Answer ... The taxes applicable to M&A transactions vary greatly depending on factors such as:
- the transaction type – share or asset purchase;
- the term of holding such assets; and
- the taxes applicable to shareholders.
Although it is not possible to explain all applicable taxes and exemptions, a general summary is set out below. However, as the exemption and calculation systems involve complex features, it is very important to obtain tax advice and carefully review the tax obligations for each specific transaction.
In principle, the purchase of assets is subject to VAT at a rate of 18%. However, there might be reductions of up to 8% or 1%, or even a full exemption, in certain cases. For example, if the target held certain real estate in its assets for at least two years prior to the transaction, these are exempted from VAT.
Under Turkish law, agreements may be subject to stamp tax, since documents that indicate a particular price fall within the scope of the Stamp Tax Law. The current stamp tax rate is 0.948% for 2021. The highest price indicated in the relevant document will be taken into account in calculating the exact amount of stamp tax, and accordingly, specialist advice should be obtained, as the application of the stamp tax to the specific transaction can be very important. The maximum amount of stamp tax that may be imposed on a document is TL 3,534,679.90 for 2021. The signatories to an agreement are jointly liable for paying the taxes to the tax authority. Acquisition agreements that benefit from the exceptions under the Corporate Tax Law are not subject to stamp tax. Likewise, the share transfer agreements of joint stock and limited liability companies may be exempt from stamp tax. Nevertheless, this exception is solely for share transfer agreements; therefore, shareholders’ agreements and share subscription agreements can be subject to stamp tax. In certain cases, an agreement may not be subject to stamp tax where it is not executed in written form.
In principle, if the shareholder is subject to corporate income tax (eg, a company), the relevant corporate income taxes, and if the shareholder is subject to income tax (eg, a real person not deemed a merchant), the relevant income taxes may apply to the gains from the sale of the shares, subject to specific calculation procedures. However, if certain conditions are met and the shares of a joint stock company or limited liability company which are subject to the transfer are held by the shareholder for at least two years prior to the transaction, for corporate income tax 75% of the gain from the sale of the shares and for income tax 100% of the gain from the sale of the shares may be exempt from the relevant taxes.