As was reported by Invest in Turkey, the investment support and promotion agency of the country, a new tax law was published in the Official Gazette on August 9, 2016, and thereby entered into force. Aim is to improve the investment climate in Turkey.
“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 agency gave account. “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 new law implements tax advantages for fixed asset investments. According to Invest in Turkey, 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 new legal situation establishes 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 do not have to pay the 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 agency reported. “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 Turkish law also sees the introduction of incentives for energy saving projects: 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.
Low impact of the failed coup attempt in July
As reported by the Turkish online medium Hürriyet Daily News in early August, the negative impact of the July 15 failed coup attempt on Turkey’s economy has been minimal. “The foreign exchange rates have been going back to pre-July 15 levels, while the country’s main stock exchange index has been climbing confidently towards a level that is higher [than] prior to the coup attempt,” the head of the Istanbul Chamber of Commerce (İTO), İbrahim Çağlar, was quoted. The Turkish economy has maintained its credibility in the eyes of the investors, he stated. In his opinion, there are no obstacles for foreign investors to continue their economic activities in safety.
This may be good news for the business partners of Turkish companies. Not only Turkey’s plastics processing industry is heavily dependent on imports. This applies also to raw materials such as scrap metal, recovered plastics and recovered paper.