GENERAL LEGISLATIONS IN TURKEY (TR)

PREPARED BY KURUMSAL DENETİM

1

FOREING INVESTMENTs IN TURKEYTurkey wants to have more foreign investment and supports

all foreign investors

It is easy to establish company with only foreign capital and

possible to transfer money-profit to mother company

There are lots of incentives to support all investments

including foreign ones. Main incentives gives advantages on VAT

exemption, Custom Duty and Social Security payments.

2

CORPORATION FORMAT1.There 3 types of formats that easily establish

a. Company : Capital amount is not depend on business typea. Jointly Stock

I. Minimum 50.000 TL capital is requiredII. Even one partner enough to establish companyIII. Foreigner partners must declared to Foreign Investment DirectorshipIV. There is no nationality restrictionsV. Board of directors must be registered to office

b. LimitedI. Minimum 10.000 TL capital is requiredII. Even one partner enough to establish companyIII. There is no nationality restrictionsIV. No need board of directors, but Managers manages the company

b. Branch office I. Almost same procedure with Jointly stock or limited companyII. Allowed to limited business operationsIII. Branch must be managed a representative resident in TR

c. Liaison office : I. Not allowed to trade (issuing invoices etc.)II. Only for representation 3

TAXATIONBasically taxes in TR, Corporate income tax, withholding tax, VAT, Stamp Duty.1.Corporate Tax

a. General rate is %20 over annual profitb. Annual profit is calculated as total expenses (such as operating

expenses, depreciation, previous year losses up to 5 years etc.) deducted from total revenues

c. Operating expenses includes, salaries, rent payments, travel expenses, etc.

d. Depreciation costs is depend on the fixed asset list announced by Finance Minister

2.Withholding Taxa. There are a few source of W/H tax such as salaries, rent payment to

individuals, receipt of self employed, interest/royalty payment to abroad

b. W/H tax for salaries is calculated over net salary with the rate of %15 to %35

4

TAXATION3.VAT

a. General rate for VAT is %18 (%1 and %8 is applicable only a few limited purchases)

b. Reverse charge VAT is applicable for service imports

4.Stamp Dutya. Applies to all signed contracts and rate is %0,948b. Also salaries are subject to stamp duty. Rate is %0,759

5

TAXATION PERIODS (DECLATARION/PAYMENT)1.Calendar year is generally accepted as fiscal year.2.Corporate Tax

a. Corporate tax is paid as advance to deduct from corporate tax for each quarter

b. Corporate tax for previous year is declared 01-25 th of April and paid by 30 th of April

c. If pre-paid corporate taxes more than corporate tax, differences can be request as refund

3.W/H Taxa. W/H tax paid for every month for previous monthb. W/H tax paid for previous month is declared 01-23 th and paid by 26 th

4.VATa. VAT paid for every month for previous monthb. VAT is paid for previous month is declared 01-23 th and paid by 26 th

6

SOCIAL SECURITY SYSTEM1.All employees must be declared to Social Security Institution before start to work2.All foreign to be employed have to get work permission3.Total of social security payments is %36,5 of gross salary. But there is an up-limit of the salaries. For 2013 first semi-annual, limit is 6.360 TL.4.There are two types of social security payments : (In practice, all payments are made by employer)

a. Employee paymentsI. %19,5 of gross salary as social security premium

*** minimum rate %19,5. But rate depends on the danger level of company business type

I. %2 of gross salary as unemployment contribution

b. Employer paymentsI. %14 of gross salary as social security premiumII. %1 of gross salary as unemployment contribution

7

ACCOUNTING OF COMPANIES1. All companies need to keep books with the compliance of

Turkish GAAP2. All official declarations must be submitted to official

authority by CPAs3. We want to warn you that there are lots of official

declarations to be given. Even if it does not require to make any payments, missing to give them will causes penalties. So choosing CPA company is very important decision.

8

Example for Salary CostEmployee A gets 7000 TL gross salary

January Cost for Employee A

Social Security Base : 7.000

Calculation of Income Tax Base;Social Security employee premium : 7.000 TL x %14 = 980 TLSocial Security employee unemployment contribution : 7.000 TL x %1 = 70 TLIncome tax Base : 7000 TL - 980 TL – 70 TL = 5.950 TL

Income Tax calculation; 5.950 TL x %15 (income tax rate) = 892,50 TLStamp Duty; 7.000 TL x %0.759 (stamp duty rate) = 53,13 TL

Net salary to be paid to Employee A :7.000 TL – 980 TL – 70 – 892,50 TL – 53,13 TL = 5004,37 TL (* calculated over minimum rate level)Social Security employer premium : 7.000 TL x %19,5 = 1.365 TL

Social Security employer unemployment contribution : 7.000 TL x %2 = 140 TL

9

Example for Salary CostNet Salary (to be paid to employee) : 5.004, 37 TL

Social Security employee premium : 980 TLSocial Security employee unemployment contribution : 70 TLSocial Security employer premium : 1.365 TLSocial Security employer unemployment contribution : 140 TLTotal of Social Security payments (%36,5 of gross salary) : 2.555 TL

Income Tax calculation : 892,50 TLStamp Duty : 53,13

Total of Employee cost : 8.505 TL

10

WE HOPE TO WORK TOGETHERTHANK YOU

END OF THIS PRESENTATION

11