Quarterly 2024/2

I. Tax Law

The details of the draft tax law prepared by the Turkish Ministry of Treasury and Finance were explained in the “2024 Law Studies Presentation to the President” on May 24, 2024. Recent draft tax law aims to introduce significant amendments across various tax regulations, impacting Value Added Tax (“VAT”), Special Consumption Tax (“SCT”), income and corporate taxes, as well as exit fees and procedural tax laws. The proposals, if enacted, will result in notable tax increases and new tax penalties. The projected annual revenue impact from these amendments is estimated at TRY 181 billion (approx. USD 5.5 billion).

Minimum Corporate Tax Base: A new minimum corporate tax will be calculated as the higher of the 10% of either: (i) the corporate profit before deductions (excluding certain exemptions), or (ii) base that will be calculated as 2% of declared revenue (or 2% of total assets for banks and financial institutions). If the annual tax paid based on revenue exceeds the normal tax, the difference can be deducted from future corporate taxes over the next five fiscal periods. New corporate taxpayers will be exempt from this minimum tax for the first three tax periods, including the start-up period. The President of the Türkiye will have the authority to increase or decrease these rates.

Minimum Income Tax Base: A new minimum income tax regulation is to be introduced for agricultural, commercial and self-employment earnings. Even if taxable income declared in annual returns (including those declaring losses) is less than 10% of gross revenue, it will be accepted as 10% of gross revenue. The difference of the minimum tax paid on gross revenue will be allowed to be deducted in the following 5 fiscal periods. New employees will be exempt from this regulation for three years.

Real Estate: The exemption for the sale of real estate will be limited to one property, with the five-year holding period exemption removed for additional properties.

Rent: Proposals include removing exemptions for residential rental income and implementing a 20% withholding tax on bank-transferred rental payments. Declarations will be optional unless rental income exceeds TRY 580,000 (USD 17,639.52*) in 2024.

Taxi Licenses: Additionally, the exemption for gains from taxi license sales will be eliminated.

Technology Development Zones: Tax exemptions for salaries of R&D, design, and support personnel in technology development zones will be capped at five times the gross minimum wage (TRY 100,012.50 [USD 3,041.68*]) effective from January 1, 2025, with an expected revenue impact of TRY 4.1 billion (approx. USD 124 million*).

Exit Fee: The exit fee for Turkish citizens leaving the country will be increased from TRY 150 (USD 4.56*) to TRY 3,000 (USD 91.24*). This fee will be subject to annual revaluation. The projected revenue impact for the first six months of 2024 is TRY 12.5 billion (USD 380 million*).

Health Services: VAT exemptions for health services provided to foreigners, including hair transplants and cosmetic surgeries, will be removed, addressing misuse and ensuring proper taxation of these services.

Tips: A simplified tax regime for tips is proposed, requiring employers to track tips in separate bank accounts, ensuring tips do not exceed 10% of the invoice value, and withholding 10% for tax purposes. These tip incomes will not be included in the wage base under these conditions.

Household Services: A simplified tax regime for earnings from household services is proposed.

Informant Incentives: Incentives for informants disclosing tax evasion will be increased, providing up to 15% of the collected taxes and penalties. The maximum reward per informant will be TRY 20,000 (USD 608.26*) per year.

Penalties: Penalties for unregistered activities will be increased, proposing a 1.5x penalty for tax evasion and a 4.5x penalty for serious breaches.

II. IP Law

In May 2024, the Turkish General Assembly Digital Media Commission initiated the drafting of the long-awaited Digital Copyright Law (“DCL”). The draft law aims to regulate the protection and usage of digital content, addressing issues such as unauthorized content use and ensuring fair compensation for content creators.

On June 25, 2024, the Commission held a meeting with representatives from Google to discuss the law. Google expressed readiness to cooperate, emphasizing their contributions to the digital ecosystem through initiatives and tools supporting journalism and content verification. DCL’s primary goals include creating effective monitoring mechanisms, aligning with international standards, and implementing innovative technologies like digital stamping and blockchain for content protection. The final meeting is expected during the summer recess to finalize the draft DCL.

III. Corporate Law

Law No. 7511 on the Amendment to the Turkish Commercial Law and Certain Laws has been published in the Official Gazette dated 29.05.2024 and numbered 32560.

Certain provisions of the Turkish Commercial Law (“Law”) have been significantly changed with the amendment:

• The requirement for annual elections of the chairman and vice chairman of the board of directors has been removed to harmonize the term of board chairman and vice-chairman with the term of office of the board of directors.

• The power to appoint and dismissal branch managers was excluded from the Board of Directors’ non-delegable and indispensable duties and powers in Joint Stock Companies.

• An obligation to call a board meeting within 30 days upon request from the majority of the board members is imposed on the board chairman. If the chairman does not comply, the requesting members can call the meeting directly.

• Joint stock companies whose capital is below TRY 250,000 (USD 7,603.24*) and limited liability companies whose capital is below TRY 50,000 (USD 1,520.65*) are required to increase their capital to given amounts by December 31, 2026, or face dissolution. Non-public joint stock companies in the registered capital system must increase their capital to TRY 500,000 (USD 15,206.48*) by the same date.

 IV. Competition Law

Law No. 7511, amending Law No. 4054 on the Protection of Competition, was published on May 29, 2024.

Before the amendment to Article 43, the parties to the investigation were obliged to submit a first written plea following the notification of Competition Authority’s investigation notice. With this amendment, first written plea is abolished. Hence, the parties won’t be under the obligation to submit the first written plea to the Authority.

Before the amendment to Article 45, Competition Authority was obliged to draw up an additional opinion after the submission of the second written plea. After the amendment, it is not obliged to prepare such an opinion if there is no change in the opinion stated in the investigation report. Furthermore, the legal period for (i) preparation of additional opinion is reduced to 15 days from 30 days, and (ii) submission of third written plea is reduced to 30 days from 60 days.

Indeed, these amendments will speed up the investigation process and the merger clearance final examination process (Phase II) which is subject to the investigation procedure.

V. Labor Law

Regulation on Procedures and Principles Regarding Short-Term Working and Short-Term Working Allowance (“Regulation”) was published on June 11, 2024, retroactively effective from March 1, 2024. Regulation allows employers to apply for short-term working in cases of economic crises, epidemics, and other compelling reasons, with a maximum duration of three months and a minimum of four weeks.

Applications are evaluated by the Turkish Employment Agency (“İŞKUR”), with the Board of Directors making final decisions except in cases of physical impacts from disasters like earthquakes. The allowance is calculated monthly and paid directly to employees by İŞKUR, with weekend and holiday wages shared between the employer and İŞKUR. Overpayments due to incorrect information from employers will be recovered with legal interest.

VI. Personal Data Protection Law

Law No. 7499 on the Amendment to the Law of Criminal Procedure and Certain Laws (“Amendment to the Law”) has been published in the Official Gazette dated March 12, 2024. Recent amendments to Article 6 of the Personal Data Protection Law redefine the conditions for processing special categories of personal data, introducing new legal grounds and detailing processing conditions. Employers can now process health and sexual life data of employees without explicit consent when necessary to fulfill legal obligations related to employment and social security.

Amendments to Article 9 introduce new mechanisms for transferring personal data abroad, including adequacy decisions, standard contracts, and incidental transfers. Personal Data Protection Board may issue adequacy decisions for specific sectors or organizations within a country. Non-compliance with standard contract notification obligations will result in administrative fines.

VII. Capital Markets Law

A draft law amending the Capital Markets Law to regulate crypto assets (“Draft”) has been submitted to the Grand National Assembly of Türkiye in January. On May 16, the Grand National Assembly of Türkiye received the final version of the proposed law for consideration. Key provisions include:

• Draft defines (i) crypto asset trading platform (“Platform”), (ii) Platform, crypto asset custodial and other services providers (“Service Provider”) and the (iii) the -software, system or application ensuring the transfer and the storage of the crypto assets (“Wallet”).

• Any contractual terms that eliminate or limit the liability of Service Provider against their customers shall be null and void.

• Service Providers are required to get (i) establishment and (ii) operation permission from the Capital Markets Board (“Board”). In this regard, Service Provider willing to operate must apply to the Board within 1 (one) month of the Draft Crypto Law's entry into force. The conditions to be a Service Provider are quite similar  to those of Brokerage Firms.

• Capital Markets Board will determine principles for issuing capital market instruments as crypto assets and oversee crypto asset service providers’ operations and activities.

• Crypto asset service providers will be liable for damages from unlawful activities and system failures, with executives potentially liable. Unauthorized service provision will result in imprisonment and fines.

• Each year, 1% of all revenues of the Platforms, excluding the previous year's interest income, will be paid to (i) the Board and (ii) the TÜBİTAK each.

(For more information, please contact us via e-mail sdundar@dundarsir.com)