In the Official Gazette dated June 28, 2022, and numbered 31880, the Istanbul Financial Center Law Numbered 7412 (the “Law”) was published by the Turkish Grand National Assembly in order to regulate the procedures and principles regarding the financial activities of the companies that obtained participation certificates in Istanbul Financial Center (“IFC”).
This Law regulates the geographical area of the IFC, the provisions regarding the management and operations of the activities carried out in the IFC, and the tax deductions, exceptions, exemptions, and incentives related to these activities.
Managing Company: The joint-stock company to be established by the Turkey Wealth Fund as the Managing Company to be responsible for the operation and management of the IFC. In the IFC, all kinds of management activities regarding the operation and management of all infrastructure and superstructure, renting of independent sections and areas, roads, squares, green areas, parks and similar places reserved for public services are carried out by the managing company for twenty years.
One-Stop Office: The one-stop office is managed by the Presidency Finance Office in order to monitor the works and transactions to be carried out in the IFC from a single source and to ensure coordination between public institutions and organizations in the one-stop office. The procedures and principles regarding the functioning of the one-stop office will be regulated in the implementing regulation.
Financial Service Export: In accordance with the Law, by obtaining a participant certificate financial services provided by financial institutions to clients residing abroad will be considered as financial service exports if they provided that the service is ultimately utilized abroad.
Exceptions and Deductions
Within the scope of financial service export activities realized at the IFC;
- 75% of the profit made from the activities will be deducted from the operating income in the calculation of the corporate tax base, provided that it is separately shown in the corporate tax return. This rate is 100% for the taxation periods of 2022 to 2031.
- Transactions and the funds received in favor of these transactions are exempt from banking and insurance transactions tax.
- Transactions are exempt from all kinds of fees, and papers issued regarding these transactions are exempt from stamp tax.
- The Law also provides certain exemptions to the monthly salaries paid to the personnel employed by the financial entities at the IFC.
- Transactions related to the leasing of immovables in the IFC are exempt from all kinds of fees, and the papers issued regarding these transactions are exempt from stamp tax.
Governing Law and Authorized Institutions
The Ministry of Treasury and Finance is authorized to make regulations in connection with the participants' books and records in foreign currency regardless of provisions of the Tax Procedure Law and the Turkish Commercial Law. Within the scope of the activities carried out by the participants at the IFC, the choice of the applicable law can be made freely in all kinds of transactions and contracts made under the private law, provided that the activities of the participants are not contrary to the legislation that they are subject to.
Regulations Regarding Real Estate
The immovables in the IFC can only be used for the purposes determined in the project and management plan. The management plan and business project of IFC are prepared by the managing company and are registered ex officio. In the event that the participant certificate is canceled for any reason, the lease agreement made by the participants to operate in the IFC will automatically expire.
With the enactment of this law, it is aimed that the IFC will become one of the leading financial centers in the world by strengthening the integration with international financial and capital markets, and to contribute greatly to the sustainable development of the Turkish economy.
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.