Recent Regulatory Developments - October 2022

According to the omnibus bill submitted to the Presidency of the Grand National Assembly of Turkey (TBMM) this week, regulations are being introduced on the following matters:

• Tax exemption for the portion of meal allowances paid in cash not exceeding TRY 51 per day. Currently, this exemption is only applied when meal vouchers or cards (such as Sodexo, Multinet, etc.) are utilized; cash payments made directly to employees are treated as wage compensation and subjected to income tax.

• Exemption of employee allowances for electricity, natural gas, and heating up to TRY 1,000 from income tax and social security (SGK) premiums.

• Extension of corporate tax exemptions related to FX-protected deposit accounts (KKM) through the end of 2023.

• Clarification of the taxation rules governing capital reductions.

• Subjecting tent and caravan accommodation services to taxation.

• Expanding the scope of unlicensed electricity generation (solar, wind, residential rooftop or facade installations, etc.).

• Increasing the tax deduction rate granted to business angels (angel investors) upon the acquisition of shares.

We will provide further updates once the bill is enacted into law.

Highlights in Brief

• The circular on e-export state subsidies has been published. Retail e-commerce websites, digital marketplaces, and B2B platforms have been included within the support scope. Subsidies can be obtained for a wide variety of eligible expenses. Circular_5986.pdf (ticaret.gov.tr)

• Applications for the E-Turquality (Stars of Informatics) support program opened as of September 28, 2022. Annex_Preconditions.pdf (ticaret.gov.tr) Program Admission (ticaret.gov.tr)

• A financial support package of up to TRY 125,000 has been announced for micro and small enterprises. Program Summary and Purpose - KOSGEB Republic of Türkiye Small and Medium Enterprises Development Organization.

• Amendments have been enacted regarding investment incentive regulations. October 1, 2022, SATURDAY (resmigazete.gov.tr)

• Although statutory conditions were met last year, inflation accounting was suspended and deferred to 2023. Inflation accounting will be implemented next year, though technical secondary details have yet to be finalized.

• FX-Protected Deposits (KKM): Foreign currency balances recognized in financial statements as of September 30, 2022, will be exempt from corporate income tax on related foreign exchange gains and interest earnings if converted into KKM accounts with a minimum maturity of 3 months.

• The deadline for the TÜBİTAK TEYDEB 1501 and 1507 programs 2022-2 call has been extended.

• Administrative fines under the Law on the Protection of Personal Data (KVKK) have begun to be issued. If your entity has regulatory compliance duties, it is advisable to review them with legal counsel.

• The deemed interest deduction on cash capital increases has been restricted to a maximum period of 5 years.

Retirement Age Requirements (EYT)

The legislative draft concerning retirement age requirements (EYT) is currently being finalized. It is expected to be presented to Parliament in December or January and will ostensibly cover employees who commenced employment before September 8, 1999.

According to media coverage (though definitive analysis is premature prior to the introduction of the official bill):

• A minimum age limit for retirement will likely not be required.

• Due to necessary technical adaptations in the Social Security Institution (SGK) IT systems, initial applications are expected around June 2023.

• Approximately 1.5 million applications are anticipated in the initial phase, followed by ongoing phased submissions. This implies the departure of a sizable workforce and substantial statutory severance pay obligations upon retirement.

• Certain SGK premium incentives depend on an increase over the average headcount; large-scale departures under EYT could cause employers to fall below headcount thresholds and forfeit these incentives.

• The social security premium cost of employing a retired pensioner is slightly higher than that of a standard employee, which may risk exacerbating unregistered (informal) employment.