News

SEVERANCE PAY FUND : AN EMERGING IDEA OPPOSED BY MANY

Instigated in 1954, discussions over a possible severance pay fund are still ongoing. With this debate, the real question refers to the need and usage of this pay. To understand the actual debate and the proposed draft, the actual system and the past of the severance pay will be showed along with the proposed draft and the reactions from different sides of the society.

Nowadays, the severance pay system is regulated by the old Labor Act no. 1475 according to the transitional Article 6 of the new Labor Act no. 4857. The actual system is simple: there is no centralization of the severance pay system but only the duty for the employer to provide a severance pay to its employee when the criteria are met.

The actual requirements are as follow:

Being an employee
His/her work must have been terminated for one of the reasons indicated in the law
- Reasons explaining the rightful termination of the contract by the employee: health issues, immoral, dishonorable or malicious conduct or other similar behavior or force majeure (Article 24 of Labor Act no. 4857)
- Reasons explaining the unfair termination of the contract by the employer: reasons outside of immoral, dishonorable or malicious conduct or other similar behavior that are not supposed to lead to the termination of the contract (Article 25 of Labor Act no. 4857)
Exceptions :
- Military service for men or marriage for women can be a reason to terminate the contract and obtain the severance pay
- Qualification to receive retirement or disability pension is a reason to terminate and obtain the severance pay
- In case of death, his/her legal heirs can obtain the severance pay

This severance pay represents the salary of 30 days of work per year.

This system is criticized by many. As it represents an important lump sum that employers must pay, it hinders job flexibility. Moreover, it increases the recourse to informal ways in order to obtain or refuse to give the severance pay. Everyone wants to change it however nobody agrees on how it must be changed.

Concerning the proposed draft, there is only a version from 2002 issued by the Ministry of Labor and Social Security which is the sole available proposal that exists until now. It foresees a system where employers must pay every month to the fund for each of the employees an amount which is not less than 3% of the salary. There will occur administrative fines in case of non-payment of the said amount.

This fund will be managed in a quite transparent manner as the certified public accountants will have the duty to audit it every three month. The fund will be independent from the Ministry, will have its own budget and a legal personality. However, the proposed draft is not only adding a fund but also changing the conditions to obtain the severance pay.

The proposed draft comprises different type of employees in its text. The ones regulated by the Labor Act no. 4857, the ones by the Sector Regulations between Press Employees and Employers Act no. 5953 and the ones regulated by Maritime Labor Act no.854.

Indeed, here are the conditions stated by the proposed draft in order to obtain the severance pay:

Qualification by the employee to receive retirement or disability pension or a lump-sum payments from the institution he/she is subjected to.
Termination of the contract by the employee once he/she contributed to the fund for at least 10 years.
In case of death, his/her legal heirs can obtain the severance pay.

There are also two exceptions regarding:

Those who were working while they had their retirement pension and that the latter stopped. If they terminate their contract to receive their retirement pension again, they can obtain the severance pay.
Those paying the Society Security Support Contribution, they can only benefit from the severance pay in case of qualification for disability pension and death.

The employee, if entitled to receive the severance pay, will get 30 days of his/her gross salary for every year of full working time. If the employee has worked less than a year, the calculation will be in a pro-rata basis. The 30 days will be calculated according to the average obtained from his/her last year’s salary. However, the amount of the severance pay must be at least the amount of the minimum wage and maximum the retirement bonus of the highest civil servant.

The employee will be able to obtain the severance pay once he/she issued a document proving that he/she qualified for retirement or disability pension or that he/she received a lump-sum payment from the institution he/she is subjected to. If the employee is dead, his/her heirs must prove that they are his/her legal heirs. If the employee has worked 10 years or more, he/she can request it with a letter to the fund. After request, if it is not paid in 30 working days, legal interests can be added to it.

There will be 10 years of prescription period to request the severance pay from the fund otherwise it will be considered that the employee has waived his/her right to obtain this pay. Once the payment has been made, if the person starts to work again, another account will be made in the fund and the same conditions will apply all over again.

The transition is pretty simple in the proposed draft. Indeed, it recognizes that this new law will apply for all however the severance pay cumulated before the coming into force of this Act, will still be the sole responsibility of the employer. Employers can make a contract with their employees in order to take into account the old working time in the fund in order not to have to pay a lump sum along with the bonuses.

This version of the text has been fiercely opposed by many social partners including employees’ unions and employers’ unions. Some scholars explained the reasons underlying the opposition by arguing that this proposed draft is trying to shift the severance pay into a pension bonus.[1] They oppose the transformation as the system is not working well with it and as there is no large-scaled unemployment insurance that can compensate this shift. Indeed, if there were a decent unemployment insurance, the severance pay could be transformed into a pension bonus however it is not the case. Actually, the current system with a limited unemployment insurance and the severance pay is supposedly a good deal for those losing their job.

Other scholars tend to see that the main problem is the irrational fear of people towards funds. Indeed, they agree that, in the past, such funding system failed due to the mismanagement however they argue that this fund will be transparent and well managed with audits issued by certified public accountants[2]. In the preamble of the proposed draft, it is clearly written that any attempt to use the fund to fill the gap of the annual budget will be forbidden.

However, it is clear that this proposed draft limits the conditions to obtain the severance pay. Exceptions regarding the marriage of women and the military service of men are set aside and it remains only retirement, death, and contribution for ten years in order to obtain the severance pay. The ancient system allowed more people to request a severance pay. Also, the calculation did allow a very high level without limit for employees while this reform sets a maximum severance pay which is the retirement bonus of the highest civil servant. Those are the main reasons of opposition from labor unions. Also, one point of opposition from labor unions is the excessive flexibility that it would allow. Indeed, as employers will not have to pay a lump sum when they terminate the contract of their employee, they will be keener to fire.

The government which issued this draft is insisting on a wider amount of people which will really get this severance pay. Indeed, it is true that until now, bankruptcy and bad faith of the employer prevented an overwhelming majority to get their severance pay.

The government instigated this reform because of the employers. Indeed, the project was to cancel the lump sum paid by companies which was hindering their business when terminating a contract. Moreover, this bonus paid every month will be reduced from the tax assessment. However, as the employers and their unions think it is an untenable burden for them to pay every month a bonus to the fund for each employee, they are opposing this reform.. They are also afraid that the amount of the bonus to be paid can be increased. However, it remains that this reform can allow job flexibility.

To conclude, all parties agree that the system must be changed as 84% of employees did not receive any severance pay in 2015[3]. However, they are also against the proposed draft. The problem is that the Ministry wants to obtain a large consensus among social partners before passing the law through the Parliament. For this reason, it is doubtful whether this fund will be implemented or not.

[1] Ünsal Engin; Kıdem Tazminatı Fonu Kanun Tasarısı Taslağı Konusunda Bazı Düşünceler, TUHİS Cilt 21 Sayı2-3 s.34

[2] Uğur S., “Kıdem Tazminatında Fon Sistemi”, Çimento İşveren, cilt.23, ss.4-18, 2009

[3] HABERTURK (2017), Kıdem Tazminatı Fonu Kurulabilecek mi ? http://www.haberturk.com/yazarlar/omer-dincer/1565874-kidem-tazminati-fonu-kurulabilecek-mi

WITHHOLDING TAX FOR FOREIGN E-COMMERCE

Technology is disruptive especially when it comes to State power. It overrides territorial borders and their rules on taxation. E-commerce is one of the elements that technology allowed. States are now trying to impose their borders against borderless worldwide internet. In Turkey, finance minister, Naci Agbal, promised the establishment of a withholding tax in order to impose tax on foreign-based e-commerce companies. The question arising out of this declaration is the way it will be done compared to the solutions found in France and China.

In the end of Spring 2017, Naci Agbal gave an interview to Habertürk[1] where he explicitly stated that its ministry is planning a withholding tax over foreign e-commerce transactions. Newspapers in Turkey have relayed this news as the coming of an equitable time[2]. The Finance Minister declared that this withholding tax will be taken by banks when the money is transferred from the customer to the e-commerce company. Indeed, he only refers to companies which are not registered in Turkey and that do not pay any taxes in Turkey. This is purported to bring an equal treatment between national e-commerce companies and foreign e-commerce companies. The former are paying all their taxes in Turkey while the latter were not paying anything in Turkey while capturing a portion of Turkish consumers. This is an unbalanced situation that the minister wants to end. To implement this tax, the finance minister promised to hire 100-200 more staff in the revenue administration in order to follow the implementation. He affirmed that this tax would be taken both for services and goods.

President of the Turkish Payment and Electronic Money Institution (ÖDED), Burhan Eliaçik, stated that online shopping on foreign e-commerce companies represented ₺5,4 billions (around €331 millions) in 2016. He foresees around ₺8 billions (around €972 millions) in 2020 and imagines the millions of tax that could be taken from this shopping.[3]

However, the declaration of the minister has been analyzed by some experts in different newspapers and problems of implementation seem to appear.

Indeed, the first problem seems to be the effect of these measures on Turkish e-commerce companies abroad. It is said that the bilateral tax agreements preventing double taxation will be applied and Turkish e-commerce companies selling abroad could be subjected to the same kind of tax in the country of performance.[4] This could hinder their benefits abroad.

The second problem is the case when the company is foreign however the seller is Turkish[5]. Indeed, there are different business models and some of them are just about linking the seller and the buyer. Hence; the following questions, “How could this automatic withholding tax know about these details?” “Will the bank have enough information to carry out this role of taking taxes from these transfers?” are legit questions because of the lack of information on this future withholding tax.

However, Turkish companies operating e-commerce websites are quite pleased with this news. The president of a well-known Turkish e-commerce website stated that the lack of taxation of foreign e-commerce companies led to an unfair competition. He even argues that this decision could act as an incentive to invest in Turkey.

The examples of France and China may be taken to have an idea of the current practices of other countries. In 8 April 2016, China established a tax on parcels with a limit of 2.000._CNY and pursuant to this regulation, only tax and VAT must be paid on 70% of the value of the declared goods on the parcel. However, above that level, customs duty must be added to it[6].

However, in France, it works differently: intra-European e-commerce is dealt differently than international e-commerce. Hence, for Europe, VAT registration is required when the turnover of the company in France exceeds €35.000. Otherwise, the company can impose the VAT of the country of exportation. However, outside the European Union, customs duty must be paid for each parcel and any VAT shall not be imposed until 22 euros. This loophole of products under €22 will not be available from 2018 as it does not bring a fair competition between national and foreign e-commerce companies[7]. However, the French system does not seem to work properly as some recent news emphasized on the massive loss due to the lack of implementation.[8]

As seen above, the regulation documents are still on progress. It would be interesting to see how Turkey will deal with this question considering the failure of France because of the European Union and due to the possibility of an easy fiscal dumping.

[1] BUSINESS HT (2017), E-Ticaret’e stopaj geliyor. http://www.businessht.com.tr/ekonomi/haber/1527447-e-ticaret-e-stopaj-geliyor

[2] HURRIYET (2017), E-ticarette adil dönem http://www.hurriyet.com.tr/e-ticarette-adil-donem-40488067

[3] AKSAM (2017), Yabancı e-ticaret sitelerine vergi yüz milyonlarca TL gelir yaratır http://www.aksam.com.tr/ekonomi/yabanci-e-ticaret-sitelerine-vergi-yuz-milyonlarca-tl-gelir-yaratir/haber-637264

[4] HUKUKI HABER (2017), E-ticarette adil dönem http://www.hukukihaber.net/ekonomi/e-ticarette-adil-donem-h93767.html

[5] DIGITAL AGE (2017), Haziran ayında bilişim hukuku gelişmeleri. http://digitalage.com.tr/haziran-ayinda-bilisim-hukuku-gelismeleri/

[6] MERIDIAN GLOBAL SERVICES (2016), Chine: taxe sur l’e-commerce étranger. https://www.meridianglobalservices.fr/Chine-taxe-sur-le-commerce-étranger/

[7] EUROPEAN COMMISSION – Press release : La Commission propose de nouvelles règles fiscales afin d’encourager le commerce électronique et de soutenir les entreprises en ligne au sein de l’UE. http://europa.eu/rapid/press-release_IP-16-4010_fr.htm

[8] LE FIGARO (2010), L’e-commerce contourne la fiscalité française. http://www.lefigaro.fr/societes/2010/04/07/04015-20100407ARTFIG00419-l-e-commerce-contourne-la-fiscalite-francaise-.php

RENEWABLE ENERGY RESOURCES IN TURKEY

“The dream for an energy supply based on 100% renewable energies is coming true.”

“The revolutionary developments in technology as well as in legal frameworks make it possible for the national use of secure, sustainable and competitively priced renewable energy sources.”[1]

As known, Turkey has abundant reserves of renewable energy sources. The most important renewable sources of Turkey’s energy sector are electrical, solar in its various forms, wind, biomass and geothermal; and the benefits of exploiting these sources would be enormous.

Turkey, both geographically and geopolitically, situated in a region that makes it a natural “energy bridge” between the major proven oil and natural gas producing areas in the Middle East, Caspian Sea regions and Central Asia on the one hand and consumer markets in Europe on the other. Moreover, Turkey, itself, is a rapidly growing energy consumer. Due to its demographic and economic growth, Turkey constitutes a major energy market, as well as playing an active role within the projects to ensure the diversification of both energy resources and transport routes.

It is envisaged that the world energy consumption, of which is expected to increase by approximately 40 % within the next 20 years, will be fulfilled by the region where Turkey is located. [2]

Turkey’s total installed power of the Power Plants commissioned within 2010 is 3.674,5 MW, out of which 1.324,6 MW portion of it is the Power Plants producing electricity from Renewable Energy Resources, energy distribution by the Electricity producing Power Plants originating:

474 MW of it from wind power
816,6 MW of it from hydraulic
17 MW of it from geothermal
17 MW of it from landfill gas and biogas

Looking ahead, the energy supply from renewables for future must be wisely structured to make use of all our resources, such as;

ELECTRICAL ENERGY:

As of end of 2008, the 17% of the electricity produced in Turkey has been obtained through Renewable Energy Resources. As per revised strategy document for Electricity Sector, this ratio is aimed to reach 20% by the year 2020.

Turkey’s total installed electricity capacity is around 45,000MW1 while about 16,000MW of this figure constitutes renewable energy capacity. Further, 16,000MW also includes large Hydro Electricity power plants that fall out of the scope of “renewable energy resources” under the Renewable Energy Law.

1000 MW Renewable Power has been installed in 2009 by private sector and 19,6% of Turkey’s electricity has been produced thru Renewable Energy Resources. [3]

Cross Border Electricity Trade between Turkey and ENTSO-E’s Continental Europe Synchronous Area:³

“On 18 September 2010, the Turkish power system was synchronized to the interconnected power systems of Continental Europe and entered the stabilization period.

Turkish Electricity System is connected to the Bulgarian Electricity System by two 400 kV transmission lines, and by one 400 kV transmission line to the Greek Electricity System. The cross-border trade is possible in four directions: Bulgaria-Turkey, Turkey-Bulgaria, Greece-Turkey and Turkey-Greece. Both Bulgaria and Greece are members of ENTSO-E.”

With the Amendment Law No. 6094 of 29 December, 2010, Turkish Parliament amended the Law on Utilization of RES for Generating Electrical Energy of 10/05/2005 no 5346.

The Amendment Law introduces amendments to improve the incentive mechanism of the electrical energy generated by the license holders and encourage renewable energy investment opportunities in Turkey. Renewable Energy Resources (RES) are non-fossil energy resources such as hydraulic, wind, solar, geothermal, biomass, biogas (including landfill gas – LFG), wave, current and tidal energy.

RES Support Mechanism

Generation Licence Holders who are subject to RES Support Mechanism and who have commenced or will commence operating as of the date this Law became effective on 18 May 2005 till 31 December 2015 shall benefit from the fixed prices for a period of 10 years.

Exempted production

In the event that real persons and entities generating electrical energy from Renewable Energy Resources shall export their surplus productions to the distribution system, they can benefit from the fixed prices for a term of 10 years.

Use of domestic products

In the event that the mechanical and/or electro-mechanical equipment used in the production facilities of license holder entities based on the Renewable Energy Resources are manufactured domestically; domestic participation rate will be added to the fixed prices and shall be applicable for a period of 5 years from the date of commencement of commercial operation of the relevant production facility.

Land Usage Fee Incentives

A discount of 85% for permission, lease, rights of easement and servitude right fees based on renewable energy resources, their transportation roads and transmission lines to the system connection point, including those to be transferred to distribution companies or the “TEİAŞ” will be applicable for the first 10 years, including the period of investment and operation. Pursuant to the Amendment Law, this discount is applicable for the generation facilities which become operative by 31 December 2015, including facilities which were already operational at the date of enactment of the Amendments.

Permission shall be granted for the construction of energy production facilities based on renewable energy resources in national and natural parks, natural monuments and nature preservation sites, preservation forests, conserved forestry, wildlife development zones, special environmental protection zones provided that the necessary permissions are obtained from the Ministry of Environment and from the regional protection board in case of natural preservation areas.

SOLAR ENERGY:

It has been calculated that Turkey receives sunlight equivalent to roughly 11 thousand times the amount of electricity generated in Turkey in 1996.

Clearly, both photovoltaic and solar-thermal systems could be used to great effect. The potential for PV is virtually unlimited, and the price for these systems is declining rapidly.

Solar Power Specific Restrictions:

According to the Amendment Law on Utilization of Renewable Energy Resources in Electricity Generation, the total installed capacity of solar power generation plants with RES Certificates that connect to the transmission line before 31/12/2013 cannot exceed 600MW, limiting the number of solar power-based generation facilities entitled to an RES Certificate.

WIND ENERGY:

Wind energy is already in use in many parts of the world at a competitive price with conventional technologies. In this context, Renewable Energy Resources appear to be one of the most efficient and effective solutions for sustainable energy development.

In Turkey, wind energy potential is high; consequently same applies to the investment of wind energy. Turkey has a land surface area of about 800.000 km². Being surrounded with Black Sea in the north, The Marmara and the Aegean in the west and the Mediterranean in the south, Turkey has a very long coast line of 8500 km and the most attractive regions for wind energy applications. These regions are highly suitable for wind power generation, since the wind speed exceeds 3 m/s in most of these areas. It has ideal climate for wind and solar energy investments, with an average of more than 7 (seven) hours of sunshine a day and wind speed of 7.7 m/s average coming from Aegean, Black and Mediterranean seas. Turkey has the highest share in technical wind energy potential in Europe.

As per revised strategy document for Electricity Sector, it is aimed to reach 20.000 MW by the year 2020, also wind energy investors are targeting to produce the 20 % of Turkey’s total electricity by the year 2023.

GEOTHERMAL ENERGY:

Turkey has one eighth of the world’s geothermal potential and is ranked 7th in the world.

The Turkish Government has already recognised the potential of geothermal and in 1972 began to implement a program of construction which would have seen nearly 710 Megawatts installed by now. Unfortunately, the program was not fully implemented and this rich resource remains unexploited.

BIOMASS ENERGY

Turkey has always been one of the major agricultural countries in the world. Agriculture is becoming more important due to biomass energy being one of the major resources in Turkey. Various agricultural residues are available in Turkey as the sources of biomass energy. Utilization of biomass is a very attractive energy resource, since biomass uses local feed stocks and labour. Turkey relies on biomass to provide much of its energy requirement. More efficient use of biomass in producing energy, both electrical and thermal, may allow Turkey to reduce petroleum imports, thus affecting its balance of payments dramatically.

Pursuant to the Law on Utilization of RES for Generating Electrical Energy of 10/05/2005 no 5346 Biomass is defined as; resources obtained from agricultural and forestry products including vegetable oil wastes, agricultural harvesting wastes as well as from organic wastes, and from the by-products formed after their processing.

According to Turkey’s Biogas Plant Inventory; almost 180 million m3 annually biogas produced from 20 running biogas plants. Recently landfill gas extraction gained importance (total capacity 162,7 million m3/year). The efficiency ratio is between 30-38% electricity and 80-85% overall depending on various parameters. Operating cost, especially labour cost is cheap in Turkey. Turkey has potential of 2000 plants with each capacity of 500 kWel.

In future scenarios based on surveys, biogas can be used in a carbon negative energy system and help reduce climate change, by capturing and storing the carbon dioxide from biogas into the ground, the climate neutral biogas becomes carbon negative, and scrubs our past CO2 emissions out of the atmosphere.

[1] These words are taken from the latest International 100% Renewable Energy Conference and Exhibition held between 6-8 October, 2011 in Istanbul, organized by EUROSOLAR Turkey, The Turkish Division of European Association for Renewable.

[2] Excerpt taken from the Minister of Energy & Natural Resources – Taner Yıldız’s presentation of 2011 Budget of the Energy & Natural Resources Ministry at Turkish Grand National Assembly – Parliamentary Counsel.

[3] These figures are based on the statistics on Turkey’s installed capacity in 2009 disclosed in the web site of TEIAS (Turkish Electricity Transmission Company).

NEW LAW ON INTERNATIONAL WORKFORCE ENTERED INTO FORCE CONCERNING THE EMPLOYMENT OF FOREIGNERS IN TURKEY AND WORK PERMIT FOR FOREIGNERS

Turkish Law on the Work Permit for Foreigners No. 4817 which had been in effect since 2003 has been abrogated by Article 27.7 of Law No 6735 on International Workforce, which entered into force on the date of 13.08.2016 regarding Work Permit for foreigners.

PARTNERS AND DIRECTORS OF COMPANIES

In accordance with Article 10.5 of The Law on International Workforce No 6735, it has been expressly regulated that;

Foreign Managing Director who is the shareholderof limited liability companies and,
Foreign shareholder of joint-stock company who is also member to board of directors

must obtain work permit,

However in accordance with Article 13.7 of the above mentioned Code,

Foreign Non-resident member of board directors of joint-stock companies,
Non-executive foreign shareholders of limited liability companies,

are exempt from work permit.

Thus, it has been clarified that the nonexecutive foreign shareholders of limited liability companies and also the non-resident foreign board members of joint-stock companies who are not shareholder shall be assessed in the scope of work permit exemption.

Foreigners who are entitled to a work permit exemption must obtain the document proving this exemption.

On the other hand, the executive Managing Director of a limited liability company must obtain work permit without consedering whether he/she is shareholder or not.

In addition to the tax immunity promulgated by Avoiding Double Taxation Agreements between countries; by virtue of the mentioned article, the Cross-Border Service Providers whose activities in Turkey not exceeding ninety days within the period of hundred and eighty days shall be assessed in the scope of work permit exemption.

Work permit is granted for a year, and it may be extended to the period of two or three years with the condition to be employed by the same employer. Regardless to be employed by the same employer; foreigners who has completed a period of eight years of work permit without interruption shall be entitled to apply for the acquirement of a permanent work permit.

TURQUOIS CARD

In order to provide a skilled workforce; ‘’Turquois Card’ providing a permanent work permit has been regulated by Article 11 of the mentioned Code. ‘’In accordance with the international workforce policy; Turquois Card shall be granted to the foreigners whose applications are accepted as appropriate with regard to their education level, professional experience, contribution to science and technology, effects of activities or investment in Turkey to national economy and employment, suggestions of International Workforce Policy Advisory Board and procedure and principles designated by Ministry .’’ With this regulation, qualified foreigners founded favourable by the evaluation performed in the end of the period of the first three years of transition following the application, shall be entitled to benefit from all the rights provided by a permanent work permit.

FREE ZONES

Foreigners planning to work in free zones must primarily obtain the conformity opinion of Ministry of Economy.

ENGINEER, ARCHITECT AND STUDENTS

In accordance with Article 20 of the above mentioned Code,

Foreignengineers and architects shall be entitled to apply for the acquirement of the Project-based of temporary work permit, provided that their graduation certificates are recognized by Council of Higher Education. Engineers and Architects must receive the opinion of the Union of Chambers of Engineers and Architectduring their work permit applications.

It has been promulgated by Article 19 of New Code that foreign students residing in Turkey and who are subject to a Higher Education Institution may also work by obtaining work permit.

It has been come into force by the law no 6735 that those who do not hold residence permit may also apply for work permit and conclude it in Turkey. Accordingly, the process of work permit application made without residence permit has been simplified and centralized in a single body in order to eliminate the complex bureaucracy in comparison to the Law No 4817.

In any case, besides of the obligation of employing five Turkish citizens regulated by the Article 13 of the Regulation for Implementation of Law on Work Permit for Foreigners No 4817; the evaluation criterias related to the work permit will be also re-determined and announced within the frame of the Law on International Workforce No 6735 by Ministry of Labour and Social Security.

AMENDMENTS TO REAL ESTATE ACQUISITION LIMITS IN TURKEY FOR FOREIGN PERSONS AND FOREIGN COMPANIES

Turkish Parliament adopted a new law which removes reciprocity principle that was barring citizens of 89 countries from owning a property in Turkey. In other words, it is no longer required that a foreign person’s home country allows for a citizen of the Republic of Turkey to acquire real estate in order for that foreign person to be able to buy property in Turkey.

With the new law, foreign buyers can purchase land up to the 10% of a town’s acreage or 30 hectares throughout the country instead of 2,5 hectares. On the other hand, the Turkish Council of Ministers may raise this amount up to 60 hectares. In any event, the local land registry office should take the approval from the Military in order to determine if the related land is or not in military or security zone.

Besides, under the new legislation, foreign companies established in accordance with their own country’s laws may acquire real estates in Turkey only in accordance with the provisions of special codes and only to conduct their areas of activity mentioned on their Articles of Associations. Thus; these corporations are required to submit their projects to the approval of the relevant Ministry within two years. If approved, the project will be sent to the local land registry office. The companies other than the said commercial companies cannot acquire real estates in Turkey.

Pursuant to the article 35 of the Title Deeds Law no. 2644, the Turkish Council of Ministers may determine, restrict, sustain totally or partially or prohibit the acquisition of real estate of foreign persons or foreign companies upon the country, citizen, geographical region, term, number, rate, category, qualification, areameter or quantity.

Legal Steps to follow for acquiring Real Estate of foreign investors can be explained as:

Checking Title Deed Registry of real estate if there is any restriction right on the property,
Request the approval of the competent National Military Authority which will be submitted following its research on the potential new proprietor and also on the real estate which is subject to an acquisition by a foreigner whether it is located out of Military Forbidden Zones and Security Zones or not,
Following the approval of the Military, the signature of the official sale agreement before the related Title Deed Registry in order to register the property in the name of the new proprietor,
Submitting a declaration to the related local municipality related to the new ownership

With the same regulation, it has been also determined that the location, registration, announcement and planning of the areas with protected status such as natural protected areas, wetlands, private environmental protection areas are under the responsibility of the Ministry of Environment and Urban Planning.

What is “Fitness for Purpose” ?

The term “fitness for purpose” arises from the Sale of Goods Act 1979 and it was amended by the Sale and Supply of Goods Act 1994 which implicitly imposes conditions for every seller of goods when performing business. This contains a statement that the provided goods will be of satisfactory quality and, where the buyer demands a specified purpose, are reasonably fit for their intended purpose.

The seller’s consent on this clause declares that it is guaranteeing that the design will be compatible with the terms claimed by the buyer. This highlights that, the only duty of the buyer is to prove that the completed work is not working properly as it should. However, it is not necessary to demonstrate that the design has been negligent.

The parties should be aware of the existence of the term of the contract which states the buyer’s purpose. When this issue is unclear, the intended purpose will usually be evaluated by the court or arbitrator in regard to the facts. This puts an extra liability on the seller to add a stated purpose or buyer’s requirements and then to verify them to ensure that the purpose is defined in a clear way.

A fitness for purpose obligation may be implied into a contract where the seller has the obligation to provide the goods which should be fit for that specified purpose. If the seller refuses or will be unable to provide fitness for purpose in the work, he/she should expressly exclude fitness for purpose in the contract.

Where the fitness for purpose risk is excluded in the contract, then the seller will have the lower obligation of reasonable skill and care on the works. In the event that the parties agree on dividing the risk of the work being unfit with the agreed terms and conditions to reflect the risk taken amongst the parties in respect of uninsured losses, the seller can agree to be liable to perform the work or to provide the other losses arising from this breach.

In the event of lack of an express or implied fitness for purpose obligation, the seller’s performance must be in compliance with a reasonable skill and care which means that the work must be compatible with the standard of competent professional seller. In this event, the buyer should prove that the seller has been neglectful by showing that the work fails to be compatible with the standard of competent professional seller.

Revocation of contract is possible if the provided work is not consensual with the intended purpose of the buyer. Compensation claim of the buyer in accordance with general rules is also reserved.

Besides, in compliance with the article 35 of the United Nations Convention on Contracts for the International Sales of Goods the seller should supply the goods in the quality, quantity and description stated in the contract.

ADVANTAGES OF THE FREE ZONES

100% CORPORATION AND INCOME TAX EXEMPTION:

Companies are 100% exempt from Corporate and Income Tax.

BRIEF PAYMENT EXEMPTION:

Companies that sell at least 85% of their products abroad are 100% exempt from the income tax payable over salaries of employees.

VALUE-ADDED TAX (VAT) EXEMPTION:

As Free Zones are outside of the customs border, companies can purchase good from Turkey without VAT. Moreover infrastructure services are provided exempt from VAT.

FREE TRANSFER OF PROFITS:

Companies can freely transfer their profits and earnings to Turkey or any other country.

DUTY FEE EXEMPTION:

The goods entering the free zones are exempt from tariff.

MINIMUM OF BUREAUCRACY:

Bureaucracy has been minimized in the free zones.

EASY STORAGE:

Companies can keep their stock without duty free and unlimited period of time.

FREEDOM TO PURCHASE MACHINERY:

Companies are free to bring second hand (used) machinery to the Free Zones and there is no age limitations for the importation of second hand (used) machinery.

OTHER EXEMPTIONS:

There is no quality standard for price in the free zones.
THE OPPORTUNITY OF USING CHEAPER ENERGY:

Companies in free zones have an opportunity to use cheap energy.

QR CODE CHEQUE SYSTEM IN TURKEY

With difference of some other countries, among the payment devices, post-dated cheques which are not payable until the date written on the cheques are widely used in Turkish internal market and; even if the cheque is payable to the holder, the identity of the issuer of the cheque may not always be known by its ultimate holder. For certain, these kind of cheques are always a stable risk factor of internal traders.

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