A law that seeks to improve the investment climate in Turkey by amending certain regulations was published in the Official Gazette on August 9, 2016, and thereby entered into force. Drafted with an aim to ease burdens that might hinder the ability to conduct business in Turkey, the law encompasses 79 articles, 47 of which are related to tax regulations. The most significant amendments include investment incentives, incentives for service exports, incentives for regional management centers, transfer pricing regulations, exemption for industrial property rights, incentives for energy savings projects, and exemptions on stamp duty in certain cases.
The law introduces certain incentives for investments and implements tax advantages for fixed asset investments. For instance, the actual contracts of investments made within the scope of an investment incentive certificate are exempt from stamp duty. Also, buildings constructed within the scope of such certificates and the lands with regard to these investments within the term of the certificate are exempt from real estate tax. Renovation or reconstruction of a building or facility within the same scheme is also exempt from fees paid to municipalities.
The law implements incentives for service exports as well. Under this new scheme, income tax exemptions are implemented for the salaries of employees working in companies operating in the fields of architecture, engineering, design, software, medical reporting, accounting entries, call centers, product testing, certification, data storage, data processing, data analysis, health, and education.
Regional management centers operating under a permit granted by the Ministry of Economy are exempt from corporate tax when meeting certain conditions. Moreover, salaries of employees working in these centers are exempt from income tax.
With regard to transfer pricing regulations, methods have been updated based on the OECD’s Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. The new law allows for the ability to deduct value-added tax paid during imports or through a reverse charge mechanism for related party transactions in which it is considered that disguised profit distribution is made through transfer pricing.
The new law also sees the introduction of incentives for energy saving projects. Accordingly, expenses for heat insulation and energy saving investments may be directly deducted from the tax base. In addition, the physical contracts and related transactions of such projects are exempt from stamp duty and fees.
The new law also implements stamp duty and fee exemptions in cases where multiple copies of contracts and related papers are prepared. Under the new scheme, any necessary stamp duty and fees will be applicable to only one copy of the papers prepared in multiple copies.