Stamp Duty Tax In Securities Given For Export Transactions

I. Introduction

Stamp Duty Tax is an indirect tax that is paid for papers included in Annex 1 of the Stamp Duty Tax Law Numbered 488 ("Stamp Duty Tax Law"). Annex 1 of the Stamp Duty Tax Law is an extensive list of agreements containing a certain sum of money, receipts/invoices, tax returns, and other commercial papers. However, there are also exemptions provided in the law to relieve the stamp duty tax for certain commercial transactions. In this article, we are going to discuss the stamp duty tax exemptions for securities given for export transactions.

II. Understanding the stamp duty tax

As mentioned above, the stamp duty tax is an indirect tax provided in the Stamp Duty Tax Law, and the "papers" which are subject to stamp duty tax are listed in Annex 1 of the Stamp Duty Tax Law. The term "papers" refers to documents that are written and signed, and that may be submitted as evidence or proof. Specifically, under I.A. of Annex 1 of the Stamp Duty Tax Law, securities given are subject to stamp duty tax of 0.948%, whose tax base is the amount of securities given. In commerce, the most important documents referred to herein are agreements and commercial bills of exchange, and stamp duty tax has the potential to burden parties to such transactions.

On the other hand, there are certain "papers" that are exempt from stamp duty tax as they are listed in Annex II of the Stamp Duty Tax Law. Further, there are provisions in the Stamp Duty Tax Law that exempt certain papers from stamp duty tax. One of those provisions is Additional Article 2 of the Stamp Duty Tax Law that exempts "papers" issued in connection with the transactions, provided that they are related to export transactions, and a list of export transactions to be exempted from the stamp duty tax is provided in the following sections, and securities given for export transactions are not explicitly mentioned there. Thus, it is not clear whether securities given for the export transactions are included in this exemption. It is further complicated by the fact that it is not apparent whether the following sections of the Additional Article 2 of the Stamp Duty Tax Law that provide specific export transactions are an exhaustive list or just an exemplification of such transactions.

The stamp duty tax treatment of the securities given for export transactions will be discussed in the 3^rd section of our article.

III. Securities given for export transactions

The transfer of export income to Turkey is regulated by Article 8 of Decision No. 32 on the Protection of the Value of the Turkish Currency. Further, the Ministry of Commerce issued Communiqué No. 2018-32/48 on Decision No. 32 Concerning the Protection of the Value of the Turkish Currency (Regarding Export Proceeds), and Article 3/2 of the Communiqué provides that the proceeds from export transactions may be brought into the country in accordance with one of the payment methods stated in the same article (e.g., Payment by letter of credit, documents against payment (D/P) payment, cash against goods (CAG) payment). Considering that the export proceeds do not have to be received by payment in advance, the exporters may be required to provide securities to ensure the export transaction and future payment. In practice, especially for mining investments, the future exporters may resort to offtake agreements under which the producer/exporter receives a payment in advance to finance their investment, and the buyer agrees to purchase or sell portions of the producer's/exporter's upcoming goods. However, such arrangements also require the producer/exporter to provide security, which may fall under the stamp duty tax (as mentioned above, 0.948% for securities given) and may create a significant burden for the exporters.

Therefore, the question here is whether such security given for a payment in advance or a financing option is exempt from the stamp duty tax according to Additional Article 2 of the Stamp Duty Tax Law, or should the exporter be burdened by such stamp duty tax.

IV. The opinion of the Revenue Administration of the Republic of Turkey

As explained above, the Additional Article 2 of the Stamp Duty Tax Law is unclear whether the exemption provided for the export transactions includes securities given for such transactions. This issue was subject to some individual tax rulings by the Revenue Administration of the Republic of Turkey. Some of these individual tax rulings are mentioned below,

• In Private Ruling No. 97895701-155 [Annex-2-2014/35]-1821, it was concluded that the guarantee would be exempt from stamp duty tax and fees, on the grounds that an advance payment had been made for a ship being built for export and a mortgage was placed on the ship as security, and that the ship mortgage agreement constituted the collateral for the advance and payments to be made in return for export.
• In Private Ruling No. B.07.1.GİB.4.34.18.01-003.01-1891, it was stated that the documents issued in connection with a mortgage to be established on real estate in favour of the exporter, as security for the amounts owed due to the exported goods, shall be exempt from stamp duty tax, provided that they are related to the export of the goods.
• In Private Ruling No. 64597866-155 [Annex 2-2014]-137, it was stated that the documents to be issued in connection with a mortgage to be established for a pre-financing loan obtained by the exporter from a foreign-based company in return for the export of goods shall be exempt from stamp duty, provided they are related to the financing of the export.

Therefore, it is understood from the individual tax rulings that the Revenue Administration interprets the Additional Article 2 of the Stamp Duty Tax Law and includes securities given for export transactions by the exporter who is a resident of Turkey within the exemption.

V. Conclusion

Despite the ambiguous wording of Additional Article 2 of the Stamp Duty Tax Law, the Revenue Administration of the Republic of Turkey perceives this article as inclusive of the securities given for the export transactions, as far as such securities are proven to be given for the export transactions. However, the critical issue is that evidence that such security is given for the export transaction shall be submitted to the Revenue Administration, and security given partially for the export transaction cannot be exempted based on the Additional Article 2 of the Stamp Duty Tax Law.

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.