Turkey: Memorandum On Amendments In The Stamp Tax And Official Fees Laws Made By The Law No. 5035

Last Updated: 4 May 2004
Article by Vural Günal

January / 2004

(Revised and renewed in the light of the Circular, no. "DV-4/2004-3/Krediler", dated 12.01.2004, of the Ministry of Finance)

INDEX

I. SUBJECT

II. AMENDMENTS IN THE STAMP TAX LAW NO. 488

1. Stamp Tax on "Activities Yielding Foreign Currency Gains"

1.1. Exception

1.2. Non-realization of Exception Event

1.3. Reporting Obligation of Banks

1.4. Definition of the "Activities Yielding Foreign Currency Gains"

2. New Stamp Tax Exemptions

2.1. Stamp Tax Exemptions on Bank Credits and Foreign Credits

2.2. Stamp Tax Exemptions on Endorsements (Avals) and Bails (Surety Bonds)

2.3. Stamp Tax Exemptions on "Consumer Copy" of "Consumer Credit Agreements"

3. Provision Deleted From The Law

4. Stamp Tax Liability on Accounts Opened in the Name of Persons Acting for and on Behalf of Governmental Bodies and Authorities

III. STAMP TAX CIRCULAR ISSUED BY THE MINISTRY OF FINANCE

IV. AMENDMENTS IN THE OFFICIAL FEES LAW NO. 492

1. Official Fee Exemptions on Bank Credits and Foreign Credits

2. Official Fee Exemptions on the "Activities Yielding Foreign Currency Gains"

MEMORANDUM ON AMENDMENTS IN THE STAMP TAX AND OFFICIAL FEES LAWS MADE BY THE LAW NO. 5035

I. SUBJECT:

The "Law Amending Some Laws", no. 5035, has been published in the Official Gazette on January 2nd, 2004.

The Law no. 5035 contains amendments in two important laws, which may positively affect the credit mechanism of banks. They are briefly reported herein.

II. AMENDMENTS IN THE STAMP TAX LAW NO. 488:

The Law no. 5035 has amended the Stamp Tax Law no. 488, dated 01.07.1964, on the following points that are important for banks:

1. Stamp Tax on "Activities Yielding Foreign Currency Gains":

Supplementary Article 2 has been added to the Stamp Tax Law by the Law no. 5035. According to this article:

1.1. Exception:

Papers issued with respect to the transactions relating to the activities yielding foreign currency gains are exempted from stamp tax by article 28 of the Law no. 5035.

1.2. Non-realization of Exception Event:

If the activities yielding foreign currency gains are not realized fully or partially, the stamp tax exempted for the non-realized activities are recovered from the taxpayer, together with a "PENALTY and DEFAULT INTEREST" according to the pertinent provisions of the Tax Procedures Code.

1.3. Reporting Obligation of Banks:

Institutions (i.e. banks), being a party to the transaction exempted from stamp tax, are obliged to report the type of the transaction exempted from tax and the amount of exempted stamp tax to the relevant "Income" or "Corporate" tax department within THIRTY DAYS following the transaction date.

If this reporting is not made, the bank will be held liable jointly with the taxpayer for payment of the STAMP TAX, PENALTY and DEFAULT INTEREST.

At this point, it must be kept in mind that if the bank (= institution) is held liable for such payment, it will have the right of recourse for such payments to its employees who cause such liability by fault.

1.4. Definition of the "Activities Yielding Foreign Currency Gains":

The Law provides that the types of the "activities yielding foreign currency gains" and the relevant procedures and principles will be "determined jointly" by the MINISTRY OF FINANCE and the FOREIGN TRADE UNDERSECRETARIAT. As the content of this concept has not yet been determined, the legislation should be carefully followed up.

The provisions of the Supplementary Article have become effective as of 1st of January, 2004.

2. New Stamp Tax Exemptions:

Article 30 of the Law no. 5035 adds THREE NEW EXCEPTIONS, in addition to the other existing exceptions to the stamp tax, in the section "IV- Papers Relating To Commercial and Civil Works" of the Table no. (2) attached to the Stamp Tax Law.

2.1. Stamp Tax Exemptions on Bank Credits and Foreign Credits:

By paragraph (23) revised and amended by the new provision, "the papers" to be issued for DISBURSEMENT and REPAYMENT of the credits to be made available by (i) BANKS, (ii) foreign crediting institutions and (iii) international organizations and "the annotations and reservations" to be put on these papers (except for drawdown of credits) ARE EXEMPTED from stamp tax. The law provision authorizing the Council of Ministers to zero the tax rate has been repealed.

2.2. Stamp Tax Exemptions on Endorsements (Avals) and Bails (Surety Bonds):

The Law no. 5035 adds paragraph (29) to the stamp tax exemptions listed in the Table no. (2) attached to the Stamp Tax Law. According to this paragraph:

"ENDORSEMENTS (AVALS) and BAILS (SURETY BONDS) on the bills of exchange and similar other negotiable instruments" are also exempted from tax. As known, the term "bills of exchange" extends to "checks, bank drafts and promissory notes" according to the Turkish Commercial Code.

2.3. Stamp Tax Exemptions on "Consumer Copy" of "Consumer Credit Agreements":

By the Law no. 5035 (article 30), only the consumer copy (not the copy retained by the crediting institution) of the agreement required to be issued for consumer credits under and pursuant to the Consumer Protection Law no. 4077 is exempted from Stamp Tax.

3. Provision Deleted From The Law:

The provision of the second paragraph of Repeated Article 30 of the Stamp Tax Law no. 488, authorizing the Council of Ministers to reduce up to (zero) the rate of stamp tax to be levied on the papers issued for disbursement and repayment of the credits borrowed from international organizations, crediting institutions of foreign countries and all other "foreign sources" directly or indirectly through the banks active in Turkey, has been deleted from the Law. As stated above, as this issue of EXEMPTION is more broadly and clearly dealt with in paragraph IV/23 of the Table no. 2 of the Law with respect to the credits made available by:

- banks,

- foreign crediting institutions and

- international organizations,

there is no need for the second paragraph of Repeated Article 30. This provision has been repealed with effect from 01.01.2004.

4. Stamp Tax Liability on Accounts Opened in the Name of Persons Acting for and on Behalf of Governmental Bodies and Authorities:

According to paragraph IV/h of the Table (I) attached to the Stamp Tax Law, the official authority copy of the receipts given to the bank for the moneys paid in the name and account of the governmental bodies and authorities was subject to Stamp Tax.

This paragraph is amended and restated more broadly as follows and the Stamp Tax liability is brought for this special situation:

"... papers issued for transfer or payment of the moneys that are transferred to the current accounts opened or to be opened in the name of persons acting for and on behalf of governmental bodies and authorities, or that are paid to their order..."

We believe that this phrase refers to the papers with respect to transfer of moneys from the accounts of the governmental bodies and authorities to the current accounts opened in the name of the said persons. If a bank holds such accounts, in order to avoid any joint liability pursuant to and under article 24 of the Stamp Tax Law, the bank must proceed only after checking the related documents and making sure that the relevant tax liabilities are fulfilled.

III. STAMP TAX CIRCULAR ISSUED BY THE MINISTRY OF FINANCE:

The Ministry of Finance has issued and published a circular, no. DV-4/2004-3/Krediler, dated 12.01.2004, about and with reference to the provisions of the Law no. 5035, and has clarified the rules of imposition of stamp tax on credits to be borrowed from banks, foreign crediting institutions and international organizations. According to the Circular:

i)The papers with respect to all types of credits borrowed from banks, foreign crediting institutions and international organizations, and the annotations and reservations on such papers, whether the credit is an export credit, house credit or any other credit, are included in the scope of EXEMPTION. However, drawdown of such credits is not in the scope of EXEMPTION.

ii) For the purposes of the Law, the definition of credit extends to both the CASH CREDITS accepted and treated as credits by the Banks Law, and the non-cash credits such as LETTERS OF GUARANTEE, SURETY BONDS, AVALS, ENDORSEMENTS and ACCEPTANCES. The LETTERS OF CREDIT are also covered by this definition.

iii) The papers with respect to the consumer credits made available by banks and special financial institutions will be legally based on and treated according to the aforementioned paragraph (23), while the papers with respect to the consumer credits made available by the FINANCING companies will be legally based on and treated according to paragraph (30), and only the consumer copy will be exempted from stamp tax.

IV. AMENDMENTS IN THE OFFICIAL FEES LAW NO. 492:

The Law no. 5035 has also made amendments in the Official Fees Law, which affect the banks. These amendments are briefed below:

1. Official Fee Exemptions on Bank Credits and Foreign Credits:

The Law no. 5035 has amended article 123 of the Official Fees Law no. 492, dated 02.07.1964, and inter alia, has provided that the transactions relating to "disbursement", "securitization" and "repayment" of the credits to be made available by (i) Banks, (ii) foreign crediting institutions and (iii) international organizations ARE EXEMPTED FROM THE OFFICIAL FEES.

Accordingly, no official fee is to be levied on the transactions relating to "disbursement", "securitization" and "repayment" of the credits to be extended by banks to their clients. This provision of credits has become effective as of January 2nd, 2004.

2. Official Fee Exemptions on the "Activities Yielding Foreign Currency Gains":

Parallel to the provision added by the Law no. 5035 to the Stamp Tax Law, a "supplementary article" has been added also to the Official Fees Law.

Accordingly:

- Transactions relating to the activities yielding foreign currency gains are exempted from official fees.

- If such activities are not realized or closed fully or partially, the official fees will be recovered from the taxpayer, together with penalty and default interest.

- Institutions, such as banks, being a party to the transaction exempted from official fees, are obliged to report:

  • the type of the transaction exempted from official fees, and

  • the amount of exempted official fees

to the relevant tax department within THIRTY DAYS following the transaction date.

If this reporting is not made, the institutions such as banks will be held liable jointly with the taxpayer for payment of

  • official fees,

  • penalty and

  • default interest.

At this point, it must be kept in mind that if the bank is held liable for such payment, it will have the right of recourse for such payments to its employees who cause such liability by fault.

- The concept of "activities yielding foreign currency gains" will be determined and defined jointly by the Ministry of Finance and Foreign Trade Undersecretariat.

The exemption of the activities yielding foreign currency gains from the official fees has become effective as of January 1st, 2004.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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