Over the past several months, the Turkish Parliament has been negotiating an omnibus bill which aims to promote the investments in Turkey mainly by way of reducing transactional costs and providing specific incentives. Finally, the law for the improvement of the investment environment has been published on the Official Gazette on 9 August 2016. The law introduces many amendments, mostly pertaining to tax legislation, in a number of laws, and it also enhances the way certain Islamic finance instruments are recognised/treated for Turkish tax purposes. We have summarised below certain amendments in relation to sukuk certificate arrangements:
- Corporate income tax and value added tax exemptions which were made available in Ijara transactions only for immovable items, will now also cover the movable assets by virtue of this law.
- Sale transactions for the purpose of issuing lease certificates will not reset the holding period for immovable assets, which was an important concern for potential source companies for benefitting from corporate income tax and value added tax exemption.
- Transfer of underlying assets under the leasing certificates will be exempt from corporate income tax and value added tax. The transfer will not reset the holding period for immovable assets for CIT and VAT purposes.
- Transfer of underlying asset under the leasing certificates and establishing lien or mortgage over such assets will be exempt from the charges regulated under the Charges Law ("Harçlar Kanunu").
- The scope of the stamp tax exemption in relation to the transfer of the underlying assets under the leasing certificates has been extended. By virtue of this enhancement, now, it may be concluded that the stamp tax exemptions which were made available in Ijara transactions only, are now extended to the certain documents concluded for the Wakala, Istisna and Musharaka transactions. Besides, the guarantee and security documents concluded in relation to the repayment of lease certificates will also be exempt from stamp tax.
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.