual leave?

Other paid and unpaid leaves or rest and sick leaves granted by the employer during the year cannot be deducted from annual leave.

Unpaid leaves given during the year will be deducted from the monthly wage in the period of use. The employer cannot deduct for unpaid leaves.

9- Are the holidays that coincide with the annual leave period deducted from the leave day?

In the calculation of annual paid leave days, national holidays, weekdays and general holidays that coincide with the leave period are not counted from the leave period. In other words, the annual leave of the employee is extended as much as the national and religious holidays and other legal holidays that coincide with this period.

Holidays and other public holidays;

National Holiday Day 29 October;

From 13.00 on 28 October to 29 October: 1.5 days

Official holidays are:

* National Sovereignty and Children’s Day on April 23: 1 day

* May 19 is the Commemoration of Atatürk and Youth and Sports Day: 1 day

* August 30 Victory Day: 1 day

Religious holidays are:

* Feast of Ramadan; From 13.00 on the day of Eve: 3.5 days

* Feast of Sacrifice; From 13.00 on the day of Eve: 4.5 days

Other holidays are:

January 1, New Year’s holiday: 1 day

May 1, Labor and Solidarity Day holiday: 1 day

July15, Democracy and National Unity Day: 1 day

10- Right of Unpaid Travel Leave

The employer is obliged to give unpaid leave of up to four days in total to cover the time spent on the way to and from those who will spend their annual paid leave at another place where the workplace is not located (in another city or in another country), provided that they make a request and document it. Unpaid leave will be deducted from the relevant month’s pay.

The employer is also obliged to keep a leave registration document showing the annual paid leaves of the workers working in the workplace.

11- If the subcontractors change, will there be a loss in the annual leave rights of the employees?

The annual paid leave period of subcontractor workers who continue to work at the same workplace even though their subcontractor has changed is calculated by taking into account the periods they have worked at the same workplace.

The main employer is obliged to check whether the annual paid leave periods to which the workers employed by the subcontractor are entitled are used and to ensure that they are used within the relevant year, while the subcontractor is obliged to give a copy of the leave registration document to the main employer.

12- Wage must be paid in advance before annual leave

As a rule, the employer is obliged to pay the wages before or in advance for the annual leave period to each worker who uses his/her annual paid leave before the worker starts his/her leave.

Weekly holidays, national holidays and public holidays that coincide with the annual paid leave period must also be paid separately. (4857/57)

13- It is forbidden to work elsewhere while on annual leave

If it is understood that the worker who is using his/her annual paid leave is working in a paid job during the leave period, the wage paid to him/her during this leave period can be withdrawn by the employer. (4857/58)

14- The accumulated annual paid leave receivable must be paid in cash only when the employment contract is terminated.

If the employment contract is terminated for any reason, the employee’s wage for the annual leave periods that s/he is entitled to but not used is paid to himself/herself or to the beneficiaries over the wage on the date of the termination of the contract. The statute of limitations for this wage starts from the date of termination of the employment contract.

In case of termination of the employment contract by the employer, the notice period and the compulsory new job search permits cannot be intertwined with the annual paid leave periods.

15- The employer determines when the annual leave will be used according to the nature and characteristics of the job.

The worker must notify the employer in writing at least one month before the time s/he wants to use the annual paid leave s/he is entitled to.

The leave board or the employer is not bound by the date of use of the leave requested by the worker. However, the schedules to be prepared by the said committee to show the order and rotation of the leave are prepared by taking into account the worker’s demand and work situation.

For permission requests that coincide with the same date: Priorities are determined by taking into account the seniority at the workplace and the date of the previous year’s leave.

The employer or employer’s representatives, in consultation with the leave board or its successors, can determine that annual paid leaves will be given in a certain period or periods of each year, depending on the nature and characteristics of the work carried out in the workplace. It is announced at work.

If travel leave permit holders return to work without using this period, the employer may not start them before the expiry of the said period.

16- Explanations on the mass leave permission application

The employer or employer’s representative may apply mass leave covering all or some of the workers between the beginning of April and the end of October.

When mass leave is applied, the leave board arranges and announces the leave schedules in such a way that the workers who will take the mass leave will start the leave at the same time and show the end of the leave period of each worker according to the leave periods and travel leave requests of the employees.

Mass leave periods can be determined to include workers who have not yet earned the right to annual paid leave during these periods. In so far, if this mass leave method is not applied in the following year or years, the date on which those in this situation will be entitled to the next annual paid leave is determined according to general principles.

In case of mass leave, the employer or employer’s representative may exclude a sufficient number of workers from the mass leave for compulsory situations such as the protection of the workplace, the maintenance, preparation, cleaning or security of the tools, equipment, equipment or machinery in the workplace.

Those who are in this situation are given their annual leave before or after the mass leave period, on any date when they want.

17- How are the annual paid leave entitlements of part-time employees calculated?

Employees working part-time or with on-call employment contracts benefit from the annual paid leave like full-time employees and cannot be subjected to different treatment.

Employees who work part-time or with on-call employment contracts, as long as their employment contracts continue, use the leave they are entitled to for each year by not working on part-time working days that fall within the next year’s leave period.

No distinction can be made between the part-time or on-call workers who are entitled to leave according to the specified principles, and the full-time workers, in terms of annual leave periods and leave wages.

18- Are premiums taken into account in the annual paid leave calculation?

While determining the leave wage, the wages to be received in return for overtime, premiums, social benefits and the permanent worker of the workplace and the wages of the workers working in preparation, completion and cleaning works outside of normal hours are not taken into account.

19- Are the annual leave rights of retired employees the same?

A person who retires from one of the 4/a, 4/b and 4/c statuses (Formerly Social Insurance Institution, Social Security Organization for Artisans and the Self-Employed and Retirement Fund) starts to work in a workplace subject to the Labor Law, and is paid to the SSI separately from the regular employees and under the name of Social Security Support Premium.

There is no difference between retired employees and regular employees in the calculation of annual paid leave entitlements. Retirees who have worked for one year, even in different workplaces of the same employer, including the probation period, have the right to annual leave of 14 working days, just like regular employees. However, if the retiree is over 50, the day off must be at least 20 working days.

20- Do unused annual paid leave entitlements transfer to subsequent years?

Any written or verbal action taken by employers to destroy the accumulated annual paid leave rights of the employees for the relevant year or previous years, for whatever reason, is illegal. If such a situation arises, the employee has the right to file a lawsuit to claim annual paid leave rights, taking into account a 5-year statute of limitations from the termination of the employment contract.

Employees whose employment contract continues must be exercised within reasonable periods of their accumulated annual leave, if any.

 

Ali KARAKUŞ

CPA and Independent Auditor

www.karenaudit.com

July 2021

Istanbul


Source: Edited by: Ali Karakuş – 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 Regarding the Liquidation of Companies in the Turkish Corporate Tax Law

26.07.2021

  1. Liquidation period

The liquidation period will be valid instead of the accounting period in the taxation of the companies that have gone into liquidation, whatever the reason might be.

Liquidation begins on the date of registration of the general assembly decision regarding the liquidation of the corporation and ends on the date of registration of the liquidation decision.

The period from the start date to the end of the same calendar year and for each calendar year after this period and for the period in which the liquidation ends, the period from the beginning of the relevant calendar year to the end date of the liquidation is considered an independent liquidation period.

In case the liquidation ends within the same calendar year, the liquidation period will start on the date the corporation goes into liquidation and will continue until the liquidation ends.

Example 1:

If the liquidation is concluded within the same year:

The date of liquidation of the corporation………… : 18/1/2006

End date of liquidation ………………………………………    : 12/12 /2006

Liquidation period ……………………………………………     : 18/1/2006-12/12/2006

Example 2:

If the liquidation continues for more than one year:

The date of liquidation of the corporation………… : 15/4/2006

End date of liquidation ……………………………………….   : 4/6 /2008

  1. Liquidation period ………………………………………… : 15/4/2006-31/12/2006
  2. Liquidation period ………………………………………… : 1/1/2007-31/12/2007

III. Liquidation period ……………………………………….    : 1/1/2008-4/6/2008

1.1. Correction if the liquidation is ended with a loss

If the liquidation is ended with a loss, the result of the liquidation is corrected towards the previous liquidation periods and the taxes paid in the previous periods are returned to the taxpayer. In case the tax base is declared as a result of the final liquidation, the previous liquidation periods will not be corrected.

Changes in the tax rate while the liquidation transactions are in progress will not require the said corrections to be made. Corrections will only be made if the last liquidation period results in a loss.

Example 3:

In a corporation that went into liquidation on 3/6/2006, the liquidation was completed on 15/4/2009. In this institution, the period between 3/6/2006-31/12/2006 will constitute the first liquidation period, the second and third liquidation periods between 2007 and 2008, and the fourth and final liquidation period between 1/1/2009-15/4/2009.

For corporation;

In the 1st liquidation period …………………. 20,000.- TL……. Profit,

In the 2nd liquidation period …………………….        150.000.- TL……Profit,

In the 3rd liquidation period ……………………..       50.000.- TL…… Profit,

In the last liquidation period, …………………….. 25,000.- TL……. Loss

Were reported.

According to these statements, in the first two periods (4.000 + 30.000 =) 34,000.- TL corporate tax was paid.

However, according to the final result of the liquidation, the profit is [(20,000 + 150,000) – (50,000 + 25,000) =] 95,000.- TL. The corporate tax to be paid on this base will be 19.000.- TL.

In this case (34.000 – 19.000 =) 15.000.- TL will be returned to the corporation.

1.2. Statute of limitations in liquidation

For liquidations lasting more than one year, the assessment statute of limitations starts from the year following the end of the liquidation.

Example 4:

If the liquidation is completed on 4/6/2006 in corporation that went into liquidation on 11/2/2002, the statute of limitations begins as of 1/1/2007 and assessments can be made for the liquidation periods covering 11/2/2002-4/6/2006 until 31/12/2011.

  1. Withdrawal from liquidation

If the liquidation is cancelled, the liquidation provisions do not apply to the corporation. In this case, the decision to cancel the liquidation will be valid from the beginning of the liquidation period when this decision is taken, and the declarations for the liquidation period submitted until the date of the decision to cancel the liquidation will replace the normal operating declarations.

The provisional tax liabilities of the corporation of which liquidation is canceled will start from the beginning of the provisional taxation period covering the date of the decision to cancel the liquidation.

Example 5:

The date of liquidation of the corporation………… : 14/2/2006

Date of withdrawal from liquidation ……………… : 15/4/2008

  1. Liquidation period …………………………………………. …. : 14/2/2006-31/12/2006
  2. Liquidation period …………………………………………. . : 1/1/2007-31/12/2007

Normal declaration period……………………………………… : 1/1/ 2008-31/12/2008

As it can be understood from the example, the normal declaration period begins as of the beginning of the year on which the decision to cancel the liquidation is taken, and provisional tax liability begins as of the beginning of the quarterly temporary tax period (1/4/2008), which includes the date of the decision to cancel the liquidation (15/4/2008).

  1. Liquidation declarations

In case the liquidation started and completed within the same calendar year, the liquidation declaration will be submitted to the tax office to which the corporation is affiliated, within thirty days from the completion date of the liquidation.

If the Start Date to Liquidation and the Completion Date Liquidation are realized in different calendar years, the liquidation declaration for each liquidation period will be given to the tax office of the taxpayer from the first day of the fourth month following the month of liquidation period to the evening of the twenty-fifth day by the liquidator.

The liquidation declaration for the period when the liquidation ended, on the other hand, will be submitted to the tax office to which the corporation is affiliated, within thirty days from the date of the liquidation.

Example 6:

The date of liquidation of the corporation…………………………  : 4/6/2006

The date the liquidation was concluded……………………………. :15 /4/2008

Period of filing the declaration for the prorota period (1/1/2006 – 3/6/2006): 1-25/10/2006

Period to submit a declaration for the 1st liquidation period (4/6/2006-31/12/2006) :1-25/4/2007

Period to submit a declaration for the 2nd liquidation period (1/1/2007–31/12/2007): 1-25/4/2008

III. Period to submit a declaration for the 3rd liquidation period (1/1/2008–15/4/2008): 15/5/2008

A detailed list of the money and other values distributed to the partners according to the balance sheet and income statement and the liquidation balance sheet will be attached to the declarations to be submitted in this way.

  1. Liquidation profit

The tax base of the corporations in liquidation is the liquidation profit. Liquidation profit is the positive difference between the value of wealth at the end of the liquidation period and the value of wealth at the beginning of the liquidation period.

When calculating the liquidation profit;

– Any payments made in advance or in other ways to the shareholders or the owners of the corporation during the liquidation will be added to the wealth value at the end of the liquidation.

– In addition to the existing capital, the payments made by the partners or owners, and the tax-exempt earnings and revenues obtained during the liquidation will also be added to the wealth value at the beginning of the liquidation period.

Moreover, the values of the economic assets distributed, sold, transferred or returned to the owner of the corporation as a deduction for their shares will be determined according to the provisions of the disguised profit distribution through transfer pricing of the Corporate Tax Law as of the day of distribution, sale, transfer or return.

In addition, while calculating the liquidation profit, the provisions of the Law on deductible expenses, loss deduction, other discounts and non-deductible discounts will also be taken into account.

The liability of those who do not have a legal personality among economic public institutions and economic enterprises belonging to associations or foundations, which do not have any provisions regarding liquidation transactions in their special laws, will end with the cessation of the business, as in sole proprietorships. Liquidation in such businesses will be concluded by either selling the existing economic assets or withdrawing them from the business by being invoiced to the institution, association or foundation to which they are affiliated. In this context, the corporate tax returns of the taxpayers who quit the job for the relevant period will be submitted within the period specified in Article 14 of the Corporate Tax Law.

  1. Wealth value

The wealth value at the beginning and end of the liquidation period is the company’s equity, which appears on its balance sheet at the beginning and end of the liquidation period. In liquidations lasting more than one year, the wealth value at the beginning of the following liquidation periods is the wealth value seen in the last balance sheet of the previous period.

All kinds of provisions and undistributed earnings are included in this capital, except for the following:

– All kinds of depreciation and provisions made according to tax laws and technical provisions of insurance companies,

– The portion of earnings to be distributed to shareholders or non-owners.

  1. Liability of liquidators

Liquidation officers cannot make payments to the creditors written in the fourth line of article 206 of the same Law and apportion them to the partners without allocating a provision in accordance with article 207 of the Execution and Bankruptcy Law No 2004. Otherwise, they will be personally and severally liable for the original and increase of these taxes and tax penalties.

As a result of the above-mentioned taxes and the examination of the liquidation process, the originals and increments of the taxes to be levied can be sought from the partners to whom an apportionment is made over the remaining part of the liquidation, as well as from the partners to whom an economic asset is transferred through distribution, transfer, return or sale during the liquidation. No further application will be made to the liquidation officers for the originals of taxes collected from the partners.

Liquidation officers can recourse to the partners to whom an economic asset was transferred or a share from the liquidation remainder during the liquidation due to the originals of the taxes they paid pursuant to Article 17 of the Law. If these values received by the partners are not sufficient to cover the taxes, they can recourse to the creditors who have collected the receivables written in the fourth line of Article 206 of the same Law, in whole or in part, within the rates in accordance with Article 207 of the Execution and Bankruptcy Law.

  1. Examination of liquidation transactions

Tax examinations will begin within three months at the latest, following the submission of the petition containing the request for the examination of the liquidation proceedings to the tax office, and within thirty days following the end of the tax examination, the tax office will notify the liquidation officers about the result of the said tax examination. Accordingly, until the result of the taxes required from the corporation is received, the responsibilities of the liquidation officers according to Article 17 of the Law will continue.

The Ministry of Finance is authorized not to have the liquidation process inspected by taking into account the legal status of taxpayers, the fields in which they operate and the size of their assets at the date of liquidation.

  1. Assessments to be made about corporate taxpayers whose legal personality has been terminated in the trade registry after being liquidated

Regulations regarding all kinds of tax assessment and fines related to the pre-liquidation and liquidation periods are included, regarding the taxpayers whose legal personality has been deleted from the trade registry by liquidation.

Accordingly, in all kinds of tax assessment and fines to be made after 27/3/2018 regarding the corporate taxpayers whose legal personality has been deleted from the trade registry after being liquidated, regarding the pre-liquidation and liquidation periods, the provisions of the fifth paragraph of Article 10 of the Tax Procedure Law must be taken into 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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