Turkey: Intersection Between Finance And Law In Turkey

Last Updated: 23 August 2013
Article by Gur Law Firm

Arising of the new developments and requirements of the investments in the different sectors, investors are facing obligations of the codes and regulations concerning the process of the activities to be carried out and codes allow the firms enter into the sectors and take an advantage of financial incentives in the economy thereof through realization of project finance.

As per the necessity of the international developments, Turkey has also published new codes and regulations so as to keep up with the standards of high level Turkish banking and financial investments and make the country ideal to invest.

In accordance with the data of The Republic of Turkey Prime Ministry Investment Support and Promotion Agency, Turkey is one of the parties of many bilateral agreements executed between the countries with regard to take an advantage of incentives and grant of the same as well.

1. Bilateral Agreements for the Promotion and Protection of Investments

Bilateral Agreements for the Promotion and Protection of Investments were signed from 1962 onwards with countries that show the potential to improve bilateral investment relations. The basic aim of bilateral investment agreements is to establish a favorable environment for economic cooperation between the contracting parties by defining standards of treatment for investors and their investments within the boundaries of the countries concerned. The aim of these agreements is to increase the flow of capital between the contracting parties, while ensuring a stable investment environment. In addition, by having provisions on international arbitration, they aim to prescribe ways to successfully settle disputes that might occur among investors and the hosting state. Turkey has signed Bilateral Investment Treaties with 75 countries.

Afghanistan, Albania, Argentina, Australia, Austria, Azerbaijan, Bangladesh, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, China, Croatia, Cuba, Czech Republic, Denmark, Egypt, Estonia, Ethiopia, Finland, France, Georgia, Germany, Greece, Hungary, India, Indonesia, Iran, Israel, Italy, Japan, Jordan, Kazakhstan, Kuwait, Kyrgyzstan, Latvia, Lebanon, Libya, Lithuania, Luxembourg, Macedonia, Malaysia, Malta, Moldova, Mongolia, Morocco, Netherlands, Oman, Pakistan, Philippines, Poland, Portugal, Qatar, Romania, Russian Federation, Saudi Arabia, Serbia, Singapore, Slovakia, Slovenia, South Korea, Spain, Sweden, Switzerland, Syria, Tajikistan, Thailand, United Arab Emirates, Yemen, United Kingdom, United States of America, Tunisia, Turkmenistan, Ukraine, Uzbekistan.

2. Double Taxation Prevention Treaties

Turkey has signed double taxation prevention treaties with 77 countries. This enables tax paid in one of two countries to be offset against tax payable in the other, thus preventing double taxation.

Albania, Algeria, Austria, Azerbaijan, Bahrain, Bangladesh, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, Canada, China, Croatia, Czech Republic, Denmark, Egypt, Estonia, Ethiopia, Finland, France, Germany, Georgia, Greece, Hungary, India, Indonesia, Iran, Ireland, Israel, Italy, Japan, Jordan, Kazakhstan, Kuwait, Kyrgyzstan, Latvia, Lebanon, Lithuania, Luxembourg, Macedonia, Malaysia, Moldova, Mongolia, Montenegro, Morocco, Netherlands, New Zealand, Norway, Oman, Pakistan, Poland, Portugal, Qatar, Romania, Russian Federation, Saudi Arabia, Serbia, Singapore, Slovakia, Slovenia, South Africa, South Korea, Spain, Sudan, Sweden, Syria, Tajikistan, Thailand, United Arab Emirates, United Kingdom, United States of America, Tunisia, Turkish Republic of Northern Cyprus, Turkmenistan, Ukraine, Uzbekistan, Yemen.

Turkey is continuing to expand the area covered by the double taxation prevention treaty by adding more countries on an on-going basis.

3. Social Security Agreements

Turkey has signed Social Security Agreements with 22 countries .These agreements make it easier for expatriates to move between countries. The number of these countries will increase in line with the increased sources of foreign direct investment.

Albania, Austria, Azerbaijan, Belgium, Bosnia and Herzegovina, Bulgaria, Canada and the Province of Quebec, Czech Republic, Denmark, France, Georgia, Germany, Libya, Luxembourg, Macedonia, Netherlands, Norway, Romania, Sweden, Switzerland, Turkish Republic of Northern Cyprus, United Kingdom.

4. Customs Union and Free Trade Agreements (FTA)

A Customs Union Agreement between Turkey and the European Union has been in effect since 1996. The agreement allows trade between Turkey and the EU countries without any customs restrictions. The EU-Turkey Customs Union is one of the steps towards full Turkish membership of the EU itself.

Turkey has FTAs with 22 countries, creating a free trade area in which the countries agree to eliminate tariffs, quotas and preferences on most goods and services traded between them. This framework explains why many global companies are now using Turkey as a second supply source and manufacturing base, not only for the EU and rapidly growing Turkish markets, but also for the Middle East, Black Sea and North African markets, with the added advantage of a relatively low cost but well-educated labor force, coupled with cost-effective transportation. The FTAs marked with (*) in the list below are in the process of ratification.

Albania, Bosnia and Herzegovina, Chile, Croatia, Egypt, Georgia, Iceland, Israel, Jordan, Lebanon*, Liechtenstein, Mauritius*, Macedonia, Montenegro, Morocco, Norway, Palestine, Serbia, South Korea*, Switzerland, Syria, Tunisia. (* in the process of ratification).

Following the above mentioned agreements, most of the authorities of Turkish government have published many codes and regulations in this respect such as Competition Authority, Energy Market Regulatory Authority, Banking Regulation and Supervision Agency, Capital Markets Board of Turkey, Information and Communication Technologies Authority, Tobacco, Tobacco Products, and Alcoholic Beverages Market Regulation Board, Privatization Administration.

In the light of the general information stated above, main codes and relevant articles of the Turkish applicable law is set forth below:

FOREIGN DIRECT INVESTMENT LAW No. 4875

The objective of this Law is to regulate the principles to encourage foreign direct investments; to protect the rights of foreign investors; to define investment and investor in line with international standards; to establish a notification-based system for foreign direct investments rather than screening and approval; and to increase foreign direct investments through established policies. This Law establishes the treatment to be applied to foreign direct investments.

DECREE OF THE COUNCIL OF MINISTERS No. 2012/3305 ON STATE AID IN INVESTMENTS

The purpose of the this Decree is to set forth the procedures and principles to channel savings to investments with high added value, enhance production and employment rate, encourage regional and big scale investments and strategic investments with a large research and development content and capacity to increase international competitiveness, increase direct foreign investments, abolish regional development differences, support investments aimed at aggregation and environment and research and development activities in accordance with the targets estimated in development plans and annual programs.

BANKING LAW No. 5411

The objective of this law is to regulate the principles and procedures of ensuring confidence and stability in financial markets, the efficient functioning of the credit system and the protection of the rights and interests of depositors.

ELECTRICITY MARKET LAW No. 5346

The purpose of this Law is to ensure the development of a financially solid and transparent electricity market operating in a competitive environment under provisions of civil law and the delivery of sufficient, good quality, low cost and environment- friendly electricity to consumers and to ensure the autonomous regulation and supervision of this market.

The scope of this law covers generation, transmission, distribution, wholesale, retailing and retailing services, import, export of electricity; rights and obligations of all real persons and legal entities directly involved in these activities; establishment of Electricity Market Regulatory Authority ("EMRA") and determination of operating principles of this authority; and the methods to be employed for privatization of electricity generation and distribution assets.

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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