Activities carried out within the scope of the Istanbul Financial Center Law No. 7412 ("IFC Law") at the Istanbul Financial Center ("IFC") benefit from certain tax advantages. Details regarding these tax exemptions and reductions are provided below.
The tax advantages described below shall also apply to regional treasury and financial management centers of participants that are actively operating in at least three countries in accordance with the IFC Law.
1. Corporate Tax Exemption
Pursuant to the IFC Law, services provided by institutions engaged in financial activities (i) to persons residing abroad and (ii) ultimately benefiting from services abroad are considered financial service exports. Accordingly, it has been stipulated that 75% of the income earned from activities recognized as financial service exports shall be deducted from corporate income when determining the corporate tax base, provided that it is separately indicated on the corporate tax return. This rate is currently applied at 100% for the period 2022-2031.
In addition to activities constituting the export of financial services; pursuant to the Corporate Tax Law No. 5520, 50% of the income earned by participants from selling goods purchased from abroad without transferring them to Turkey, or from acting as an intermediary in the purchase and sale of goods abroad, exclusively within the scope of their activities at the IFC, may be deducted from corporate income when determining the corporate tax base, provided that it is separately indicated on the corporate tax return.
Profits derived from the sale of goods purchased abroad without being brought into Turkey, or from acting as an intermediary in the purchase and sale of goods abroad, must be included in corporate income for the period in which they are earned. Any portion of these profits that is not transferred to Turkey by the deadline for filing the corporate income tax return will not be eligible for the deduction. Income not transferred to Turkey within this period will not be eligible for the aforementioned deduction, even if it is transferred to Turkey in subsequent years.
2. Bank and Insurance Transactions Tax ("BITT") Exemption
BITT is one of the intermediary costs incurred by financial institutions. Accordingly, in order to reduce participants' operating expenses and ensure their competitiveness, transactions constituting financial services exports carried out in the IFC and the funds received as a result of these transactions are exempt from BITT.
3. Income Tax Exemption
The actual net value of the monthly salary paid to personnel employed at the IFC by legal entities engaged in financial activities or national wealth funds who hold a participant certificate and who have not worked in Turkey in the last three years prior to the commencement of employment shall be exempt from income tax as follows: 60% for individuals with at least five years of professional experience abroad, and 80% for individuals with at least ten years of professional experience abroad.
4. Stamp Duty and Fees
Transactions related to financial services conducted at the Istanbul Financial Center (IFC) and transactions related to the leasing of real estate located at the IFC, including areas outside the scope of the IFC, are exempt from all fees. Documents issued in relation to these transactions are also exempt from stamp duty.
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.
