Investment in Turkey 2017 - KPMG · PDF fileIncentives for International Investors 19 2.2....

Investment in Turkey

kpmg.com.trkpmgvergi.com

Tax Services

Investment in Turkey

Tax Services

Contents

Preface 7

1. CountryProfile 9

1.1.GeneralInformation 9

1.2. Economy and Currency 11

1.3.EmploymentConditions 15

2. OpportunitiesforInternationalInvestors 19

2.1.IncentivesforInternationalInvestors 19

2.2.InvestmentIncentiveRegime 19

2.3.ApplicationofIncentives 25

2.4."SuperIncentives" 26

2.5.“CentreofAttraction”Programme 27

2.6.IncentivesregardingResearch,DevelopmentandDesignActivities29

2.7.IncentivesforTechnologyDevelopmentZones 30

2.8.IncentivesforFreeTradeZones(“FTZ”) 30

3. ForeignTrade&Customs 33

3.1.ForeignTradeLegislation 33

3.2.CustomsRegimesandSynopsisofCustomsTransactions 33

3.3.TurkeyandtheEU 34

3.4.TurkishImportRegime 35

3.5.CustomsValuation 36

3.6.Anti-DumpingandAnti-SubsidyPractices 36

3.7.ResourceUtilizationSupportFund(RUSF) 36

3.8.AuthorizedEconomicOperator(AEO) 37

4. CompanyLawRequirements 39

4.1.AvailableCorporateStructures 39

4.2.SubsidiaryTypes:JointStockCompanies(“JSC”)andLimited

LiabilityCompanies(“LLC”) 39

4.3.JointStockCompanies(“JSC”) 40

4.4.LimitedLiabilityCompanies(“LLC”) 45

4.5.OtherFormsofDoingBusinessinTurkey 46

4.6.GeneralRequirementsforJointStockandLimitedLiability

Companies 47

5. CorporateTaxation 51

5.1.TaxesonCorporateIncome 51

5.2.AllowableDeductions 53

5.3.DisallowableDeductions 56

5.4.Exemptions 58

5.5.CorporateTaxation 61

5.6.BookkeepingRequirements 66

6. SettlementandTaxCase 69

6.1.Settlement 69

6.2.TaxCase 70

7. TransferPricingRegulations 73

7.1.Arm’sLengthPrinciple 74

7.2.DocumentationRequirements 76

7.3.AdvancePricingAgreements(APA) 80

8. IndirectTaxation 83

8.1.ValueAddedTax 83

8.2.SpecialConsumptionTax 88

9. IncomeTaxonIndividuals 91

9.1.TaxableIncome 92

9.2.IncomeTaxRates 95

10.Labour 99

10.1.LabourLegislation 99

10.2.LabourCosts 105

10.3.SocialInsurance–GeneralHealthInsurance 105

10.4.RulesApplicabletoExpatriates 109

10.5.CollectiveAgreements-TradeUnionRights 109

11. TaxationofMergers,AcquisitionsandReorganizations 113

11.1.Mergers 113

11.2.Acquisitions 115

11.3.CorporateReorganizations 120

12.InternationalCorporateTaxation 123

13.Appendices 133

13.1.AppendixI:ChartofPrincipalTurkishTaxes 133

13.2.AppendixII:ChartofWithholdingTax 135

13.3.AppendixIII:ComputationofTaxesontheYear-endProfits 136

13.4.AppendixIV:TurkishWithholdingTaxesbyTreatyCountries 138

Preface

Thispublication“InvestmentinTurkey-2017”,compiledbyKPMGTurkey’sTaxPractice,aimstoprovidegeneraloutlineoftheTurkishtaxenvironmentinwhichforeigninvestorsconsiderinvestinganddoingbusinessinTurkey.ThesetofinformationcontainedinthispublicationisanintroductionfortheforeigninvestorsthatplantotakealookintotaxandbusinessenvironmentinTurkey.ItreflectsdevelopmentstoMarch2017andtheinformationhereinisnotexhaustiveandshouldbereadasaframe.Therefore,theinformationshouldnotbeperceivedasthesolebasisforinvestmentdecisionsinTurkey.Detailedadviceintax,accounting,legalandothermattersshouldbesoughtfromprofessionaladvisers.IwouldliketotakethisopportunitytothanktoKPMGTurkeyTaxProfessionalsastheauthorsofthisbooklet.

AbdulkadirKahramanHeadofTax,Partner

InvestmentinTurkey-7

1.1 General Information

Geography and Climate

TurkeyissituatedatthejunctionofEuropeandAsia.TheEuropeanpartofthecountryiscalledThrace(Trakya)andtheAsianpartisnamedAnatolia(Anadolu).

ThelocationontwocontinentshasbeenacentralfeatureoftheTurkishhistory,cultureandpolitics.ThecountrysharesborderswithGreeceandBulgariatothenorthwest,withGeorgiaandArmenia,andIrantotheeast,IraqandSyriatothesouth.TheBlackSeatothenorth,theAegeanSeatothewest,andtheMediterraneanSeatothesouthareconnectedbytheBosphorus,theSeaofMarmaraandtheDardanelles,awaterwayknownastheTurkishStraits.

TheclimateofcoastalregionsshowsfeaturesofatransitionbetweenaMediterraneanandBlackSeaclimate.SummerstendtobehotanddryexceptfortheBlackSeacoast.Whilespringandfallarewarmandtemperate,wintersarecold,butthenumberofsnowydaysisfew.Theinnerlandismoresnowyandcolderinwinter.ThecoldestmonthsoftheyearareJanuaryandFebruary,whilethehottestareJulyandAugust.

History and Government

TheRepublicofTurkeywasestablishedin1923.ThenewRepubliclookedtotheWestforindustrializationandtheestablishmentofasecularpoliticalsystemundertheguidanceofthenewRepublic’sfirstPresidentMustafaKemalAtatürk,whosereformsconstitutedtheframeworkforthedevelopmentofthemodernTurkishRepublic.Turkeyhasenjoyedmulti-partypoliticssince1946.Turkeyisaunitaryparliamentaryrepublic.TheGrandNationalAssemblyhas550memberselectedforfouryearsterm,bysecretballot.

1. Country Profile

TheexecutivebranchistheGovernment,headedbythePrimeMinister.ThePresidentiselectedbycitizensforafiveyeartermands/hecannotbeelectedconsecutivelymorethantwice.ThePrimeMinister,whoisappointedbythePresident,nominatestheothermembersofthecabinet,whichisapprovedbythePresident,andissubjecttoaparliamentaryvoteofconfidence.Thejudiciaryisindependentofboththelegislatureandtheexecutive.ThelegalsystemislargelybasedoncontinentalEuropeanmodels.AConstitutionalCourtisalsoentitledtocancellegislationpassedbytheParliament.Itcancancelthoselaws,orpartsofthem,whichitdecidestobeincompatiblewiththeConstitution.

Foreign Relations of TurkeyTurkeyisafoundingmemberoftheUnitedNations(UN),theOrganizationofIslamicCooperation(OIC),theOrganizationforEconomicCo-operationandDevelopment(OECD)andtheOrganizationforSecurityandCo-operationinEurope(OSCE),amemberstateoftheCouncilofEuropeandNATO.

Since2005,TurkeyisinaccessionnegotiationswiththeEuropeanUnion.ThenegotiationshavebeenlaunchedwiththeadoptionoftheNegotiationFrameworkbytheCounciloftheEuropeanUnion.TurkeyandEuropeanUnion’srelationscover3elements.Theseare;theapplicationofCopenhagenCriteria’s,theapplicationofEUacquisandthestrengthofcivilsocietydialogue.Accordingtothebasis,negotiationsarekeepingupwithEuropeanUnion1.

TurkeyisalsoamemberoftheG20industrialnationswhichbringstogetherthe20largesteconomiesoftheworld.

1 www.abgs.gov.tr

Population and Language

The population of TurkeyAccordingtothePopulationServicesLawNo.5490actedin2006,newpopulationregistrationsystem,whichwillbethemaindatasourceofpopulationcensuses,wasestablishedinthecountry.Theresultsofthelatestcensusstatesthatthepopulationisapproximately79.814.8712asof31.12.2016.

10-InvestmentinTurkey

The proportion of population living in cities is 92.3%ThenumberofpeoplelivinginIstanbulis14.804.116.MostpopulatedprovincesareAnkara,Izmir,BursaandAntalya.Tunceli istheleastpopulatedprovinceinTurkey,withapopulationsizeof82.1933.

The half of the population is below age 31 in TurkeyThemedianageofthepopulationinTurkeyis31,4Whilethemedianageis30,8formales,itis32forfemales4.

The proportion of the population at ages between 15 and 64 is 68 %People between the ages of 15-64 are theworking group,whichconstitute68%ofthetotalpopulation.Theagegroup0-14formthe23,7%oftheoverallpopulation,whilethe8,3%ofthepopulationismadeupbypeopleat65andover5.

2-3-4-5 www.tuik.gov.tr

1.2 Economy and Currency

EconomyTurkeyhasmarkedaremarkablerateofgrowthafter1980’s.Thishasbeenattributedtothreefactors,namelyashiftfromagriculturetowardsindustryandserviceactivities,themodernizationoftheexistingindustryandtechnologytransfer,andtheeffectofinternationaltradeandcompetition.

SignificantimprovementsinsuchashortperiodoftimehaveregisteredTurkeyontheworldeconomicscaleasanexceptionalemergingeconomy,beingthe18thlargesteconomyintheworldandthe6thlargesteconomywhencomparedwiththeEUcountries,accordingtoGDPfigures(atPPP)in20166. • InstitutionalizedeconomyfueledbyUSD151billionofFDIin

thepastdecade• 18thlargesteconomyintheworldand6thlargesteconomy

comparedwithEUcountriesin2016(GDPatPPP,IMF-WEO)• RobusteconomicgrowthwithanaverageannualrealGDP

growthof4.7percentduring2002-2015

• GDPreachedUSD720billionin2015,upfromUSD231billionin 2002

• Soundeconomicpolicieswithaprudentfiscaldiscipline• Strongfinancialstructureresilienttotheglobalfinancialcrisis

Turkey’sGDPcurrentpricesandgrowthratesofGDPareasfollows:7

GDP Current Prices(TRY Million )

Growth Rate (%)

2006 758,391 16.9

2007 843,178 11.2

2008 950,534 12.7

2009 952,559 0.2

2010 1,098.799 15.4

2011 1,297.713 18,1

2012 1,416.798 9.2

2013 1,567.289 10.6

2014 1,747.362 11.5

2015 1,952.638 11.7

TheliberalizationofcapitalmovementsandthewillingnessofforeigncreditorstolendtoTurkishinvestorscontributedtothehighgrowthrateofprivateinvestment.

6http://www.invest.gov.tr7 www.tuik.gov.tr

Annual Average Real GDP Growth (%) Forecast in OECD Countries 2014-20168

Turkey

Israel

Poland

Irelan

dSlovakia

Icelan

enEston

tralia

Norway

Switzerland

inSlove

Belgium

Portug

Finlan

ceJapa

nItaly

3,63,5

3,3 3,3 3,3

3,1 3,13

2,9 2,92,8 2,8

2,72,6

2,5 2,52,4 2,4

1,91,8 1,8

1,61,61,5 1,5

1,4 1,4

1,21,1 1,1

Turkeyattachesahighprioritytotheencouragementofforeigninvestmentandprovidesavarietyofincentives.

8 www.tuik.gov.tr

CurrencyThe Turkish currency is called Turkish Lira (TL/TRY), which wasintroduced,insteadofNewTurkishLiraasfromJanuary1,2009.Inaddition,sixdigitsweredroppedfromTurkishLiradenominationsasfromJanuary1,2005.Ontheotherhand,togetherwiththe(TRY),Kurush(Kr),whichisahundredthof(TRY),hasbecomeinuseagainasfromJanuary1,2005.

TheTurkishCentralBankhasissuednotesofTRY5,TRY10,TRY20,TRY50,TRY100andTRY200.Therearealsocoins incirculation indenominationTRY1,Kr50,Kr25,Kr10,Kr5andKr1.

The following table shows the Central Bank’s exchange rate ofTurkishLira,toothermajorcurrenciesasofDecember31,2016.

Country Currency TRY value 9

US 1USD 3.5192

Euro 1 Euro 3.7079

GreatBritain 1PoundSterling 4.3189

Switzerland 1SwissFranc 3.4454

Japan 100JapaneseYen 3.0025

9www.tcmb.gov.tr

InflationTurkisheconomyhasexperiencedhighinflationratesformorethanadecade,buttherehasbeensignificantimprovementinreducingtheinflationratesunderthestabilizationprogramrunsince2001.

Thefollowingtableshowstheinflationratesofpast5years10:

Years Producer Price Index (Annual %)

Consumer PriceIndex (Annual %)

2010 8.87 6.40

2011 13.33 10.46

2012 2.45 6.16

2013 6.97 7.40

2014 6.36 8.17

2015 5.71 8.81

2016 9.94 8.53

10 www.tuik.gov.tr

1.3 Employment Conditions

Residence and Work PermitsMostforeignersenterTurkeywithoutaVisaandtheycanstayinthecountryupto3months.Incaseswhereavisaisrequired,itmaybeobtainedattheairports.

AforeignindividualsentbyaforeigncompanytocarryoutbusinessonitsbehalfinTurkeyhastoobtainaworkpermitfromtheMinistryofSocialSecurityandLabourAffairsandaworkvisafromtheTurkishconsulate.(Thereisalsoawebsitenamedwww.goc.gov.travailableforonlineapplication)

However,aworkpermitisnotrequiredforforeignersinTurkeywhoaretemporarilyappointedforthefollowingconditions;

- InstallationofmachineryandequipmentimportedtoTurkey,maintenanceandrepairing,takingdeliveryofequipment,trainingonhowtouseoftheequipmentorfortherepairingofthefailedmachineryinTurkey;onlyifthestaydoesnotexceedthreemonthsinayearwitheffectfromthedateofentryintoTurkeyandtheconditionhastobeprovedwithdocuments

- ForeignerswhovisitTurkeyforthepurposeoftrainingonusingofgoodsandserviceswhichareexportedfromTurkeyorimportedtoTurkey;onlyifthestaydoesnotexceedthreemonthsinayearwitheffectfromthedateofentryintoTurkeyandtheconditionhastobeprovedwithdocuments

Opening HoursOfficehoursoflargescaledcompaniesarefromMondaytoFridayfrom8:30amto5:30pm.ShoppinghoursarebasicallyfromMondaytoSaturdayfrom9:00amto7:30pm.However,onSundaysomehave longer shoppinghours.Government institutionsdonot haveofficehoursonweekends.Banksareopentill5:00pmfromMondaytoFriday.AutomatictellermachinesarewidespreadalloverTurkey.

Cost of Living and HousingLivinginTurkeyisnotexpensiveforforeignersfromEUandtheUSA.Exceptforcertainlocations,housingandthecostoflivingischeapercomparedtothatintheirhomecountries.

Cost of Living Index for Each Country in 201611

Country Consumer Price Index

Rent Index

Consumer Price Plus Rent Index

Groceries Index

Restaurant Price Index

Local Purchasing

Power Index

Switzerland 123.10 55.14 90.44 123.86 119.14 178,74

Germany 65.54 24.01 45.58 53.12 60.68 147,61

Australia 78.45 40.95 60.43 74.68 74.85 147,25

Denmark 84.88 30.83 58.90 69.20 97.88 142,14

UnitedStates

74.08 38.39 56.93 75.69 69.13 139,17

Canada 64.82 26.83 46.56 65.04 60.04 134,81

Finland 75.25 26.98 52.05 66.59 76.85 132,93

Netherlands 72.12 31.76 52.72 56.11 80.73 129,34

Sweden 75.70 25.21 51.44 67.89 79.18 128,22

SouthAfrica 34.75 13.18 24.38 29.15 32.27 126,1

Norway 99.80 37.04 69.64 93.27 110.77 125,75

SouthKorea 73.18 34.41 54.55 86.23 41.18 120,64

Austria 66.59 26.15 47.16 61.71 62.64 120,46

U.K. 81.03 36.29 59.53 68.48 86.68 120

France 75.30 26.22 51.72 69.62 73.48 118,51

Japan 81.25 29.75 56.50 86.90 47.45 117,55

Israel 75.75 26.78 52.21 65.71 77.27 115,54

Singapore 83.67 73.88 78.97 75.83 53.75 110,5

Belgium 75.44 31.42 54.28 67.15 82.87 106,69

Italy 68.77 21.49 46.05 58.64 75.27 105,67

Spain 56.11 18.86 38.21 46.02 56.99 105,31

India 24.14 6.37 15.60 24.92 15.31 89,65

Poland 38.53 13.54 26.52 30.76 31.71 80,77

Greece 54.40 9.51 32.82 44.75 55.07 79,27

China 48.10 23.24 36.15 53.27 29.28 77,42

Turkey 45.07 10.45 28.43 39.89 31.89 64,12

11http://www.numbeo.com/

2. Opportunities for Investors2.1 Incentives for International InvestorsTurkeyhasbeenrestructuringitseconomysince1980alongthelinesofamoreliberaleconomicpolicy.Inthiscontext,moreemphasisisbeingplacedonprivatesectorespeciallyinproductivesectorsofeconomyandtheroleofStateislimitedtoinfrastructuredevelopmentandtheprovisionofpublicservices.

Theneweconomicpolicyaimstodiminishunemployment,torealizetechnologytransfers,toprivatizeStateEconomicEnterprises,toovercomethedeficitinthebalanceofpaymentsandespeciallytoincreasetheintegrationoftheeconomywiththeworldeconomyandtoattractmoreforeigncapitaltotheCountry.Turkeyalsousestheoptionoffiscalincentivestochannelizedomesticandforeigninvestmentsforindustrialdevelopmentandrural-urbanintegration.

Theseincentivesortaxexpendituresareusuallyavailabletoinvestorsforthepromotionofprivateinvestmentactivitiesinselectedsectors/regionsdependingonthescaleofinvestmentandinthefollowingforms:

2.2. Investment Incentive RegimeTTheTurkishGovernmenthasbeengenerousin2016andintroducedtwonewincentivepackages(“centreofattraction”and“superincentives”whichprovidecomprehensivesupporttothequalifiedinvestments.

The“centreofattraction”programmeaimstobalancethedevelopmentlevelwithintheregionsthroughincreaseinemployment,productionandexportswhereas“superincentives”

aimtomeetanycriticallyimportantcurrentorfuturerequirementsofTurkey,developtechnologiccapacityinthefieldsthattechnologicallyTurkeyfallbehind,reducedependencyonimports/foreignsources,improveTurkey’scompetitivepowerandsupportR&Dfocusedinvestments.

Theinvestmentincentiveregimeasageneralaimstofurtheraccelerateinboundinvestmentsoverthecourseofthenextfewyearsandcontributetotheemploymentwiththenewincentiveprogrammes.

Classification of investments

Generalinvestments:Theinvestmentsthatarenotqualifiedasaspecialtypeofinvestmentaresubjecttogeneralincentives.TheseincentivesarecustomsdutyandVATexemptiononthepurchaseofinvestmentgoods(i.e.machineryandequipment).Fortheinvestmentsinthe6thregion,thegeneralincentivesareexpandedwithincomewithholdingtax.Socialsecurityemployerpremiumreliefisaddedtotheshipconstructioninvestmentsintheshipyards.

TheminimuminvestmentexpenditureshouldbeTRY1millionforthefirsttworegionsoutofsixregionsandTRY500thousandfortherestoftheregions. Regionalandsector-basedinvestments: Turkeyisseparatedintosixregionsbasedonthedevelopmentlevelofthedistricts/citiesintheseregions.Thefirstthreezonesrepresentmoredevelopedregions,respectively,whereasthelastthreeshowrelativelylessdevelopedzonesinTurkey.

Largescaleinvestments: InvestmentsinexcessofatleastTRY50millionareclassifiedaslargescaleinvestments.Thisamountcanincreasedependingontheindustryoftheinvestment.Theindustriesincludebutnotlimitedwithproductionofoilproducts,portandportservicesinvestments,drugmanufacturing,productionofairandspacevehiclesandtheirpartsandairportinvestments.

Prioritizedinvestments: Thistypeofinvestmentscanbenefitfromtheincentivesthataregrantedtotheinvestmentinthe5thregion.Iftheinvestmentsarelocatedinthe6thregion,investorscanbeentitledtoincentivestobegrantedtothisregion.Investmentsinthebelowindustriescanqualifyasprioritizedinvestment:

• Investmentsregardingseatransportationofloadand/orpassengers

• Railwayinvestmentsthataretobemadebytheprivatesectormembersforthepurposeofdomesticloadand/orpassengertransportationandinnercityloadtransportation

• Automotive,spaceordefenceorientedtestcentres,windtunnelsandinvestmentsinsimilarnature

• AccommodationinvestmentsfortourismpurposesthatareinthescopeofProtectionandDevelopmentofCultureandTourismortheaccommodationinvestmentsforthermaltourismthatareentitledtoregionalincentives

• Internationalfairinvestmentswithaminimumclosedareaof50thousandsquaremeters(excludingtheaccommodationandshoppingmallunits)

• InvestmentprojectsindefenceindustrytobeapprovedbytheUndersecretariesforDefenceIndustry.

• Mineextractionand/ormineprocessinginvestmentsofinvestorsholdinganexplorationlicenseissuedunderMineLaw(excludingcertainspecificinvestments)

• Daycarecentres,kindergartens,andprimary,secondary,andhighschoolinvestmentstobemadebytheprivatesectormembers.

• ProductsdevelopedasaresultofR&DprojectsthataresupportedbyMinistryofScience,IndustryandTechnology,SmallandMediumSizedEnterprisesDevelopmentOrganizationandtheScientificandTechnologicalResearchCouncilofTurkey.

• InvestmentsinmotorvehiclesindustrywithaminimuminvestmentamountofTRY300millionandautocomponents

industry(i.e.engineproductioninvestmentswithaminimuminvestmentamountofTRY75million,investmentsincomponentsandtransmissioncomponentsofenginesandelectronicsofautomotivewithaminimuminvestmentamountofTRY20million)

• Investmentsincoalbasedelectricitygenerationpowerplants(underaminingandprospectinglicense).

• Exceptforun-incentivizedinvestments,energyefficiencyorientedinvestmentswiththebelowpropertiespursuanttotheapprovalofEnergyandNaturalResources:

a) Anannualenergyconsumptionof500tonsofequivalentoil,whichwillberealizedinthemanufacturingindustryplants;

b) Annualminimumof500tonsofequivalentoilenergyconsumption,

c) Shouldbeheldintheexistingmanufacturingfacilityd) Energysavingsbyatleast20%perunitofproductione) Returnoninvestmentismaximumof5years.

• Wasteheatbasedelectricitygenerationinvestmentswheretheelectricityisgeneratedthroughwasteheatrecoveryfacilities.(Exceptfornaturalgas-basedpowergenerationplants).

• LiquefiednaturalgasandundergroundgasstorageinvestmentswithaminimuminvestmentamountofTRY50million

• Carbonandfibreproductionandproductionofcompositematerialsmadeofcarbonandfibretogetherwithproductionofcarbonandfibreinvestments

• ProductionofproductsinthehightechnologyindustriesdefinedbasedontheOECDTechnologyIntensityClassificationsuchasaircraftandspacecraft,pharmaceuticals,Office,accountingandcomputingmachinery,Radio,TVandcommunicationequipmentandMedical,precisionandopticalinstruments

• ExplorationinvestmentsofinvestorsholdinganexplorationlicenseorCertificateissuedunderMiningLaw

• Turbineandgeneratorproductioninvestmentsrelatedtorenewableenergygenerationandrotorproduction(forwindenergygeneration)

• Integratedinvestmentsforproducingaluminiumflatgoodswithspecialtechniqueidentifiedinincentivelegislation

Strategicinvestments: Astrategicinvestmentshouldaltogetherqualifythebelow:

• TheminimumfixedamountoftheinvestmentshouldexceedatleastTRY50million.

• TotalimportsrelatedtotheinvestmentgoodshouldexceedUSD50millioninthelatestyear.

• Expectedaddedvaluetobeprovidedbythepotentialinvestmentshouldbeminimum40%.

• Thetotaldomesticproductioncapacityofthefinalgoodtobeproducedshouldbelessthantheimports.

PrioritizedinvestmentswithoverTRY3millionofminimumfixedinvestmentamountwillbequalifiedasstrategicinvestment(interestsupportforsuchinvestmentsislimitedtoTRY700thousand).

Investmentsentitledtoincentivesapplicableinasuccessiveregion: Theinvestmentssatisfiesoneofthebelowpropertiescanbenefitfromtheincentivesgrantedtoasuccessiveregionwithrespecttoreducedcorporatetaxandsocialsecuritypremium.

• InvestmentsmadeintheOrganizedIndustrialZones(OIZ)orinindustrialzonesformanufacturingindustryinvestments,

• Investmentsthataremadebyaninvestorwithatleast5individualsorcorporateshareholdersandprovidesanintegrationoftheinvestmentstobemadeinacommonoperating area.

Iftheinvestmentisinthe6thregion,2yearstosocialsecurityemployercontributionand5pointstotheinvestmentcontributionrateareaddedtothecurrentincentivesapplicableinthatregion.

Investment incentives:Investmentincentivesareavailabletoinvestorsthroughan“InvestmentIncentiveCertificate”(“IIC”),whichisobtainedfromtheGeneralDirectorateofIncentivePracticesandForeignCapitalundertheMinistryofEconomy(“Authority”).

InorderforaninvestmenttobegrantedanIIC,theminimuminvestmentexpendituresshouldbeatleastTRY1millionforthefirsttworegionsandTRY500thousandforotherregions.ItshouldbenotedthattheinvestmentprojectsarestillsubjecttoAuthorityevaluationinordertobegrantedanyincentives.

TheincentivesunderanInvestmentIncentiveCertificatearesummarizedbelowforeachtypeofinvestment:

Customs duty

Incentives

General Investment

1st region

2nd region

region

4th region

5th region

6th region

region

6th region

Large scale

Strategic

Prioritized

VATReduced rate CIT

SS employer

SS employee

Land allocation

Interest support

Income w/h tax

VAT refund

** * ***

* Fortheinvestmentsinthe6thregion,

** Fortheshipconstructioninvestmentsintheshipyards

*** Non-recoverableVATwithrespecttotheconstructionpartofaninvestmentwith minimumfixedamountofTRY500millionwillberefundedtotheinvestors.This incentivewillbegrantedtotheinvestorsuntil31December2023.

x: Notapplicable

2.3. Application of Incentives

Customsdutyexemption: 100%customsdutyexemptionisavailableontheimportedmachineryandequipment(ImportsfromEUcountriescanbecustomsdutyfree).

ValueAddedTax(“VAT”)exemption:100%VATexemptionforbothdomesticpurchaseofandimportofmachineryandequipmentforthequalifiedinvestments(UndertheVATCode,importationofmachineryandequipmentunderanIICisnotsubjecttoVAT,aswellaslocalpurchasesofmachineryandequipment).

Corporatetaxreduction: Statutorycorporatetaxrateis20%.Regionalandsector-based,prioritized,large-scaleandstrategicinvestmentsareentitledtobenefitfromcorporatetaxreductionlimitedtothetaxsavingsthatreachtheinvestmentcontributionrate. Governmentprovidesacorporatetaxreductionfrom50%upto90%dependingonthelocationandtheamountoftheinvestment

Socialsecurityemployerpremiumcontribution: SocialSecurityemployerpremiumincentiveisgrantedfrom2yearsto10years,dependingonthelocationoftheinvestmentandlimitedtothepremiumsapplicabletominimumwageceiling(monthly).Theincentiveamountisalsolimitedtoapercentageoftheactualinvestmentamountwhichshouldbecheckedforeachinvestmentprojecteligibleforthisincentive.

Socialsecurityemployeepremiumcontribution:Thisincentiveisprovidedonlyfortheinvestmentsinthe6thregionlimitedto10yearsandtothepremiumcontributioncorrespondingtotheminimumwageamount.

AllocationofLand: Landcanbeprovidedtotheinvestorsasarightofeasementorusagerightfor49yearsbytheMinistryofFinance.(SubjecttotheprovisionsofLawno.4706)

Interestsupportonfinancing: Governmentcontributesalsotointerestpaymentsontheinvestmentloanswithamaturityofatleastoneyeargrantedinthescopeofincentiveregime.Interestsupportislimitedto70%ofthetotalprojectedinvestmentamountregisteredontheIICandgrantedonlytotheinvestmentsinthe3rd,4th,5thand6thregions.

Interestsupportisgratedinarangeof3to7pointsforTurkishLiradenominatedloansandupto2pointsforforeigncurrencyandforeignexchangeloans.ThemaximumamountofinterestsupportamonginvestmentsotherthanstrategicinvestmentsisTRY900thousandwhichisprovidedforinvestmentsinthe6th region.Interestsupportforstrategicinvestmentsisthehighestwithalimitationof5%ofthefixedinvestmentamountbutcanreachuptoTRY50million.

Incomewithholdingtax: Thisincentiveisgrantedtoinvestorsonlyfortheinvestmentsinthe6thregionlimitedto10years.

VATrefund: ThisincentiveisgrantedtoinvestorsforinvestmentswithaminimumfixedamountofTRY500millionandlimitedtotherefundofnon-recoverableVATwithrespecttotheconstructionpartoftheinvestment.Thisincentivewillbegrantedtotheinvestorsuntil31December2023.

2.4 “Super incentives”

WiththeSuperIncentivesaflexibleincentivesystemhasbeeninitiated.Thenewmodelisaveryimportantmilestonewherethedevelopmentofourinvestmentincentivesystemisconcerned.Throughthismodel,aspecialincentivesystemuniquetoeachinvestmentprojectputforwardforsupportcannowbedeveloped.

Theprogrammeenvisagesaprojectbasissupportwhichwillenableaflexibleandcustomizedincentivemechanismtothequalifiedinvestments.ThequalificationofaninvestmentwillbedeterminedbasedonwhethertheseinvestmentsmeetthecurrentorfuturerequirementsofTurkeyinlinewiththetargetssetinthedevelopmentplansandannualprogramsand/orwhethertheycouldensurecontinuedsupply,reducedependenceonforeignsources,achievetechnologictransition,beinnovative,andaddvalueaswellasbeingR&Dfocused.

AsthisincentivemechanismisapartofIncentiveRegime,investorsarerequiredtoobtainanInvestmentIncentiveCertificatefromtheMinistryofEconomyinordertobenefitfromtheincentives.

Theincentivesgrantedtotheinvestorsinthescopeof“superincentives”mechanismcanbesummarizedasfollows.

— VATandcustomsdutyrelief

— VATrefundpossibility

— Reducedtaxratesortaxexemptions(corporatetax)

— Socialsecurityemployerpremiumsupport

— Incomewithholdingtaxsupport

— Qualifiedpersonnelsalarysupport

— InterestsupportorGovernmentgrants

— Capitalcontributions

— Supportonenergyexpenses

— Governmentpurchaseguarantee

— Landallocationandfreeofchargetransferoftheland

— Infrastructuresupport

— Facilitationinbureaucraticprocess

ItshouldbenotedthatMinistryofEconomyistheauthoritytoevaluatetheprojectsandgranttheincentives/supports(allorlimited)totheinvestorsforthequalifiedinvestments.

2.5 “Centre of Attraction” Programme

TurkishGovernmentrecently(November2016)announcedanewincentiveprogrammecovering23comparativelydistressedcities.Theprogrammeaimstobalancethedevelopmentlevelwithintheregionsthroughincreaseinemployment,productionandexportsandvitalisingtheinvestmentenvironmentinrelativelylessdevelopedregions.

Theincentivesgrantedtotheinvestorsinthescopeof“centreofattraction”mechanismcanbesummarizedasfollows.

— Advisoryservicessupport,

— Turnkeyfactorybuildingconstructionsupport,

— Interest-freeinvestmentloansupport,

— Low-interestoperationalloansupport,

— “ProductionFacilityRelocationSupport”forinvestorswhowishtorelocatetheirproductionfacilities,whicharestillinoperation,fromprovincesthataredesignatedbytheCouncilofMinisters,tothoseprovincesthatarecoveredundertheAttractionCentresProgram

— Supportsforcallcentresanddatastoragecentres,

— Allocationoftreasurylandforconstructionof“callcentresanddatastoragecentres”,

— Allocationofidlepublicbuildingspertainingtopublic,localadministrations,stateeconomicenterprisesandotherstateinstitutionsandorganisationsforuseascallcentreanddatastoragecentre,

— Callcentreanddatastoragecentrebuildingconstructionsupport,

— “Callcentreanddatastoragecentreinvestmentsupport”coveringthesupportsthatwillbeprovidedforthetelecommunicationinfrastructurethatisrequiredincallcentresanddatastoragecentres

— Additionalenergysupportfordatastoragecentres.

Basicconditionstobenefitfromthesupportsofferedundertheprogram;

IncentivesinthisgroupwillbeofferedtooverTRY2millionininvestment,whichpromisestoprovideatleast30newjobs.

— Forcallcentres,atleast200newemploymentagreementsmustbesigned.

—Newdatastoragecentreincentivescovertheinvestmentsthatarenosmallerthan5.000squaremetersofland,andthatmeetcertaintechnicalcriteria/certifications.

— Inordertobenefitfromproductionfacilityrelocationsupport,theprimaryconditionisthatthefacilityhasbeeninoperationforthelasttwoyears.Meetingthiscondition,ontheotherhand,wouldnotbesufficientalone.Additionally,relocationmustbecompletedwithintwoyearsfollowingthedatethatCMDisineffect,anditmustbeundertakenthat200peoplewillbeemployedafterrelocation.

Bothindividualsandcorporationscanbenefitfromthisprogramme.

ItshouldalsobenotedthatthisprogrammeisstillapartofInvestmentIncentiveRegimehowever,willbeimplementedthroughDevelopmentBankofTurkey.Tobenefitfromthisprogramme,theapplicationshouldbedonetoDevelopmentBankofTurkeyandlocaldevelopmentagencies.

2.6 Incentives regarding Research, Development and Design Activities

BasicincentivesandsupportssetforthundertheLawNo.5746pertainingtheSupportofResearchandDevelopmentActivitiesfortheR&Dinvestmentprojectsareasfollows;

• 100%ofalleligibleR&Dandinnovationexpendituresmadewithintechnologycentres,R&Dcentres(whichshouldemployatleast15(mayincreaseto30forspecificsectors)full-timeequivalentR&Dpersonnel),R&Dandinnovationprojectssupportedbygovernmentalinstitutions,foundationsestablishedbylaw,orinternationalfundsanddesignexpendituresmadewithindesigncentres(whichshouldemployatleast10full-timeequivalentdesignpersonnel)anddesignprojectssupportedbytheaboveinstitutionscanbedeductedfromthecorporateincometaxbase.100%deductioncanbeincreasedto150%throughsatisfactionofcertain criteria.

• SalariesofR&D,designandsupportpersonnelareexemptfromincomewithholdingtaxatthedifferentpercentages(80%-95%)dependingontheirdoctoratediploma,master’sdegreeandbachelor'sdegree.

• 50%oftheemployer’scontributionofsocialsecuritypremiumsissupportedbytheMinistryofFinanceforeachR&D,designandsupportpersonnel.

• AlldocumentsmadeoutregardingR&D,innovationanddesignfacilitieswithinthescopeoftheLawNo5746(R&DLaw)areexemptfromStampTax.

2.7 Incentives for Technology Development Zones

• Incomederivedfromsoftware,designandR&DactivitiesperformedintheTechnologyDevelopmentZones(“TDZ”)bythetaxpayers(doingbusinessinthesezones)areexemptfromincomeandcorporateincometax.

• SalariesofR&D,designandsupportpersonnelrelatedtotheR&D,designandsupportactivitiesinthesezonesandoutofthezones(limitedtocertainpersonnelandapplicabletocertainportionofincome)areexemptfromincometaxandstamptax.

• 50%oftheemployer’scontributionofsocialsecuritypremiumsissupportedbytheMinistryofFinanceforeachR&D,designandsupportpersonnelprovidedthattheirsalariesareexemptfromincometax.

• Deliveryofgoodsandserviceswhichareproducedexclusivelyinthesezonesandintheformofsystemmanagement,datamanagement,businessapplications,industrial,internet,mobileandmilitarycommandcontrolapplicationsoftwarearealsoexemptfromVAT.

2.8 Incentives for Free Trade Zones (“FTZ”)

Turkeyaimstoencourageproductionandexportactivities,fastentheforeigncapitalinflowandtechnologyinTurkeyaswellasdevelopingtheinternationaltradingactivitiesthroughthegrantoftheseincentivestoinvestors.

InvestorsshouldobtainaspeciallicensetobeableoperateintheFTZs.Theselicensesareprovidedforaperiodfrom15yearsto45yearsbasedonthetypeoftheoperator(e.g.lessee,manufacturer,investor,etc.)

ThefollowingincentivesaregrantedtoinvestorsinvestingintotheFreeTradeZones.TheseincentivesareapplicableuntiltheendofthefiscalyearinwhichTurkeyfullyaccessestotheEU:

• TheincomederivedfromthesaleofgoodsthataremanufacturedbylicenseholdersinFTZisexemptfromincomeorcorporateincometax(Corporateincometaxexemptiondoesnotcoverthedividenddistributions).Moreover,incomederivedbythelicenseholdershavingavalidlicenseobtainedbeforeFebruary6,2004canalsobenefitfromcorporatetaxexemptionuntiltheexpirationdateoftheirlicenses.

• ThesalarypaymentsmadebytaxpayersoperatinginFTZtotheiremployeesareexemptfromincometax,providedthatthetaxpayersexportatleast85%ofannualproduction(i.e.FOBvalues).(CouncilofMinistersisauthorizedtodecreaseorincreasethisrate).

• ThedocumentsandtransactionsregardingoperationsinFTZareexemptfromstamptaxandcharges.

• Inadditiontotheabovementionedincentives,thedeliveryofgoodsandperformanceofservicesinfreetradezonesareexcludedfromVATunderVATCodewithoutanytimelimitation.

3. Foreign Trade & Customs3.1 Foreign Trade Legislation

Someoftheapplicablelawsthatregulateforeigntradeactivitiesare:• CustomsLawNo:4458• CustomsRegulation• RegulationregardingAEO(RegulationRegardingSimplification

ofCustomsOperations)• ImportRegimeDecree• ExportRegimeDecree• LawonthePreventionofUnfairCompetitioninImportsNo:

3577• LawonRegulationofForeignTradeNo:2976• DecreeontheRegimeofTechnicalRegulationsand

Standardization• FreeTradeZoneLawNo:3218• CombatingwithSmugglingLawNo:5607• ValueAddedTaxLawnumbered3065• SpecialConsumptionTaxLawNo:4760

3.2 Customs Regimes and Synopsis of Customs Transactions

InTurkishCustomsLegislation,thereexist8customsregimeswhichare:• ReleaseForFreeCirculationRegime• TransitRegime• CustomsWarehousingRegime• InwardProcessingRegime• ProcessingUnderCustomsControlRegime• TemporaryAdmissionRegime• OutwardProcessingRegime• ExportationRegime

Establishedcompanieswithavalidtaxnumbercanperformimportation/exportation.Exportersshouldalsobeamemberofrelevantexportersunion.Afteracustomsdeclarationissubmittedbycustomsbroker,computersystemevaluatesthedataanddesignatesalineforthetransaction.

Basically,therearefourlines:

• Redline(meansphysicalcontrol/inspectionanddocumentcontrol)• Yellowline(meansdocumentcontrol)• Blueline(meansdeferredcontroli.e.simplifiedprocedure)• Greenline(meansnocontrol)

Dependingonthegoods,theiroriginandregime,somedocumentsshouldbesubmittedforimportcustomsclearance:commercialinvoice,proformainvoice(whenfinalcommercialinvoicedoesnotexistatthetimeofentry);A.TR,EUR.1,FormAorEUR-MEDifapplicable;dependingontheconsignmentfreightand/orinsuranceinvoice,CertificateofOriginifapplicable,ValueDeclarationForm,PackingList,Inspection/Control/SurveillanceCertificateetc.(ifimportationissubjecttocertification).Someofthedocumentsthatshouldbesubmittedforexportcustomsclearanceare:commercialinvoice,A.TRifapplicable,packinglistetc.CustomsCodeArticle60andCustomsRegulationArticle114providemoredetailsaboutdocumentsthatshouldbeattachedtocustomsdeclarations.Specificationsrelatedtocustomsduty,excisedutyanddocumentationssuchasrequiredcertificatesaredesignatedaccordingtoHSnumberofproduct(12-digitcodeisusedinTurkey).

3.3 Turkey and the EU

AftertheEUTurkeyAssociationAgreementof1963,TurkeysignedaCustomsUnionagreementwiththeEUin1995whichseekstopromotetradeandeconomicrelations.TurkeyisacandidatecountrytoEUsince1999andanaccessioncountrysince2005.

TheEUandTurkeyhaveaprofoundtraderelationship.TheEUranksnumberoneinbothTurkey’simportsandexports,whileTurkeyranks6thintheEU’stopimportand4thinexportmarkets.Textiles,

machineryandtransportequipment,plasticsandrubbersandmanufacturedgoodsdominateEUimportsfromTurkey.MainEUexporttoTurkeyaremachineryandtransportmaterial,chemicalproducts,plasticsandrubbersandmanufacturedgoods.(EuropeanCommissionTrade,2015)

Thecustomsunionisbasedonfreecirculationofgoodsandpreferentialtreatmentisapplicableforindustrialgoodsandprocessedagriculturalgoods(CustomsUnionbetweenEUandTurkeydoesn’tcoveragriculturalgoods,servicesandECSCgoods).AccordingtoCouncilDecisionaboutRulesofImplementationCustomsUnionbetweenTurkeyandECnumbered2006/10895,inordertoenjoypreferentialtreatmentgoodsthatshouldbedelivereddirectlytoTurkeywithanA.TRCertificate(thisisamovementcertificateratherthanacertificateoforigin).But,ifitisnecessarytodeliverover3rdcountry,goodsshouldbeundercustomsobservationofthecountryanditshouldbeprovedtoTurkishCustomsAuthoritiesthatthegoodsarenotfurtherprocessedin3rdcountries.TheinformationanddescriptionofgoodsontheinvoiceandcustomsdeclarationshouldcorrespondwiththeinformationontheA.TRcertificate(anA.TRcertificateshouldbesubmittedtocustomsadministrationwithin4monthsandifitisissuedretrospectivelyoritisduplicated,thisshouldbeindicatedontheremarkssectionofthecertificate).

Ontheotherhand,TurkeyhassignedFreeTradeAgreementwithEFTA(Norway,Iceland,SwitzerlandandLiechtenstein)andothervariouscountriesand18oftheseagreementsareinforce(includingthosewithRepublicofKorea,ChiliandGeorgia).TurkeyalsohasaPreferentialTradeAgreementwithIransince1stJanuaryof2015.

3.4 Turkish Import Regime

TheImportRegimereflectsbothTurkey’sinternationalrightsandobligationsandthecountry’seconomicneeds.TheImportRegimeDecreeispreparedeveryyear,publishedintheofficialjournalbyDecember31andputintoforcebyJanuary1.ImportRegimeDecreeindicatestheratesofthecustomsdutiesseparatelyforcountriesandcountrygroupsandtheproductsareclassifiedundersixlistswhichare:

• Agriculturalproducts(List:I)• Industrialproducts(List:II)• Processedagriculturalproducts(List:III)• Fishandfisheryproducts(List:IV)• Suspensionlist(List:V)• Listofgoodsusedincivilaircrafteligibletorelieffrom

customsduties(List:VI)

3.5 Customs Valuation

Thecustomsvalueofgoodsisdeterminedtoapplyadvaloremratesofcustomsandexciseduties.i.e.;VAT,SCT,anti-dumpingdutiesandsomeotherapplicablefunds.TurkeyacceptedprovisionsoftheWTOAgreementonCustomsValuation.CustomsValuationisregulatedbetweenarticles23–31ofCustomsLaw.Thelawprimarilydefinesthecustomsvalueasthetransactionvalueofimportedgoodswhichisthepriceactuallypaidorpayableforthegoodsconsideringnecessaryadjustmentsoftheimportrelatedcostsandcharges.Othercomponentsofcustomsvalue;suchasTPadjustmentsandRoyaltypaymentshaveacomplexstructurethathastobeevaluatedcarefullyregardingcustomsvalue.

3.6 Anti-Dumping and Anti-Subsidy Practices

MinistryofEconomycarriesoutdumpingandsubsidyinvestigationsrelatingtounfairpricingpracticesofcompaniesorcountriesexportingtoTurkey.Accordingtoresultsoftheinvestigationananti-dumpingdutyorcountervailingdutymaybesetupovergoodsofsuchcompaniesorsuchcountries.

3.7 Resource Utilization Support Fund (RUSF)

RUSFonimportationdependsonthetermsofpayment.RUSFisapplicableonimportationswhichhavethedefinedtermsofpaymentsinrelevantregulations.Therearesomeapplicableexemptionssuchasimportationviaanincentivecertificate,inward

processingregimeortemporaryimportationregime.Accordingtoarticle3/dofCouncilofMinister’sDecreeofRUSFnumbered88/12944dated12May1988,importsconductedthroughacceptanceletterofcredit,deferredpaymentletterofcreditorcashagainstgoodsshallbesubjecttoRUSFwhichiscalculatedovertheamountofinvoice.ThecurrentRUSFrateis6%forimportationoncreditbasis.Furthermore,RUSFisacceptedasimportduties.PleasenotethatregardingtheMinisters’Decreenumbered2015/7511anddated10.04.2015,importRUSFratehasbeendeterminedas0%onvariousproductsbasingontheirHSCodes.

3.8 Authorized Economic Operator (AEO)

AsofJanuary2013,TurkeyhaslaunchedAuthorizedEconomicOperator(AEO)Programwhichfacilitatesforeigntradeoperationsandminimizeleadtimesandcosts.Thecertificateprivilegesinvolvelocalclearance,authorizedconsignorstatus,usinglumpsumguarantees,issueA.TRcirculation,issueEUR.MEDinvoicedeclaration,submitincompletedeclaration&documents,simplified(FAS)declaration,labreportfacilitations,blue-linefacilitationsonFASdeclarations,lessdocumentationandphysicalcontrols,controlpriorities.

AEOcertificatewillbeobtainedbyreliableTurkishresidentcompanies,operatingatleast3yearswhohasadequatetraceabledocumentation,financialsolvencyandpracticingsafetyandsecuritymeasures.TheAEOprogrambringsrecognitionandcompetitiveadvantagetocompaniesinthelongrun.

4. Company Law Requirements4.1 Available Business Structures

IndividualsandlegalentityinvestorsintendedtoconductbusinessactivitiesinTurkeyrealizetheirbusinessactivitiesinvariouslegalforms.Whiledecidingamongthosecommercialstructures,factorssuchasbusinessplan,exitstrategy,organizationalstructure,minimumcapital,shareholders’responsibility,liabilityandresponsibilityoftheexecutives,auditandpenaltiesprescribedaretaken into account.

Thecommercialstructurewhichinvestorsmayprefershallbedeterminedcompletelyaccordingtotheirneeds.Inotherwords,thereisnotonlysinglestructureapplicableandaccurateforeachprivateinvestor,buttailoredsolutionsforeachofthem.

Mostcommonly,investorstendtoincorporatecompanies,branchesorliaisonofficesinTurkeytoconducttheirbusinessactivities.ForthecorporateentitiesincorporatedinTurkey,theTurkishCommercialCodenumbered6102,whichisinforceasofJuly2012,shallbeapplicable.

4.2 Subsidiary Types: Joint Stock Corporations (JSC) and Limited Liability Companies (LLC)

TheJointStockCompany(inTurkish:AnonimSirket,A.Ş.)andtheLimitedLiabilityCompany(inTurkish:LimitedŞirket,Ltd.)arethemostcommonformsofcompaniesunderTurkishCommercialLaw.

Although,theinvestorsarefreetooptforthebusinessstructuretheywishtopursue,someofthebusinessaresubjectedtocompulsoryestablishmenttypesaspertherelevantapplicablelawsandregulations.Someofthebusinessesthatneedstobeestablishedasjointstockcompaniesmaybelistedasfollows:

• Banks• InsuranceCompanies• FinancialLeasingCompanies• FactoringCompanies• HoldingCompanies• Stockexchanges• VentureCapitalInvestmentCompanies

4.3 Joint Stock Companies (JSC)

Number of shareholdersAjointstockcompanymaybeformedbyatleastoneshareholderandsuchshareholdersmayberealpersonsorlegalentitiesaswellasresidentsornon-residents.Thereisnoupperlimittothenumberofshareholders.However,JSCswithmorethan500shareholdersaresubjectedtoCapitalMarketsBoardregulations.

Shareholders’ liabilityLiabilitiesoftheshareholdersofJSCsarelimitedwiththecapitaltheyhavecontributed.

Articles of associationDocumentsofincorporation,mandatoryinformationinthearticlesofassociationandincorporationprocedureshavebeenregulatedunderTCCindetail.Primarily,thefoundersshallpreparethearticlesofassociation,whichincludetheprovisionsonthecompany’sbasicstructureandbodiesinwhichtheunconditionalpaymentofwholecapitalisundertaken;afterwards,thearticlesofassociationissubmittedtothesystemnamedMERSIS(TheCentralRegistrySystem)andeitherthefounders’signaturesinthesearticlesofassociationaffixedandcertifiedatthenotarypublicorsignedinfrontofthetraderegistryofficer.Thecompanydeemedtoacquireitslegalpersonalityafteritsregistrationattherelevanttraderegistry.

Share CapitalTheminimumcapitalrequiredfortheincorporationofJSCisTL50.000-.InJSCsadoptingtheregisteredcapitalsystemwheretheboardofdirectorsisauthorizedtoincreasethecapitaluptotheprescribedupperlimit,thestart-upcapitalcannotbelessthanTL100.000-.Furthermore,fortheJSCswhicharesubjectedtoaspeciallegislation(banks,insurancecompanies,powerproducersetc.),ahigherminimumcapitalamountmayberequired.

Itemsthatcanbecontributedascapital:AssetswhichcanbecontributedinJSCsascapitalareasfollows;

• Intellectualpropertyrights• Movablesandallkindsofimmovable• Usufructrightsofmovablesandrealestates• Commercialenterprises• Assetsusedunderarightsuchastransferableelectronic

media,domains,namesandmarks• Minelicensesandothersimilarrightswhichhavesuch

economicvalue• Anykindofassetwhichcanbetransferredandevaluatedin

Propertiesuponwhichrightinrem,pledgeorinjunctionisestablished;performancesofservice;commercialreputation;andunduereceivablescannotbecontributedtoJSCsascapital.

Theproperties,including,butnotlimitedtointellectualpropertyrightsandvirtualplatformsandmedia,whichcanbetransferredorassignedincash,withnolimitedrealrightsorattachmentorinjunctionorotherencumbrancesthereon,maybesubmittedascapitalinkind.

Payment of the CapitalItisnotmandatorytowhollypaythecapitalofJSCincashbeforetheregistration.Atleast25%ofthecashcapitalcontributedtotheJSCshallbepaidtoablockedaccounttobeopenedinabankbeforetheregistrationatthetraderegistry.ThisamountblockedatthebankreleasedonlyaftertheJSC’sregistrationisauthenticatedbyaregistryletterorifthecompanyisrefundedtoitsownersuponaconfirmingletterbytheregistryoffice(within3months)ifthecompanyisnotincorporated.Forthepaymentoftheportionup

to75%ofthecashcapital,whichisnotpaidduringincorporation,partiesmaydecideonamaximumtermof24monthsasofthedatecompanyisregistered.

Bodies of the CompanyShareholdersoftheJSCarenotinvolvedinthecompany’sdailyactivitiesinconnectionwiththeirshareholdingcapacity.Theboardofdirectors(“BoD”)thatwillmanagetheJSCsiselectedbythegeneralassembly,andthedecisionsontheJSC’sbasicstructurearealsotakenbythegeneralassembly.

i. GeneralAssembly

Meetings:JSC’sgeneralassemblymayconveneordinarilyorextraordinarily.Ordinarygeneralassemblymeetingsareheldwithin3monthsasoftheendofeachtermofactivity,andnegotiationsareconductedanddecisionsaretakeninthismeetingfortheelectionandreleaseoftheboardofdirectors,financialstatementsandannualreport,howprofitisutilizedandothernecessaryissues.Extraordinarymeetingsontheotherhandareheldwhenitisdeemednecessary(suchasadvancedividenddistribution,lossofcapital,capitalincreaseetc.).

Attendants:Theprimaryattendantsofthesemeetingsaretheshareholders.Inadditiontotheshareholders,representativeoftheMinistryofCustomsandTradeshallalsoattendthegeneralassemblymeetingsofbanks,financialleasingcompanies,factoringcompanies,insurancecompanies,companiessubjecttoCapitalMarketsLaw(companiesthatissuecapitalmarketinstruments,offerthemtopublic,investmentcompanies,portfoliomanagementcompaniesetc.),andtoregularJSCgeneralassembliesprovidedthatcertaintypesofdecisionswillbenegotiated(i.e.capitalincreaseetc.).

Dutiesandauthorities:Therearesomeinalienabledutiesandauthoritiesofgeneralassembly,whichmaybeexemplifiedasfollows: • Amendmentofthearticlesofassociation• Appointmentofboardmembers,determiningtheirterms,

remunerationsandrightssuchasattendancefee,bonus,premium,decidingontheirreleaseanddismissingthem.

• Terminationofthecompany.• Wholesaleofasubstantialamountofcompany’sassets.

ii. BoardofDirectors

Management:BoardofdirectorsisthemainbodywhichensuresthemanagementandrepresentationoftheJSCs.TheactivitieswhichtheJSCswillconductinordertoachieveitsgoalsareplannedandimplementedbytheboardofdirectors.

Numberofmembers:Boardofdirectorsmayconsistofoneormoremembers.

Appointmentofthemembers:Themembersareelectedunderthearticlesofassociationduringincorporationandbythegeneralassemblyresolutionafterwards.

Qualifications:Beingamemberdoesnotrequireshareholding.Legalpersonsmaybecomemembersasrealpersons.Industry-specificlegislationsmayrequirespecialconditionsformembership.

Termofofficeandterminationofmembership:Termofofficeofboardmembersshallnotexceed3years.Thememberswhosetermhasexpiredmaybereelected.Membershipisterminatedduetoareasonsuchastheexpirationofthetermofoffice,resignation,dischargeordeath.

Inalienabledutiesandauthorities:SomeoftheadministrativedutiesandauthoritiesgrantedtotheJSC’sboardofdirectorsmaynotbetransferred.Themajorinalienabledutiesandauthoritiesmaybeexemplifiedfollows;

• High-levelmanagementofthecompanyandprovidingtheinstructionsaboutthem

• Determiningthemanagementstructureofthecompany.• Establishingthenecessaryorderforaccountingandfinancial

audit,andfinancialplanningtotheextentrequiredbythecompany’smanagement.

• Keepingtheshareledger,boardofdirectors’resolutionledgerandgeneralassembly’smeetingandnegotiationledgers.

• Notifyingthecourtincaseofindebtedness.

Transferofmanagement:AlldutiesandauthoritiesoftheboardofdirectorsapartfromtheinalienabledutiesandauthoritiesstipulatedintheTCCmaybetransferredtooneorsomeofthemembersorthirdpartiesunderaboarddecisiontobetakenintheframeworkofaninternaldirectiveissuedonthebasisofaprovisioninthearticlesofassociationthatallowstransfer.

Meetings:Theboardofdirectorsmaygatheratthecompany’sheadquartersoranyotherplacewhennecessary.Boardofdirectorsmayalsomeetelectronicallyunderanoptionalarrangementmadeinthearticlesofassociation.

Meetinganddecisionquorum:Meetingquorumisthemajorityofmembers,whiledecisionquorumisthemajorityofmembersattendingthemeeting.Thesequorumsmaybeincreasedbythearticlesofassociation.

LiquidationTheTCCregulatesthelegalframeworkfortheliquidationofthejointstockcompanies.Thecompaniesmayresolvetoenterintoliquidation,iftheydecidedtodosoduetoeconomic,financial,managerial,operational,strategicreasons.

PursuanttotheTCC,liquidationshallbeconductedbytheBoardofDirectorsunlessliquidatorisappointedbythearticlesofassociationoraGeneralAssemblyresolution.Liquidatormaybeashareholderoranyotherthirdparty.AtleastoneoftheliquidatorhavingtherepresentativeauthorityshallbeaTurkishcitizenandresideinTurkey.

Duringtheliquidationprocess,companyshallmaintainitscorporateentitytotheextentrequiredbytheliquidationactivities,howeverthephrase“underliquidation”shallbeaddedtothetradenameofthecompanyuntilthecompletionoftheliquidationprocedure.

Theremainingassetsofthecompany,afterpaymentofitsdebtsandtherefundingofthesharevaluetotheshareholdersarecompleted,shallbedividedamongtheshareholders,inproportiontotheircontributiontothecompany’scapitalandprivilegesunlessotherwiseisstipulatedunderthearticlesofassociation.Distributionmayonlyberealizedafterthesixmonths(6)waiting

period,tobecalculatedasofthedatethatthelastannouncementtothecreditorsismadeattheTurkishTradeRegistryGazette,ends.Thecompletionofliquidationmaytakebetween6monthsto12monthsdependingonthecurrentstructureofthecompany(i.e.debts,ongoinglitigationsetc.).

4.4 Limited Liability Company (LLC)

RelevantexplanationsundertheJSCsshallbetakenintoaccountforthemattersthatarenotaddressedunderthissection.

Number of shareholdersAn LLC may be formed by at least one shareholder and suchshareholders may be real persons or legal entities as well asresidentsor non-residents.Numberof shareholders are regulatedtobemaximum50.

Shareholders’ liabilityLLCshareholdersareliabletothecompanyonlywiththeamountofsubscribedcapitalandinproportiontotheircapitalcontributionwithregardstothirdpartyreceivables.LLCshareholdersarejointlyandseverallyliableforpublicreceivablessuchastaxeswiththeirown/personal assets. Such liability occurs only if the tax office cannotcollectoutstandingtaxesfromtheassetsofthecompany.

Articles of associationThearticlesofassociationofLLCsdonothaveanydifferentcharacteristicthantheJSC’s,otherthantheamountofcapital,numberofshareholders,andnamesofcorporatebodies.

Share CapitalTheminimumcapitalrequiredfortheincorporationofLLCisTL10.000-.ItemsthatcanbecontributedascapitalarethesamewiththeJSCs.

Bodies of the Company

• GeneralAssembly• BoardofManagers:Boardofmanagersisthemainbodywhich

ensuresthemanagementandrepresentationoftheLLCs.

4.5 Other Forms of Doing Business in Turkey

Liaison / Representative OfficesAliaisonofficemaybeestablishedinTurkeywiththepermissionoftheMinistryofEconomyIncentiveAdministrationandForeignInvestmentDepartment(FID).Underthepresentregulations,aliaisonofficeisnotallowedtobeengagedinanycommercialactivity.Inotherwords,itcannotbeauthorizedtodobusinessandtoconcludecontracts.Therefore,forinstance,aliaisonofficecannotissueinvoicesorproformainvoices.Allexpensesoftheliaisonofficeincurredinrelationtorunningtheoffice(includingthesalaries)shouldbemetwiththeimportofforeigncurrencysentbytheparentcompany.Underthepresentregulations,regardlessofnationality,remunerationstotheemployeesoftheliaisonofficeshallbeexemptedfromTurkishincometaxaslongasthepaymentofthesalariesisfromaforeignsource.

InaccordancewiththelatestamendmentsintheCommuniquérelatedtoDirectForeignInvestmentCode,Liaisonofficesaregrantedwithmaximum3yearspermissionuponfirstapplication.

BranchUnderTurkishlaw,aBranchOfficeactsandoperatesinthenameandonbehalfoftheheadoffice(headquarters)ofthecompanywhichtheyareassociatedwith.Accordingly,rightsandobligationsstemmingfromactionsandoperationsbelongtotheparentcompanybutnottheBranch.

ThedaytodayactivityofaBranchOfficeisrunbyitsmanagerwhoactsonapowerofattorneygrantedtohim/herbytheparentcompany.

IncaseaBranchOfficeisrequestedtobeincorporatedbyaforeignfirm,thenapersonwhoisresidingwithinTurkeyshallbeappointedasarepresentative.

Thebranchwillnothaveseparatearticlesofassociationbuttheparentcompany'sarticlesofassociationwillbeapplicable.TheTurkishBranch,therefore,willnothaveaseparatelegalpersonality.

Attheoperationalstage,itmaybemorebureaucratictorunabranchsincethechangeorauthorizationofthebranchrepresentative;increaseofcapitaletc.requiresparent‘sdecisions.Inotherwords,thebranchwillnothaveaseparateshareholders’assembly,whichwilltaketherelatedresolutionsfortheoperationsofthecompany,buttheseshouldbeexecutedbytheboardoftheparentcompanyoftheTurkishbranch.

Thebranchesaresubjecttoofficialliquidationprocess.Additionally,therewillalsobetaxandaccountingrequirementstobefulfilledundertheTurkishLaw.Intermsofcorporatetaxliability,branchissubjecttosameratesasasubsidiarycompany.

4.6. General Requirements for Joint Stock and Limited Liability Companies

Company with Sole ShareholderCapitalcompaniessuchasjointstockcompaniesandlimitedliabilitycompaniesmaybeestablishedwithasoleshareholder.Furthermore,theaforesaidcompanieswhicharealreadyestablishedshallbeabletodecreasethecurrentnumberofshareholderstooneshareholderthroughsharetransfers.

Moment of EstablishmentThemomentofapprovalofarticlesofassociationbythenotarypublicorsigningthearticlesofassociationbeforethetraderegistryofficerbythecompanyfoundersshallbedeemedastheestablishmentmomentofthecompany.ThemomentofacquirementoflegalpersonalitywillbethemomentofregistrationwiththeTradeRegistry.

Web SiteCompaniesthataresubjecttoindependentauditshallberequiredtoestablishawebsitewithin3monthsasoftheirregistrationatthetraderegistryandtoallocateapartofsuchwebsiteforpublishingthelegallyrequiredannouncements.

Prohibition to Become Indebted to the CompanyTheshareholdersshallnotbeindebtedtothecompanyunlessthefollowingconditionsaremet.

Shareholdersmaybeindebtedtothecompanyprovidedthattheydonothaveanyduedebtsarisingfromcapitalsubscription,andthetotalprofitofthecompanyalongwiththefreereservesareadequatetocoverthepreviousyear’slosses.

Group of Companies“GroupofCompanies”and“ControllingCompany”conceptsareregulatedundertheTCC.

AsperArticle195oftheTCC,ifacompanydirectlyorindirectly;

a) controlsthemajorityofvotingrights,b) isentitledtoappointnumberofmembers,whichwouldsuffice

toestablishamajorityinthemanagementbody,c) hasthecapacitytoexercisemajorityvotingrightsonitsownor

withothershareholdersarisingoutofacontractualrelationshipenteredintowiththesame;or

d) controlsanothercorporationviaacontractorinanyothermanner,

itqualifiesasa“ControllingCompany”whereastheothercompanyis“Affiliate”.

IftheprincipalplaceofbusinessofoneofthesecompaniesislocatedinTurkey,thesecompaniesforma“Group”andtheTCCputsspecialresponsibilitiesupontheControllingCompanies(i.e.illegaluseofcontrol).

TheBoDoftheAffiliatemustprepareanaffiliatereportwithinthefirstthreemonthsoftheyearregardingthetransactionsconductedwiththeControllingCompany.Thisreportshallbepresentedattheannualordinarygeneralassemblyofthecompany.

Independent AuditorUndertheTCC,companiesarenotobligedtohaveaninternalauditorasastatutoryorgan.CompaniestobesubjecttoindependentauditaredeterminedbytheCouncilofMinisters.

IndependentauditinvolvestheinspectiontoensurethecompliancewiththeTurkishAccountingStandards,LawandprovisionsoftheArticlesofAssociationregardingthefinancialstatements.FinancialstatementsandannualactivityreportsoftheBoardofDirectorsthataresubjecttoaudithoweverfailedtobeauditedareconsideredtobenon-existent.Theauditorshallbeappointedbythegeneralassemblywhereasthegroupauditorshallbeappointedbythegeneralassemblyoftheparentcompany.TherequirementtoappointauditorhasbeeninforcesinceJanuary2013inaccordancewiththeimplementationofthenewTCC.

Independent Audit Requirement under the New Commercial CodeAspertheAmendmenttotheCouncilofMinistersDecisionRegardingtheDeterminationofCompaniesBeingSubjecttoIndependentAuditnumbered2016/8549publishedintheOfficialGazettedated09.03.2016tobeeffectiveasof01.01.2016,companiesmustfulfilltwoofthefollowingthreecriteriaintwoconsecutivefinancialyear,inordertobesubjecttoindependentaudit:

• TotalassetsofTL40.000.000andabove• AnnualnetsalesrevenueofTL80.000.000andabove• 200employeesandabove

Companiesoperatinginspecificfieldsarealsosubjecttoindependentauditwithoutconsideringtheabovementionedgeneralcriterion.ThosecompaniesaremainlytheonesoperatinginregulatedmarketssuchasEnergyMarket,ElectricityMarket,PetroleumMarket,Insurance,CMB,BRSAetc.

5. Corporate TaxationNewCorporateIncomeTaxCode(LawNr:5520)hasbeenannouncedintheOfficialGazettedated21June2006andenforcedasof1January2006.TheformerCorporateIncomeTaxCode(LawNr:5422)dated3June1949anditsannexeswereabolishedthroughenforcementofNewCorporateIncomeTaxCode.

NewCorporateIncomeTaxCodebroughtsignificantchangesintheexistingtaximplementationsandalsointroducedsomenewconceptsintoTurkishtaxlegislation.ByvirtueoftheprovisionsofthenewCode,Turkishcorporatetaxlegislationhasbecomemoreclearandobjectivewithrespecttoparticularanti-avoidanceregulations,suchasthincapitalization”and“transferpricing”inlinewiththeinternationaltaxliterature.Ontheotherhand,thenewCodeintroducedsomenewconceptsintoTurkishtaxlegislationsuchas“ControlledForeignCorporation”,“TaxHeavens”.

5.1 Taxes on Corporate Income

Companies Subject to TaxThefollowingentitiesaresubjecttotaxesonincomeleviedundertheCorporateIncomeTaxCode,No.5520

(i) CompanieswithShareCapital:Jointstockcompanies(JSC),limitedliabilitycompanies(LLC)andlimitedpartnershipsdividedintosharesandsimilarforeigncompaniesincorporatedunderTurkishCommercialCodeareconsideredascapitalcompanies.FundswhicharesubjecttoregulationandsupervisionofCapitalMarketsBoardandsimilarforeignfundsarealsoincludedhere.

(ii) Co-operatives:Co-operativesfoundedunderCo-operativesLaworunderitsspecialregulationsandsimilarforeignco-operatives

(iii) StateEconomicEnterprises:Commercial,industrialandagriculturalorganizationsotherthan(i)and(ii)above,whichareinvolvedincontinuousbusinessactivityandownedbyoraffiliatedtocentralandlocaladministrations,municipalities,andotherpublicorganizations.

(iv) Commercial,industrialandagriculturalorganizationsotherthan(i)and(ii)aboveownedbyoraffiliatedtoforeignstates,foreignstateadministrationsandorganizationsarealsotreatedasstateeconomicenterprises.

(v) Economicentitiesownedbyassociationsandcharities:Commercial,industrialandagriculturalorganizationsotherthan(i)and(ii)above,whichareinvolvedincontinuousbusinessactivityandownedbyoraffiliatedtoassociationsandcharitiesandsimilarforeignenterprisesareeconomicentitiesrunbyfoundationsorassociations.Unionsaretreatedasassociationandcongregationsaretreatedasfoundation.

(vi) JointVentures(JV)establishedbetweenentitiesorindividualstorenderworkwiththeobjectiveofsharingprofitsunderthejointresponsibilityaresubjecttocorporateincometax.

Stateeconomicenterprisesandeconomicentitiesrunbyfoundationsandassociations,whetherornottheyhavea)legalpersonality,b)independentaccountingsystems,orc)sharecapitalord)ownbusinessplacesandregardlessofwhethertheyareformedforthepurposesofprofit,aresubjecttotaxesonincome.

TerritorialityTaxpayerswhoselegalorbusinessseatsarelocatedinTurkey,aresubjecttocorporateincometaxontheirworldwideincome.IncaseswherebothofthelegalandbusinessseatsarenotlocatedinTurkey,theentityisqualifiedasnon-residentinTurkeyandwillbesubjecttotaxonlyonTurkish-sourcedincome.

ThelegalseatisdeterminedintheArticlesofAssociationandthebusinessseatistheplace,wherebusinessactivitiesareconcentrated.

Taxable IncomeCorporateincometaxiscomputedthroughmultiplicationofcorporateincometaxrateandthefiscalprofitsgeneratedwithinafiscalyear.Fiscalprofits(i.e.corporateincometaxbase)iscalculatedbyadditionofnon-deductibleitemstonetbusinessprofitsandapplicationofexemptionsandcarried-forwardlossfigurestothebusinessprofits.

5.2 Allowable Deductions

Thenetbusinessincomeisdeterminedthroughdeductionofbusiness-relatedexpensesfromthegrossincomegeneratedwithinafiscalyear.Asaprincipalrule,theexpensesincurredforthepurposeofgeneratingandmaintainingbusinessincomearetreatedasdeductiblefortaxpurposes.Apartfromthis,otherparticulardeductibleexpensesarelisted,butnotlimitedtobelow,:

• Managementfeecharges(incompliancewithTurkishtransferpricingregulations)toTurkishcompaniesbyrelatedparties(Pleaserefertosection7fordetailedinformation).

• Taxesimposedongoods,suchasrealestatetax,stamptax,registrationdutiesandmunicipalfees

• Royaltypaymentsfortheuseofpatents,copyrights,know-howandtrademarksprovidedthattheyaredeterminedonanarm’slengthbasis

• Aspecificbaddebtreserveisallowed,where:

(a) ThedisputeonthereceivableisunderreviewbytheCourts,or(b) Thereceivablehasnotbeenpaidafteraformalnotarizedor

writtenrequesttopay,(c) Specialreserverequirementsfornon-performingloansdefined

intheBankingLawandrelatedregulations.

• Business-relatedrepresentationandentertainmentexpenses

• Travelexpenses(includingmealsandlodging)aredeductibleiftheyareincurredforbusinesspurposesandarereasonableascomparedwiththeimportanceofbusiness.

• Donationstogovernmentalinstitutions,municipalities,villages,associationsthatpursuethepublicinterestandfoundationsundertheCivilCodewithataxexemptstatusgrantedbytheGovernment,andorganizationsengagedwithscientificresearchanddevelopmentaredeductible,upto5%oftaxableincomeoftherelevantyear

• Allexpensesanddonationsmadefortheconstructionofschools,healthpremises,dormitories,nurseryschools,resthomes,rehabilitationcenters,andallkindofdonationsandgiftsmadetothesecorporationsfortheconstructionofthementionedpremisesorforthecontinuanceoftheactivitiesoftheexistingpremises

• Donationsmadeincashorin-kindviaPrimeMinistryuponreceiptforthenaturaldisastersdecidedtobehelpedbyBoardofMinisters

• Sponsorshipexpensesforamateursportactivitiesdeterminedbytherelevantlawsand50%ofsponsorshipexpensesfortheprofessionalsportactivities

• Employeesalariesandpaymenttothechairman,directorsandauditorsaredeductible.Paymentsmaybeintheformofallowances,fees,premiumsandbonuses.Paymentsinkindarealsotaxdeductiblebutaredeemedassalaryandtaxedassuch.

• Interestcosts;eitherasadirectchargeorasdepreciationexpense,whencapitalized

• Undocumentedexpensesupto0.5%ofthegrossincomerealizedinforeigncurrencyrelatedtoexport,constructionandmaintenanceservicesperformedoutsideofTurkey,andinternationaltransportations

• FeespaidtotheEmployer’sUnionaredeductiblewiththeconditionthatmonthlyfeespaidshouldnotexceedthedailytotalpaymentofsalaries

Deduction of the Venture Capital FundTheamountsallocatedasaventurecapitalfundwillbedeductedfromtaxableincomestartingfrom01.01.2013.

Conditionsforthededuction;

• Theamountoffundsallocatedfortheventurecapitalshouldnotexceed10%ofthedeclaredincome,andthetotalamountofthefundshouldnotexceed20%ofthepaidincapital.(Bothconditionsmustbesatisfied)

• InvestmentshouldbemadeintoventurecapitalinvestmentfundsorpartnershipswhichareestablishedorwillbeestablishedinTurkeyandsubjecttoregulationandsupervisionofCapitalMarketBoarduntiltheendoftheyearoffundsareallocated.

• Theamountofallocatedfundsshouldbeshownonthecorporatetaxreturnoftherelevantyearseparately.

Deduction for services provided from Turkey to non-resident corporations and individuals TheincomederivedfromtheservicesrenderedinTurkeytonon-residentswhicharesolelybenefitedoutofTurkeymaybesubjecttoa50%deductionfromcorporatetaxbase.Incasethereisnosufficientcorporatetaxbaseforthededuction,theamountwhichisnotdeductedfromthecorporateincometaxbasecannotbecarriedforward.

Theserviceswithinthecontextofthisdeductionare:

• Architectural,engineering,design,software,medicalreporting,bookkeeping,datastorageservicesandcallcenterservices

• Educationandhealthserviceswhicharesubjecttorelevantministry’spermissionandsupervision.

Incentive for cash capital increases Effectivefrom01.07.2015,stockcorporations(exceptforthoseoperateinfinance,bankingandinsurancesectors)willbeabletodeduct50%oftheinteresttobecalculatedoverthecashcapitalincreasesregisteredinTradeRegistryfromtheirtaxableincome.Thedeductibleinterestamountwillbecalculatedbyusingthelatest“annualweightedaverageinterestrateappliedoverthe“TRY”denominatedcommercialloansgrantedbybanks”tobeannouncedbyTurkishCentralBankandfortheperiodfromthecapitalincreasetothelastdayofthefinancialyear.

5.3 Disallowable Deductions

Thenon-deductibleexpensesarealsoseparatelydeterminedinthetaxlaws,butnotlimitedtobelow:

Disguised Profit Distributions through Transfer PricingIfataxpayerentityconductstransactionswithrelatedparties,wherethepricesarenotsetinaccordancewitharm’slengthprinciple,therelatedprofitsareconsideredtobedistributedinadisguisedmannerthroughtransferpricing.Suchdisguisedprofitdistributionsthroughtransferpricingarenottreatedastaxdeductibleforcorporateincometaxpurposes.(Pleaserefertosection7forfurtherinformation).

Cost AllocationInterest,commissionsetc.paidtoaparentcompanyorbranchesoutsideTurkeyforpurchasesandsalescarriedoutonbehalfofanon-residentcompanyinTurkeyandamountsallocatedtomeettheexpensesandlossesoftheparentcompanyanditsbranchesoutsideTurkey,arenottaxdeductiblewiththeexceptionsof;

• amountsrelatedtothegenerationandcontinuationofincomeinTurkeyandallocatedinlinewiththecostallocationkeysdeterminedinaccordancewiththearm’slengthprinciple,and

• travelexpensesincurredbyauthorizedpersonssentfromforeigncountriesinconnectionwiththeauditingandsupervisionofabranchinTurkey.

Thin Capital Interest,foreignexchangelossesandothersimilarexpensesrelatedtotheborrowingsfromrelatedpartieswhichareregardedasthincapitalaretreatedasnon-deductibleexpensesforcorporateincometaxpurposes.

TheCorporateTaxLawimposesaspecificdebt/equityratioof3:1forconsiderationofthincapital.Iftheborrowingobtaineddirectlyorindirectlyfromshareholdersorpersonsrelatedtoshareholdersexceedthreetimestheshareholders’equityofthecompanyatanytimeduringtherelevantyear,theexceedingportionoftheborrowingwillbetreatedasthincapital.

Iftheshareholder(orrelatedparty)providingtheloanisqualifiedasabankorafinancialinstitutionwhichoperatesinlinewithitsownfieldofactivity,thenthe50%oftheborrowingsobtainedfromthesewillbetakenintoconsiderationinthecalculationofdebt/equityratio-hencetheallowabledebt/equityratiowillbeincreasedto6:1.

However,borrowingsobtainedfromtheintra-groupcreditcompanieswhichareonlyfinancingtherelevantgroupcompaniescannotbetakenintoconsiderationas50%inthecalculationofdebt/equityratio.

Loansmentionedbelow(butnotlimitedto)willnotbequalifiedasthincapital;

• Loansobtainedfrom3rdpartiesagainstnon-cashguaranteesprovidedbyshareholdersorthepersonsrelatedtoshareholders,

• Loansobtainedbycompanies’subsidiaries,shareholdersorrelatedpersonsfromthebanksandfinancialinstitutionsorfromthestockmarketsthataretransferredwhollyorpartiallytothecompanywiththesametermandconditions.

Excludingforeignexchangedifferences,theinterestspaidorcalculatedandothersimilarexpensesoverthethincapital(thatexceedsthe3:1debtequityratio)istreatedasdividenddistributedtoshareholdersasofthelastdayoftheaccountingperiodinwhichthincapitalconditionsaresatisfied.

Financial Expense RestrictionEffectivefrom01.01.2013,acertainpercentageofthefinancialexpenses(i.e.interest,commission)incurredovertheborrowingsfromexternalsourcesexceedingtheshareholder’sequityofaTurkishcompanymayberegardedasdisallowableexpense.TheCouncilofMinistersisauthorizedtodeterminethepercentageupto10%andre-determinetheratepersectors.Thecreditinstitutions,financialinstitutions,leasing,factoringandfinancecompaniesareexcludedfromthisapplication.SincenoratehasbeendeterminedbytheCouncil,thelegislationisnotapplicableyet.

5.4 Exemptions

Exemptionsareseparatelydeterminedinthetaxlaws,butnotlimitedtobelow:

Dividends – domestic participation exemptionDividendsreceivedbyaTurkishcompanyandventurecapitalinvestmentfunds/partnershipsfromaresidentcorporatetaxpayerarenotsubjecttocorporateincometax.Theexemptionisalsoavailablefornon-residentcompaniestotheextentthatthedividendsareattributabletoaTurkishpermanentestablishmentorbranch.Dividendsreceivedbythecompaniesfromfounder’ssharesthatgiveaparticipationrighttotheprofitofanotherresidentcompanyandfromotherredeemedsharesarealsoexemptfromcorporatetaxation.Capitalgainsarenotcoveredunderthisexemption.

Dividends – foreign participation exemption Dividendsreceivedfromnon-residentsubsidiariesareexemptfromcorporatetaxuponprovisionofbelowconditionstogether. (i) theparticipationrateshouldbeatleast10%,(ii) theparticipationshouldhavebeenheldatleastfor1year,(iii) overalltaxburdenoverthesedividendsmustbeatleast15%,

and (iv) gainshouldbetransferredtoTurkeyuntilthedateoffilingof

corporatetaxreturnofthefiscalyearinwhichtherelevantgainisobtained.

Capitalgainsupondisposalofsharesinforeignparticipationsarenotcoveredunderthisexemption.Underthesameconditions,foreignbranchprofitsmayalsobeeligibleforthisexemption.

Capital gains exemption on the disposal of participation sharesForeign participation shares

Thecapitalgainsderivedbyaresidentcompanyfromthedisposalofthesharesofparticipations/subsidiarieswhoselegalandbusinesscentersarelocatedoutofTurkey(i.e.sharesoftheforeignsubsidiaries)areexemptedfromcorporatetax,whereallthefollowingconditionsaresatisfiedalltogether;

• Atleast75%oftotalassetsoftheTurkishcompany,otherthancashequivalents,shouldbecomposedofparticipationinforeignsubsidiariessharesatleastforanuninterruptedperiodof1yearasofthedateofthegainobtained,

• ATurkishjointstockcompanymustholdatleast10%ofsharesoftheseforeignsubsidiaries,

• Theforeignsubsidiarymustbeacompanyinthestatus/natureofajointstockoralimitedliabilitycompany,

• Thesharesoftheforeignsubsidiarymustbeheldbytheresidentjointstockcompanyatleastfor2fullyears.

Domestic participation shares 75%ofcapitalgainsarisingfromthedisposalofimmovablepropertiesandparticipationshares,founder’sshares,pre-emptiverightsandredeemedsharesinothercompaniesareexemptfromthecorporatetax.Majorrequirementsare(i)assetssoldshouldhavebeenheldatleastfortwoyears;(ii)theexemptionisappliedintheyearinwhichsaleoccurredandcapitalgainbenefitfromtheexemptionshouldbekeptinaspecialreserveaccountatleastforfiveyears(iii)salesrevenueshouldbecollecteduntiltheendofsecondcalendaryearfollowingsaleyear(iv)exemptedamountcannotbetransferredtoanotheraccount(otherthanpaid-upcapital)orwithdrawnfromcompanywithinfiveyears.Inthecasethatcompanyisliquidatedwithinthese5years’time,theexemptedamountshouldbesubjectedtocorporatetax.

Exemption for the gains derived from non-resident place of business and legal representative Gainsderivedbythecompaniesthroughtheplaceofbusinessorlegalrepresentativesabroadareexemptedfromcorporatetaxuponfulfillmentofcertainconditions.Theseare,generally,amongothers,(i)gainsshouldbesubjecttoatleast15%taxburdeninaccordancewiththetaxlegislationoftherelevantcountries,(ii)gainsshouldbetransferredtoTurkeyuntilthedateofthefilingofthecorporatetaxreturnofthefiscalyearinwhichtherelevantgainisobtained.

Exemption on Emission PremiumsNewshareissuepremiums(Agio),whichrepresentthedifferencebetweenthenominalandsalevaluesofsharesissuedbyjoint-stockcompanies,areexemptfromcorporationtax.

Exemption on Off-shore Construction and Technical Services IncomeOffshoreincomefromconstruction,repair,maintenanceandtechnicalservicesisexemptfromcorporatetax.

Exemption on Portfolio Management IncomePortfoliomanagementincomebysecuritiesinvestmentfundsandcompanies,theprofitsofrealestateinvestmentfundsandcompanies;venturecapitalinvestmentfundsandcompanies;pension,housingandwealthfinancingfunds;andtheportfoliomanagementprofitsobtainedbyinvestmentfundsorcompanieswhichhaveportfoliobasedonthegoldandpreciousmetalsdealinginexchangemarketsfoundedinTurkeyareexemptfromcorporatetax. Exemption on Education Services IncomeProfitsderivedfromeducationandrehabilitationservicesareexemptfromcorporatetaxforaperiodof5yearsstartingfromcommencementofsuchbusinessesundercertainconditions.

Investment Incentive AllowanceInvestmentIncentiveAllowanceisamechanismwhichenablestaxpayerstodeductsomeoftheireligibleinvestmentexpendituresagainsttheirfiscalprofits.Intheabsenceofanyfiscalprofits,the

carriedforwardinvestmentallowancewasbeingallowedtobecarriedforwardforutilizationagainstthefuturefiscalprofitswithoutanytimelimitation.

Exemption for the income derived from industrial property 50%oftheincomederivedfromtheleasing,transfer,sale,massproductioninTurkeyandmarketingoftheinventionsofthecorporatetaxpayers,whichhavepatentorutilitymodelregistration,andwhichresultfromresearch,development,innovationandsoftwareactivitiescarriedoutinTurkeyisexemptedfromcorporatetaxasfrom01.01.2015,providedthatcertainconditionsaresatisfied.Iftheinventionisusedinthemanufacturingofaproduct,50%oftheincomederivedfromthesaleofthisproduct(limitedtotheportionofincomeattributabletothepatentedinnovation)canalsobetaxexempt.

Regional Headquarters TheincomeoftheRegionalHeadquarters,establishedupontheapprovalobtainedfromMinistryofFinance,fulfillingtheconditionsbelowarenotsubjecttoCorporateIncomeTaxinTurkey:

- TheexpensesoftheHeadquartershallbecoveredbythenon-residentcorporations

- TheexpensesshallnotbereflectedintotheaccountsofanentityresidesinTurkey

5.5 Corporate Taxation

Computation of Corporate Income TaxThecorporateincometaxrateis20%.Corporateincometaxiscalculatedoverannualfiscalprofitsofthetaxpayerandeachtaxpayeristaxedonstand-alonebasis.TaxgroupingisnotallowedinTurkey.

Advance Corporate Income TaxAllresidentandnon-residentcompanies,whogeneratecommercialorprofessionalincomeandwhoareobligedtofileannualcorporateincometaxreturn,arealsorequiredtofileadvancecorporateincometaxreturnandbesubjectedtocorporatetaxat20%onthebasisoftheiractualquarterlyprofits.

Advancecorporateincometaxreturnispaidduringtheyearisimputableagainstthefinaltaxescalculatedontheannualcorporateincometaxreturn.Anyexcesspaymentmaybeoffsetagainstothertaxliabilities,andintheabsenceofsuchliabilitiesitisrefundableupontheclaimwithinoneyear.

Tax lossesAlossincurredinanyfinancialyearcanbecarried-forwardfor5yearsagainstfutureprofitsforpurposesofcorporationtax.Taxlossescannotbecarriedback.

Tax Returns and PaymentsThenormalfiscalyear-endisDecember31st.Wherethecalendaryearisnotappropriateduetothenatureofbusiness,taxpayersmayoptanalternativeperiodtodeterminetheirfiscalyearuponthepermissiontobeobtainedfromtheMinistryofFinance.

Annualcorporateincometaxreturnsmustbefiled,withintheperiodfrom1stto25thdaysofthefourthmonthfollowingtheendofthefiscalyearandcorporateincometaxispayable(aftertheoffsetofACITandotheravailabletaxcredits)untiltheendofthemonthinwhichthetaxreturnisfiled.

Advancecorporateincometaxreturnmustbefiledbythe14thofthesecondmonthfollowingthequarterendandispayableonthe17thofthesamemonth.

Withholdingtaxondividendsmustbefiledbythe23rdofthemonthfollowingthedividendpaymentstoshareholdersandpaidon26thofthesamemonth.

Advance Profit DistributionLimitedliabilityandjointstockcompaniesincorporatedinaccordancewiththeTurkishCommercialCodemaydistributeprofitsreportedintheirinterim/quarterlyfinancialstatementsasperNewTurkishCommercialCode.

Inordertodistributeadvanceprofitsduringtheyear,companiesshouldreportprofitsduringfirst,secondandthirdadvancetaxperiodsandtakeadecisioninthegeneralassembly.Itisenvisaged

thatupto50%oftherelatedperiods’profitscanbesubjecttodistributionaftertheoffsetoftaxesandpreviousyears’lossesandprovisionsforlegalreserves.

Incasetheadvanceprofitwhichisdistributedduringadvancecorporatetaxquartersexceedsthefinaldistributabledividendamount,theexceedingamountswillbesettledfromthelegalreserves,ifany.Also,incasetheamountoflegalreservesisnotenoughtooffsetthedistributedadvancedividendamount,theoverpaidamountswillberenderedtothecompanybyshareholders.Companiesareobligedtooffsetthedistributedadvanceprofitstotherelevantyear-endprofitbeforemakinganyfurtherdividenddistribution.

Withholding tax on dividendsWhendividendsarepaidout,thecompanyisrequiredtomakeawithholdingfromthedividends.Theratefordividendwithholdingtaxis15%.DividendspaidtoaTurkishresidententity(i.e.Turkishholdingcompany)oraTurkishbranchofaforeigncompanyisnotsubjecttothewithholdingtax.Althoughthelocalratefordividendrepatriationisdeterminedas15%,theratecanbereducedthroughtaxtreatyprovisions.

Withholding tax on branch profitsTherewillbeawithholdingonthebranchprofitsofnon-residentcompaniesuponremittanceofsuchprofitstotheheadquarters.Therateofwithholdingtaxis15%whichisappliedonthedistributablebranchprofitsafterthedeductionofcorporateincometax.

Controlled Foreign Corporation (CFC)Theprofitsofforeigncompaniescontrolledbytaxresidentcompaniesorpersonsbymeansofthedirectorindirectandseparateorjointownershipofatleast50%ofthecapital,dividendsorvotingrightsaresubjecttocorporateincometaxinTurkeyirrespectiveofwhetherdistributedornot,ifallofthefollowingconditionsaremet:

• Atleast25%ofthegrossrevenueofCFCmustbecomposedofpassiveincomesuchasinterest,dividend,rent,licensefee,securitysalesgainetc.,

• TheCFCshouldbesubjecttoataxburdenlowerthan10%overitscommercialincomeinitscountry,

• TheCFC’stotalgrossrevenueintherelevantyearshouldexceedtheforeigncurrencyequivalentofTRY100,000.

Thehighestrateownedatanytimewithintherelevantfiscalyearshouldbetakenintoconsiderationas“ControlRate”.IfCFCdistributesdividendoveritsprofit,dividendsthathasalreadybeentaxedinTurkeywillnotbesubjecttoanyadditionaltaxinTurkey.However,profitswhichhasnotbeenpreviouslytaxedinTurkeywillbesubjecttocorporatetaxwhendistributed.TaxespaidbyCFCoveritsrelatedprofitinforeigncountrieswillbeoffsetagainstthecorporateincometaxcalculatedoverthisprofitinTurkey.

Foreign Tax CreditTaxespaidabroadonprofitstransferredbacktoTurkeymaybecreditedagainstcorporateincometax,butonlytotheextentthattheydonotexceedlocalcorporateincometaxcalculatedthereon.

Withholding Taxes Applicable on Certain PaymentsIngeneral,theTurkishTaxationSystemhasthefollowingtypesofwithholdingtaxesapplicabletocorporations.

Multi-year Construction or Repair worksProgresspaymentsfortheconstructionandrepairworkslastingmorethanoneyeararesubjectto3%withholding.Suchconstructionworksistaxedoncompletedprojectbasis,andtheamountofwithholdingtaxespaidonprogresspaymentsaredeductedfromthetaxdueattheendoftheconstruction.

Payments to Non-resident EntitiesThefollowingpaymentstonon-residentcompaniesaresubjecttowithholdingtax;

• Progresspaymentsfortheconstructionandrepairworkslastingmorethanonecalendaryearat3%

• Professionalfeesat20%,• Rentalsandroyaltiesat20%,• Dividendsandinterestsat15%,• Salesproceedsofcopyrights,patents,trademarksetc.at20%.

Theratesapplicableforpaymentstonon-residentscanbeseeninAppendixIVindetail.

Withholdingtaxwillnotbeappliedtoprincipal,interestanddividendpaymentsfortheborrowingsobtainedfromforeignfinancialinstitutionsandalsoinsuranceandreinsurancepayments.

WithholdingtaxesoverpaymentsmadetoCFCsinlinewiththeaboveregulationcanbeoffsetagainstthecorporateincometaxcalculatedoverCFC’sprofitincludedinthetaxreturninTurkey.

Payments to Tax HeavensAllsortsofpaymentsmadetotheentities(includingbusinessplacesofresidentcompaniesintherelevantcountries)thatareestablishedoroperatinginthecountrieswhichareannouncedbytheCouncilofMinistersbytakingintoconsiderationwhetherthereisanunfairtaxcompetitionornotandtheexchangeofinformation,wouldbesubjecttowithholdingtaxatarateof30%untilanewrateisdeterminedbytheCouncilofMinistersirrespectiveofthefactthat;

• Thesaidpaymentsareinthescopeoftaxornotor,• Theentitythatreceivesthepaymentsisataxpayerornot.

Ontheotherhand,theCouncilofMinistershasauthoritytoamendtheabovementionedratewithincertainlimitsandmightuseitsauthorityforeachsortofpaymentsorforeachlineofactivitiesandsectorsseparately.

Payments to Resident CompaniesThefollowingpaymentstoresidentcompaniesaresubjecttowithholdingtax:

• Interestonalltypesofbondsandbills• Capitalgainsderivedfromthesaleofbondsandbillsissuedon

orafter1.1.2006andfromthesaleofstocksquotedinIstanbulStockExchange(ISE)thatarepurchasedonorafter1.1.2006andheldlessthan1year.

• Interestonbankdepositsandrepoincome..

Alternate Tax BasisAnon-residentcompanywhichdoesnothavecommercialincomegeneratedfromabusinessinTurkeyandpayswithholdingtaxatsourcemayfileacorporateincometaxreturnshowinggrossrevenueandexpensesandcalculatingthetaxespayableonnetincome.Ifthetaxcomputedislessthanthetaxdeductedbywithholding,thenaclaimmaybemadetorefundtheexcesstaxespaid.Otherwise,withholdingtaxesrepresentthefinaltaxationforthenon-residentcompanies.

Statute of LimitationAtaxreturnisnotsubjecttoquestionoradditionalassessmentaftertheendofthefifthyearfollowingtheyearthetaxliabilitywasincurred.Thisperiodcannotbeprolonged.However,thetimetakenforanadministrativeorcourtproceedingisnotcountedinthefiveyears.

5.6 Bookkeeping Requirements

BasedonTurkishTaxProceduralCode,Companieswhokeeptheirrecordspertothebalancesheetmethodshouldmaintainbelowlegalbooks:

• Journalledger• Generalledger• Inventoryledger

Belowarethecertaincriticalissuesforlegalbooksthatmentionedinthetaxlaws:

• Abovelegalbooksaresubjectedtopublicnotarycertificationprocedure.

• LegalbooksmustbekeptinTurkish(duallanguagecanalsobeused),intermsoftheTurkishLira,andinlinewiththeTurkishUniformChartofAccount.

• Legalbooksshouldbeprintedashardcopiesifthecompanyisnotregisteredwithe-invoicing/e-ledgersystems.

E-invoice,e-ledgerande-archivesystemshasrecentlybeenintroducedbytheTurkishRevenueAdministrationtoadopttheelectronictransformationintotaxenvironment.Throughthesesystems,companieshavetheopportunitytocreate,storeandsubmittheirinvoices,journalsandledgerselectronically.Implementationofe-invoice,e-ledgerande-archiveareobligatedforcertaintaxpayers:

• E-archive:Taxpayerswhichsellproductsandservicesoverinternetandhavingagrosssalesrevenueof5millionTLandhigherin2014andonwardsareobligedtoimplemente-archiveapplication.

• E-invoiceande-ledger:LubeoillicensedfirmswithinthescopeofPetroleumMarketLaw,producers,constructorsandimportersoftheproducts(coladrinks,alcoholicdrinksandtobaccoproducts)includedthe(III)numberedlistattachedtotheSpecialConsumptionTaxLaw,taxpayershavingagrosssalesrevenueof10millionTLandhigherin2014andonwardsareobligedtoimplemente-invoiceande-ledgerapplication.

6. Settlement and Tax Case

Legalremedies,whichtaxpayersmayresorttoconcerningthetaxesandpenaltiesassessedagainstthem,areregulatedundertheTaxProceduresCodeNo.213.

Remediesthatmayberestoredbythetaxpayersagainstthetax/penaltyassessmentsareasfollows;

• Settlement• Directlegalaction(TaxCase)• Legalactionincasenosettlementisreached.

6.1 Settlement

Taxpayersmayapplytosettlementagainstthetax/penaltynotificationswithin30daysfollowingthenoticeofthetax/penaltyassessment.

Settlementapplicationsshouldbeaddressedtoauthorizedsettlementcommitteewhichwouldbedeterminedinaccordancewiththetaxamountassessedbythetaxoffice.

Settlementapplicationwouldbeevaluatedbytheauthorizedcommissionandthesettlementdatewouldbenotifiedtothetaxpayerbefore15daysfromthesettlementdate.

Inthesettlementmeeting,thesignatureauthorityoftaxpayer,itsattorneyanditsSwornFiscalAdvisormayattendwiththeproxyshowingthattheyhavetherighttoattendsettlementmeeting,accept/rejecttheproposedamountsandsignthesettlementminute.

6.2 Tax Case

Taxpayersmaydirectlyapplytothetaxcourtagainsttax/penaltyassessmentsfollowingtheassessmentinthefirstinstance.Inthiscase,litigationshouldbeinitiatedbeforetheTaxCourtwithinthirty(30)daysfollowingthedeliverydateofthetaxpenaltynoticetothetaxpayerand/oraddresseeofthepenaltyunlessotherwiseisprovidedunderlegislation.

Besides,incasenosettlementisachievedattheendofthesettlementmeetingandrelevantminutesarepreparedconcerningtheresult,litigationshouldbeinitiatedbeforetheTaxCourtagainstthetaxes/penaltynotificationwithin15daysasofthenotificationdateofthesettlementminutestothetaxpayer.

Initiationofataxcasewillsuspendthecollectionproceduresoftax/penaltyassessmentsuntiltheendofthefirstinstancetaxcourtprocess(notificationofthefirstinstancetaxcourtdecision).Andthepaymentshouldbemadewithin30daysfollowingthenotificationof2ndtax/penaltynotificationtobeissuedupontheunfavorabledecisionofthefirstinstancetaxcourt.

Firstinstancetaxcourtdecisionswillbefinaldecisionsforthetaxcases,fullremedyactionsandlitigationsinitiatedagainstadministrativeactsofwhichthelitigatedamountisunderTRY5.000.Itisnotpossibletoobjectto/appealthesedecisions.Accordingly,thedecisionsheldbyfirstinstancetaxcourtswillbefinaldecisions.

Evenotherwiseisprovidedunderotherlaws,thedecisionsoffirstinstancetaxcourtforthetaxcases,fullremedyactionsandlitigationsinitiatedagainstadministrativeactsofwhichthelitigated

amountishigherthanTRY5.000canbeappealedbeforetheRegionalAdministrativeCourt(BİM).

BİMdecisionswillbefinalforthelitigationsinitiatedagainstadministrativeactsofwhichthelitigatedamountisbetweenTRY5.000andTRY100.000.

Forthelitigationswhichthelitigatedamountinhigherthan100.000,taxpayershavetherighttoappealtheBİMdecisionsbeforeCouncilofState.DependingonthedecisionoftheCouncilofState,thisdecisionwouldbefinal.

7. Transfer Pricing RegulationsInTurkey,transferpricingprovisionshavebeenstatedundertheArticle13ofCorporateTaxLawwiththeheadingof“disguisedprofitdistributionviatransferpricing”.TheTransferPricingCommuniquéNo.1ondisguisedprofitdistributionviaTransferPricing,datedNovember18,2007setsdetailsaboutimplementationoftherules.TransferPricingCommuniquéNo.2wasreleasedasasupplementarydocumenttothefirstcommuniquéonApril22,2008.ThetransferpricingregulationsinTurkeyarecreatedinlinewiththeprinciplesestablishedbytheOECDTransferPricingGuidelinesforMultinationalEnterprisesandTaxAdministrations.Withthe6728numberedlawwhichisineffectiveasof09August2016;newregulationsrelatedtotransferpricingruleshavebeenenacted.Withtheamendmentsmadetoarticle13ofcorporatetaxlawnumbered5520;TurkishtransferpricingruleshavebeenmoreconvergedtoOECDtransferpricingguidelines.

Ifataxpayerentersintotransactionsregardingsaleorpurchaseofgoodsandserviceswithrelatedparties,wherethepricesarenotsetinaccordancewitharm’slengthprinciple,thenrelatedprofitsareconsideredtobedistributedinadisguisedmannerthroughtransferpricing.Suchdisguisedprofitdistributionsthroughtransferpricingarenotacceptedastaxdeductibleforcorporateincometaxpurposes.

Thenewlawstipulates10%thresholdto“relatedparty”definition,itremovesthestricthierarchyamongsttransferpricingmethods,itallowscertaintypeof“rollback”forAPAagreementsandremoves50percentoftaxpenaltiesfortaxpayerswhofulfilltimelyand

properdocumentationrequirements.Transferpricingrelatednewregulationsareinforceasof09August2016.

Inaddition,On16March2016,TheTurkishRevenueAdministrationhavereleasedadraftGeneralCommuniquéonDisguisedProfitDistributionthroughTransferPricingSerialNo:3whichintroducescertainsignificantchangesandamendmentstoGeneralCommuniquéonDisguisedProfitDistributionthroughTransferPricingSerialNo:1.

ThedraftCommuniquéincludesnewrequirementswhichconstituteanenlargementofthecurrentlegalrequirements.Inaddition,thenewdraftCommuniquéintroducesadditionalTransferPricingDocumentationrequirementsinlinewithBEPSAction13.Thisdraftcontainsinstructionsforthefurtherelaborationoftheadditionaldocumentationrequirementsformultinationalenterprises,includingCountry-by-CountryReporting(CbCReport),MasterFileandLocalFile.

AlsointhedraftCommuniqué;locationsavings,assembledworkforceandMulti-NationalEnterprise(MNE)GroupSynergiesasnewcomparabilityfactorsaswellasdescriptionandgeneralinformationregardingCostContributionArrangements(CCA)andtreasurylossareincludedassignificantparts.

7.1 Arm’s Length Principle

Arm’slengthprincipleisdefinedassettingpricesoramountsforthepurchaseorthesaleofthegoodsorservicesbetweentherelatedpersonsasthepricesoramountswouldbechargedforthesametransactionscarriedoutwithunrelatedparties/thirdparties.

Thetransferpricingregulationsstatethattaxpayersshouldselectthebestsuitabletransferpricingmethodologyforsettingthearm’slengthpricesandamountsforthetransactionswithrelatedpersons.Theselectionofatransferpricingmethodologyservestofindthemostappropriatemethodforthenatureoftheintercompanytransactionsunderconsideration.Taxpayerswillsetthearm’slengthpricesoramountsfortheirintercompanytransactionsbychoosingoneofthefollowingmethodsstatedinthearticle.

• Comparable uncontrolled price method: Thismethodmeansthatarm’slengthsellingpriceappliedbyataxpayerisdeterminedbycomparingwiththemarketpricestatedforthecomparablepurchaseorsaleofthegoodsortheservicesbetweentheunrelatedparties.

• Cost plus:Arm’slengthpriceiscalculated/determinedbyincreasingthecostsoftherelevantgoodsorserviceswithareasonablerateofgrossprofitmargin.

• Resale price method:Arm’slengthpriceiscalculated/determinedbydeductingareasonablerateofgrosssaleprofitmarginfromthepricewhichwillbeappliedfortheresaleoftherelevantgoodsorservicestotheunrelatedparties,

Transactionalprofitmethods:Referstothemethodsbasedonprofitsarisingfromthetransactionsbetweenrelatedpartiesindesignationofarm’slengthpriceorreturn.Thesemethodsconsistoftransactionalnetmarginmethodandprofitsplitmethod.Transactionalnetmarginmethodisbasedontheexaminationofanestablishednetprofitmarginrealizedbythetaxpayerresultingfromacontrolledtransactiononcertainrelevantandappropriatebasissuchascosts,salesorassets.Profitsplitmethodreferstothearm’slengthsplitoftotaloperatingmarginorlossbetweenrelatedpartiesrealizedfromoneormorerelatedpartytransactionswithregardstothefunctionsperformedandrisksbornebyeachparty.

Incircumstanceswhereanarm’slengthpriceorremunerationcouldnotbeidentifiedviaoneofthemethodsmentionedabove,anothermethodwhichisconsistentwiththenatureoftherelatedpartytransactionanddefinedbythetaxpayercanbeutilized.

Therelatedprofitregardedasdistributedwhollyorpartiallyinadisguisedwayviatransferpricingistreatedeitherasdividenddistributedoramounttransferredtotheheadquartersforthenon-residententitiesasofthelastdayoftheaccountingperiodinwhichtheconditionsspecifiedundertheArticle13ofCorporateTaxLaw13Articleoccur.Previoustaxationswillbeadjustedforthepartiesinvolved.Inordertomakethisadjustment,taxesassessedforthecompaniesdistributingtheprofitinadisguisedwayshouldbefinalizedandpaid.

Forintra-countrygrouptransactions,disguisedprofitdistributionviatransferpricingwouldbeapplicableiftreasurylossresultsfromthedomesticintercompanytransactionsofthecorporatetaxpayers.Thetreasurylossisdefinedasunderdeclarationorlatedeclarationofalltypeoftaxesasaresultofthepricesortheamountswhicharenotinlinewiththearm’slengthprinciple.

7.2. Documentation Requirements

AccordingtogovernmentdecreeandtheTransferPricingCommuniquéNo.1taxpayershavetwodifferentdocumentationrequirements;preparationoftransferpricingformandyearlytransferpricingreport.

Alsoin2014,anewguidanceissuedbyCapitalMarketsBoardofTurkey(SPK)requiresadditionalinformationreportingaboutcontrolledtransactionsoflistedcompaniesandthusmayaffectthetransferpricingdisclosuresbythesecompanies.Thecommuniqué(CommuniquéofCorporateGovernance)datedJanuary3,2014concernscorporategovernanceanddirectslistedcompaniestosubmitanadditionalboarddecisionandanexplanatoryreportregardingcertaincontrolledtransactions(i.e.,thosecontrolledtransactionshavingavalueabovecertainlimitsassetforthinthecommuniqué).

WiththeamendmentsmadebytheArticle59oflawnumbered6728,incircumstanceswheretransferpricingdocumentationobligationsarefulfilledcompletelyandinduetime,taxpenaltyarisingfromunderassessedorpastduetaxesbyreasonofdisguisedprofitdistributionwillbeimposedwitha50percentdiscount(excludingthestateswhichgiverisetolossoftaxthroughactswordedin359thclauseofTaxProcedureLaw).

Transfer Pricing FormAccordingtotheregulations,alltaxpayersareobligedtocompleteaformcalled“transferpricing,controlledforeigncompanyandthincapitalizationform”attachedtothecompany’sannualcorporatetaxreturn.Inthisform,taxpayersarerequiredtopresentallintra-grouptransactionsthattakeplaceduringtheyearandindicatethe

selectedtransferpricingmethodstotestthearm’s-lengthnatureoftheintra-grouptransactions.Taxpayersarealsorequiredtocompletethe‘controlledforeigncompany’and‘thincapitalization’sections.

Annual Transfer Pricing ReportCorporatetaxpayersregisteredwiththeLargeTaxpayerTaxOfficearerequiredtodocumenttheirinternationalanddomesticrelatedpartytransactionsintheannualtransferpricingreports.CompaniesregisteredwiththeLargeTaxpayerTaxOfficearetypicallythelargestcompaniesdeterminedbyreferencetotheirturnover,payabletaxes,andassetsizeandlocationbeinginIstanbul.AllbanksandinsurancecompaniesarealsoamongthemembersoftheLargeTaxpayerTaxOfficeregardlessoftheirlocationandsize.CorporatetaxpayerswhoarenotregisteredwithLargeTaxpayerTaxOfficearerequiredtopreparethetransferpricingannualreportsincludingonlytheirinternationaltransactionswithrelatedparties.

Additionally,TransferPricingCommuniquéNo.2requiresthatallcorporatetaxpayersshoulddocumenttheirtransactionswiththeirrelatedentitiesand/ortheirbranchesthatoperateinFreeTradeZoneinTurkey.

TransferPricingCommuniquéNo.1setsforthdetailsoftheinformationthatneedstobeincludedinthetransferpricingdocumentation.Accordingtothecommuniqué,transferpricingreportsshouldbepreparedcoveringthefollowinginformationanddocuments.

• Descriptionofactivitiesofthecompany,organizationalstructure,definitionoftherelatedparties(i.e.,taxidnumber,addresses,phonenumber,etc.)andownershipinformationoftheseparties,

• Allfunctionsareperformedandriskstaken,• Pricinglistsoftheproductsoftheyear,• Detailsofcostofgoods,• Theamountandinvoiceinformationaboutalltransactionswith

relatedandunrelatedpartieswithintheyear,• Allagreementssignedwiththerelatedparties,• Financialstatementsofrelatedparties,

• Intra-grouppricingpolicies,• Intra-groupaccountingstandardsandpolicydifferencesifthey

exist,• Ownershipofintangibleassets,• Transferpricingmethodselectedbythecompany

(comparabilityanalysis,selectedcomparableswhetherexternalorinternal),

• Calculationsandassumptionforreachingthearm’s-lengthprice,

• Calculationsforreachingthearm’s-lengthrange,ifapplicable.

Corporatetaxpayerswhodonothaveinternationalrelatedpartytransactionsandindividualtaxpayersarenotrequiredtoprepareayearlytransferpricingreport.However,theabovementioneddocumentsandinformationshouldalsobesubmittedifrequestedbythetaxauthoritiesbycorporatetaxpayersotherthanthoseregisteredatLargeTaxpayerTaxOfficefortheirdomesticoperationsperformedwithrelatedpartiesandbythepayersofincometaxfortheirdomesticandforeignoperationsperformedwithrelatedpartiesduringacalendaryear.

TheGovernmentDecreeandtheGeneralCommuniquéstatethatdocumentationshouldbepreparedbythetaxreturnsubmissiondate,whichis25thofAprilfornormalcalendaryear,anditshouldbesubmittedtotheTaxAuthorityuponrequest.Thedecreeandgeneralcommuniquéstatethatifthetransferpricingdocumentationispreparedinaforeignlanguage,Turkishtranslationsalsohavetobesubmittedtothetaxauthorities.

New Documentation Requirements Introduced by Transfer Pricing Communiqué No. 3

On16March2016,TheTurkishRevenueAdministrationhavereleasedadraftGeneralCommuniquéonDisguisedProfitDistributionthroughTransferPricingSerialNo:3whichintroducescertainsignificantchangesandamendmentstoGeneralCommuniquéonDisguisedProfitDistributionthroughTransferPricingSerialNo:1whichregulatestransferpricingruleseffectivefrom 01.01.2007.

ThedraftCommuniquéincludesnewrequirementswhichconstituteanenlargementofthecurrentlegalrequirements.In

addition,thenewdraftCommuniquéintroducesadditionalTransferPricingDocumentationrequirementsinlinewithBEPSAction13.TheapplicationofBEPS13ActionPlanisalsoguaranteedbytheclauseinArticle59oflawnumbered6728whichstatesthatCouncilofMinistersisentitledtoimposedocumentationobligationsandinclusionofinformationregardingtheactivitiesofcrossborderrelatedpartieswithinthescopeofmentionedobligations,sharingoftheseinformationwithothercountrieswithinthecontextofinternationalagreementsanddetermineandspecifyothertransferpricingprocedureandfundamentals.

Thisdraftcontainsinstructionsforthefurtherelaborationoftheadditionaldocumentationrequirementsformultinationalenterprises,includingCountry-by-CountryReporting(CbCReport),MasterFileandLocalFile.

• Country by Country Reporting:Ultimateparentcompanies,whicharetaxresidentsinTurkeyandwithaminimumconsolidatedturnoverofTRY2.037billion(EUR750million)areobligatedtoprepareandprovideaCountrybyCountryreport.Thefirstreportingperiodwillbe2016andwillbereportedasof31December2017whichisinlinewithOECDpractice.

• Masterfile:AsstatedinthenewdraftCommuniqué,Companiesthatarepartofamultinationalgroupwithaminimumof250millionTLassetvalueasofendofpreviousfiscalyearandturnoverof250millionTLandoverarerequiredtopreparethe“MasterFile”untiltheendofthesecondmonthfollowingthesubmittalofCorporateIncomeTaxReturnandprovideittotheTaxAuthoritiesincaseofaquery.TheMasterFilewillconsistof5maincategories;organizationstructure,definitionofbusinessoperations,intellectualproperty,intragroupfinancialtransactionsandTaxandFinancialpositionofallgroupcompanies.

• Local File:Furthermore,allgroupentitiesthataretaxresidentinTurkeyandwhichhaveintercompanytransactionswillcontinuetopreparetransferpricingreportandannualtransferpricingformwhichareexplainedabove.AccordingtothedraftCommuniqué,theFreeTradeZonetaxpayersarerequiredtodocumenttheirinternationalanddomesticrelatedpartytransactionsintheannualtransferpricingreports.

Theannualform(EK2)willbefilledfortransactionsexceedingTRY30thousand.Ontheotherhand,companieswithaminimumassetvalueattheendofpreviousfiscalyearandturnoverofTRY100million,arerequiredtosubmitaform(EK4)whichrequiresdetailedinformationregardingtheirrelatedpartiesandrelatedpartytransactions.

7.3 Advance Pricing Agreements (APA)

Themethodsdeterminingthearm’slengthpriceorvaluefortherelatedpartytransactionscanalsobeagreedonwiththeMinistryofFinanceupontherequestofthetaxpayer.Themethoddeterminedviasuchagreementwillbecertainintheconditionsandperiodsstatedintheagreement,notexceedingthreeyears.

AtaxpayercanagreeuponthemethodstobeusedfordeterminingthetransferpricesforhisintercompanytransactionswiththeMinistryofFinance.Themethodsthataredeterminedwithinthetermsandconditionsoftheagreementcouldbeusedbythetaxpayerforamaximumperiodofthreeyears.

Iftheagreementisenteredintobetweenonetaxauthorityandataxpayer,thenitiscalledunilateralAPA;andastransferpricesaffectrelatedenterprisesthatarelocatedinothercountries,therecanbebilateralormultilateralAPAs.Inthisrespect,unlesslocallawsandregulationsprovideguidancefortaxauthorityandtaxpayers,themutualagreementprocedureofapplicabledoubletaxtreatiescanbeusedtoconcludebilateralormultilateralAPAs.

SincethetransferpricingregulationswentintoeffectonJanuary1,2007,TurkishtaxpayershavebeenentitledtoenterintoAPAswiththeMinistryofFinanceforthedeterminationofmethodsinrelationtosettingfeesandpricesfortheirtransactionswithforeignrelatedparties(i.e.,non-residentrelatedparties)upontheirrequest.

AccordingtopressreleasesfromtheTurkishRevenueAdministration(TRA)onJuly15,2011,December26,2012,June19,2014,April30,2015andDecember25,2015thefirstsix

unilateralAPAshavebeenconcludedandsignedbetweentheTRAandtaxpayers.InDecember2016,firstbilateralAPAhasbeensignedbetweentheTRAandtaxpayer.

ThemainpurposeoftheapplicationofAPAsistopreventpotentialtaxrelateddisputesandcontroversiesinrelationtotransferpricesappliedbytaxpayersfortheirtransactionswithrelatedparties.ConcludinganagreementwiththeTRA,taxpayerswillbeprotectedagainstpotentialtaxrisksandpenaltiesthatmaybeimposedbythetaxauthorities.

WiththefirstsixunilateralandfirstbilateralAPAssignedinTurkey,weexpectthattherewouldbemoreunilateralAPAapplicationsfromnowonandthiswillpavethewayforbilateralandmultilateralAPAsinthefuture.Inaddition,Article59oflawnumbered6728providesacertainrollbackforAPAfortheprioryears.

8. Indirect Taxation8.1 Value Added Tax

Taxable Transactions

VATappliestothefollowingtransactions:

• Thesupplyofgoodsorservicesinthecourseofperformingcommercial,industrial,agricultural,orindependentprofessionalactivitiesmadeinTurkeybyataxableperson.

• GoodsandservicesimportedintoTurkey

• Deliveriesandservicesarisingfromotheractivitiesspecificallystatedinlaw.

VAT Taxpayer

AtaxablepersonisanypersonorlegalentitythathasVATliabilityinTurkey.Anyentitythathasafixedplaceofbusinessorregularlycarriesoutcommercialorprofessionalactivities inTurkeymustregisterinTurkey.

VATregistrationisgrantedautomaticallybythetaxofficewhenabusinessregistersforcorporateincometaxpurposes.

Group registration: VATgroupingisnotpermittedunderTurkishVATlaw.LegalentitiesthatarecloselyconnectedmustregisterforVATindividually.

Non-established businesses:Anon-establishedbusinessmaynotregisterforonlyVAT.IfaTurkishtaxablepersonreceivesservicesfromanentitythatdoesnothaveafixedplaceinTurkey,VATisaccountedforusingthereverse-chargemechanism.

Reverse charge:ThereversechargeappliesifcertainsuppliessubjecttoTurkishVATaremadebyapersonthatisnotresidentinTurkeyorthatdoesnothaveapermanentestablishmentorheadquartersinTurkey.Itisaformofself-assessmentforVATthroughwhichtherecipientofasupplyofservicesaccountsforthetax.

Thereversechargeappliestothefollowingservicesperformedbynon-residentswithoutafixedplaceofbusinessinTurkey:

• Services of independent professionals, such as engineering,consulting,dataprocessingandprovisionofinformation

• Transfers of copyrights, patents, licenses, trademarks, know-how,andsimilarrights

• Importcommissions

• Interest paymentsmade to foreign entities other than banksandfinancialinstitutions

• Rentpayments

• Transfer or assignment of the right to use capacity for thetransmission, emission, or reception of signals, writings,images, sounds, or information of any nature by wire, radio,opticalorotherelectromagneticsystems

• OtherservicesnotspecifiedinthislistbututilizedinTurkey

VAT rates

InTurkey,thefollowingVATratesareapplied:

• Standardrate:18%

• Reducedrates:1%and8%

ThestandardVATrateappliestoallsuppliesofgoodsorservices,unlessaspecificmeasureprovidesforareducedrateorexemption.

Examples of goods and services taxable at 1%

• Newspapersandmagazines

• Certainfoodsandbeverages

• Usedpassengercars

• Financialleasingservices(withcertainconditions)

Examples of goods and services taxable at 8%

• Certainfoodsandbeverages

• Books

• Pharmaceuticalsandmedicalproducts

• Someconstructionequipment

• Ready-wearproducts,garmentsandtextileproducts

• Admissionchargesforcinemas,theaters,andoperas

VAT Exemptions

Exemptionsareclassifiedintwodifferentgroups:

• The term“fullyexempt”supplies refers tosuppliesofgoodsandservicesnotsubjecttoVATandrecoveryorrefundoftheinputVATispossible(exemptwithcredit).

• “Partiallyexempt”suppliesrefertosupplyofgoodsandservicesnotsubjecttoVATbutnorightofinputtaxdeduction.

Examplesoffullyexemptwithcreditsuppliesofgoodsandservicesare;

• Exportsofgoodsandservices

• Services rendered atmarines and airports formarine and airconveyances

• Suppliestopersonsengagedinpetroleumexploration

• Suppliesofgoodstoinvestmentcertificateholders

• SalestotheDirectorateoftheDefenseIndustry

• Sales todiplomatsor diplomatic entitiesbasedon reciprocityprinciple

• Internationaltransport

• Deliveryoffertilizerandbait/feed

Examplesofpartiallyexemptsuppliesofgoodsandservicesare;

• Leasingimmovablepropertybyanindividual

• Financialtransactions

• Suppliestocertainculturalbodies

• Suppliesbyandtocertaingovernmentalbodies

• Waterforagriculture

• The supply of unprocessed gold, foreign exchange money,stocksandbonds,dutystamps,scrapmetal,plasticetc.

• Storageservicesperformedatbondedwarehousesortemporarystorageplaces

• Delivery of goods or performance of services in free-tradezonesandtransportationtoorfromfree-tradezonesforexportpurposes.

Time of supply or service

Timeofsupplyforgoodstakesplacewhentheyaredeliveredandforservicesittakesplacewhentheyareperformed.However,ifthesupplierissuesaninvoicebeforethetimeofsupply,VATappliestotheextentthatthesupplyiscoveredbytheinvoice.Aprepaymentordepositdoesnotresultinataxabletransaction.

Thetimeofsupplyforimportedgoodsiseitherthedateofimportation,orthedateonwhichthegoodsleaveadutysuspensionregime.

Taxable Base

Thetaxablebaseofatransactionisgenerallythetotalvalueoftheconsiderationreceived,notincludingtheVATitself.TheVATLawdealswiththetaxablebaseunderfourheadings,namelythetaxablebaseondeliveriesandservices,onimportation,oninternationaltransportation,andspecialtypesoftaxablebase.

Incaseaconsiderationdoesnotexist,isunknownorisinaformotherthanmoney,thetaxablebaseisthemarketvalue.MarketvalueistheaveragepricepayableinthemarketforsimilargoodsandservicesandisdeterminedwithreferencetotheTaxProceduralLaw.

Recovery of input VAT

AtaxablepersonmayrecoverinputVAT,whichischargedongoodsandservicesreceivedforbusinesspurposesandrelatedwithtaxableorfullyexempttransactions.

InputtaxincludesVATchargedongoodsandservicessuppliedinTurkey,VATpaidonimportsofgoods,andVATself-assessedonreverse-chargeservices.

Avalidinvoiceorcustomsdocumentmustaccompanytorecoverinputtax.

Therightofdeductionmaybeexercisedinthetaxperiodinwhichthepurchasedocumentsareenteredintotherecipient’sbooksofaccount,butonlyduringthecalendaryearinwhichthetaxableeventtakesplace.

Non-deductible input tax: Inputtaxisnotrecoverableifitischargedonpurchasesofgoodsandservicesthatarenotusedforbusinesspurposesandareconsideredtobenon-deductibleexpensesforcorporatetaxpurposes.Inaddition,inputtaxmaynotberecoveredforpartiallyexempttransactions(inputVATassociatedwithpassengercarsisrecoverableonlyiftheyarerentedoroperatedforausagefee).

Partial exemption:AninputtaxdeductionisgrantedfortaxablesuppliesandforsuppliesthatareVATexemptwithcredit.Aninputtaxdeductionisnotgrantedforpartiallyexemptsupplies.Ifataxablepersonmakesbothtaxableandpartiallyexemptsupplies,itmayrecoveronlyinputtaxallocatedtosuppliesthataretaxableorfullyexempt.

Refunds:IftheamountofinputVATrecoverableinaperiodexceedstheamountofoutputVATpayableinthesameperiodtheexcessamountiscarriedforwardtofollowingperiodswithoutanylimitation.ItispossibletorefundsuchcarriedforwardVATonlyinthebelowcases:

• DeliveryofgoodsandservicessubjecttoreducedrateVAT• DeliveryofgoodsandservicesthatarefullexemptfromVAT• Deliveryofgoodsandservices thataresubject topartialVAT

withholding

TheamountoftheVATrefundcanbeclaimedeitherintheformofoffsettingtoothertaxliabilitiesorcashrefund.

Invoicing

Deliveryofgoodsorperformanceofservicesshouldbeinvoicedwithin7days.Moreover,recipientsofthesuppliesmustretaincopiesoftheinvoices.

Foreign-currency invoices:AninvoiceissuedforadomesticsalemustbeissuedinTurkishlira(TRY).TheinvoicemayalsoshowtheinvoicedamountinaforeigncurrencyiftheTRYequivalentsarestated.However,aninvoiceissuedforanexportsalemaybeissuedin a foreign currency.

VAT returns and payment

ReturnsarefiledonmonthlybasisandmustbesubmittedbytheReturnsarefiledonmonthlybasisandmustbesubmittedbythe24thdayofthefollowingmonth.

Paymentinfullmustbemadebythe26thdayofthesamemonthandinTRY.

8.2 Special Consumption Tax

SpecialConsumptionTaxisanexcisetaxanditisimposedontheimport,manufactureandfirstacquisitionofarangeofgoods.

SpecialConsumptionTaxwasimplementedinAugust2002byabolishing16differentindirecttaxesandfundsinordertomaketheindirecttaxationsystemharmonized.UnlikeVAT,whichisappliedoneachdelivery,SpecialConsumptionTaxischargedonlyonce.Therearemainly4differentproductgroupsthataresubjecttoSpecialConsumptionTaxatdifferenttaxrates.

Scope of Tax

GoodsintheListsattachedtotheSpecialConsumptionTaxLawarethesubjectofthetax.

Therearemainly4differentproductgroupsthataresubjecttospecialconsumptiontaxatdifferenttaxrates;

• ListIisrelatedtopetroleumproducts,naturalgas,lubricatingoil,solventsandderivativesofsolvents.

• ListIIisrelatedtoautomobilesandothervehicles,motorcycles,planes,helicopters,yachts.

• ListIIIisrelatedtotobaccoandtobaccoproducts,alcoholicbeveragesandcola.

• ListIVisrelatedtoluxuryproducts(durablewhitegoods,cellularphones,diamondsetc.).

Taxpayers of the Special Consumption Tax

Taxpayersof special consumption tax changesbasedon the lists.Theyare;

• ForListI;manufacturers(includingrefineries)andimportersofthepetroleumproducts,

• ForListII;Motorvehicledealers,importersforspecialpurposeormotorvehiclesellersthroughauction.

• ForListIII;manufacturers,importersorsellersthroughauctionoftobacco,alcoholicbeveragesandcola.

• ForListIV;manufacturers,importersorsellersthroughauctionofluxuryproducts.

9. Income Tax on IndividualsIncometaxisunitaryinnature.Thesourceofincomeisdefinedin7categories:Businessprofits,agriculturalprofits,employmentincome,professionalincome,rentalincome,interest&dividends,andotherincome.

Thecategoryof“otherincome”coversincome,whichdonotfallunderthefirst6categories,mainlybeingcapitalgainsandincomefromcertainincidentaltransactions.

Therearetwomaintypesoftaxstatutes:residenttaxpayers,andnon-residenttaxpayers.Residentsaretaxedontheirworldwideincome,whereas,non-residentsaretaxedonlyontheirTurkishsourceincome.

Turkishcitizens,whoworkabroad,evenifemployedbycompanieswithheadquarterssituatedinTurkeyorbytheTurkishGovernment,arenotsubjecttoTurkishtaxationinrespectofincomeobtainedandtaxedoutsideTurkey.

AforeignerwhospendslessthanacontinuousperiodofsixmonthsinTurkeyduringacalendaryearandwhosecentreofvitalinterestisnotconcentratedinTurkeyorwho,althoughstaysinTurkeyformorethansixmonthsbuthascometoTurkeyforaspecificandtemporaryassignment(e.g.businessman,expert,pressorradiocorrespondent),isregardedasnon-residentandistaxedaccordingly.

9.1 Taxable Income

Gross IncomeTaxablegrossincomeincludesamountsreceivedfromthefollowingsources:

• Incomefromcommercialactivities,• Incomefromagriculture,• Incomefromprofessionalservices,• Incomefromemploymentservices(wagesandsalaries),• Incomefrommovableproperties(interestanddividends),• Incomefromimmovableassetsandrights(rentalincome),and• Otherincomeandearnings(capitalgains,etc.).

Withsomeexceptions,income(orlosses)fromtheabovecategoriesiscombined.

Exclusions and ExemptionsCertainamountsreceivedbyindividualsneednottobereportedfortaxpurposes.Thefollowingsarespecificallyexempt:

• AnnualrentalincomeuptoTRY3.900• Employmentincomewhollyconsistingofsalariesderivedfrom

oneresidentemployer,providedthatallpaymentsaretaxedbywithholdingmechanismonpayroll,

• Interest incomewhichhasbeensubjectedtowithholdingtaxatsource,

• Halfofdividendincomereceivedbyaresidenttaxpayerfromaresidentcorporation,

• Incomederivedbyauthors,sculptors,paintersandcomposers,etc.andtheirheirsfromcopyrightsandpatentrights,

• Pensionsandothersocialsecuritycompensationsreceiveduptocertainlevels,

• Reimbursement(madebytheemployer)oftravellingexpensesincurredbyemployeesforbusinesspurposes,

• Salaries paid in foreign currency by the representative/liaisonofficesofforeigncompanies,

• Retirement and termination indemnity payments (maximum;TRY4.426,16forthefirsthalfof2017)

• Capital gains from the disposal of Turkish corporation sharesheldformorethantwoyears,

• Capital gains from the disposal of real estates retained byindividualsformorethanfiveyears.

Deductions and AllowancesTurkishincometaxlawprovidesvariousdeductionsandallowancesforeachcategoryofincome.Someimportantdeductionsandallowancesareexplainedbelow:

• Businessexpensedeductionssetout forcompaniesarealsoapplicable to individuals, to the extent that they relate to anindividual’sbusinessincome,and

• Compulsorypensioncontributionsandsocialsecuritypremiums,

The following benefits are not taxable from the employee standpoint:

• Insurance premiums paid for the taxpayer and his family fordeath, sickness, disability, birth and education are deductiblefromthetaxablesalary.However,theinsurancecompanyshouldbe established in Turkey and monthly insurance premiumsshouldnotexceedthoseestablishedbylaw,

• Ifmealsareprovidedatthebusinesspremises,totalpaymentmadebytheemployeristaxexempted.Otherwise,onlycertainamountisexempted.

• Transportationprovidedbytheemployer,• Accommodationprovidedby theemployer, to theemployees

working in mining, factory and those whom the employeeshouldprovideaccommodationinaccordancewiththespeciallegislation.(whichshouldbeownedbytheemployerandnotbemorethan100squaremeters),

• Childrenallowanceuptotheamountreceivedbyagovernmentemployee,formaximumtwochildren,

• Indemnity and assistance payments for reasons of death,disability,illnessandunemployment,

• Assistancepaid toemployeesbecauseofmarriageandbirth,limitedtotwomonths’salary.

- Donationstogovernmentoffices,municipalities,villages,associationsinthepublicinterestandfoundationsundertheCivilCodeofupto5%oftaxableincome,and

- 50%ofthelifeinsurancepremiumspaidtotheinsurancecompaniesestablishedinTurkeyand100%ofthepremiumsfordeath,sickness,disability,motherhood,etc.upto15%ofdeclaredincomeandwithamaximumoftheminimumwage/salaryforeachmemberofthefamily.Thisdeductionisnotapplicablefornon-residents.

- Annualexpensesincurredoneducationandhealthupto10%oftheincomedeclaredontheannualtaxreturnaredeductible,

- EffectivefromJanuary1,2007,minimumsubsistenceallowanceenteredintoforce.Accordingly,itisadoptedthatanamountiscalculatedbymultiplyingtherateappliedtothefirstincometaxbracketoftheincometaxtariffwith50%forthetaxpayer,10%forhisspousenotworkingornothavinganyincome,7,5%forthefirsttwochildren,10%forthethirdchildrenand5%foreachofthechildrenremaining,oftheannualgrossamountoftheminimumwage(amountvalidatthebeginningofthecalendaryearwhenthewageisearned,fortheemployeeswhoareabove16andworkingintheindustrialsector);thenthisamountcanbedeductedfromtheincometaxtobecalculatedoverthewage.

- Rentalincomeearnersmayeitheritemizeexpensesrelatedtoimmovableormaydeductalumpsumof25%ofgrossrentalsexpenses,

- Incalculationoftaxablecapitalgains,thecostofassetswhosedisposalledtocapitalgainsmaybeindexedtotheinflationonlyiftheinflationduringtheholdingperiodisinexcessof10%.Non-residentsareallowedtoeliminateforeignexchangegainswhencalculatingthetaxablegainsfromdisposalofTurkishsecurities.

9.2 Income Tax Rates

TheincometaxrateisappliedatprogressiveratesinTurkey,currentlyfrom15%to35%.

Theincometaxratesandbracketsapplicableforincomegeneratedthroughpersonalinvestments(excludingemploymentincome)in2017calendaryearareasfollows:

Income scales (TRY) Rate (%)

Upto13.000 15

13.001-30.000 20

30.001-70.000 27

70.001andupwards 35

Theincometaxratesandbracketsapplicableforemploymentincomein2017calendaryearareasfollows:

Income scales (TRY)(Employment income)

Rate (%)

Upto13.000 15

13.001-30.000 20

30.001-110.000 27

110.001andupwards 35

Tax CreditsAftertaxhasbeencalculated,creditsagainsttaxpayableareallowedfor;

• Taxwithheldatsourceoncertainincome,and• ForeignincometaxthatislimitedtotheamountofTurkishtax

applicable to foreign incomeprovided that the primary taxingrightbelongstoTurkeyandcertainconditionsaresatisfied.

Tax Credit on DividendsResidenttaxpayershavetoinclude1/2ofgrossdividendsreceivedfromaresidentcompanyintheirtaxableincome.Withholdingtaxpaidatsource,however,iswhollycreditableagainsttaxcalculatedonthereturn.

Tax Returns, Filing, PaymentsTaxreturnsmustbefiledby25thofMarchinthefollowingyear.IncometaxispayableintwoequalinstallmentsinMarchandJuly.

Non-residentsaretaxableonallearningsofincomecollectedorrealizedinTurkeyunlessexempted.Thefilingrequirementsandtaxationsystemsonnon-residentsingeneral,areasfollows:

• Incomefromcommercialandagriculturalactivitiesmustbeincludedinthetaxreturn,

• Salaries,incomefromservicesandproceedsofsaleofrights,interest,rentanddividendsaresubjecttowithholdingtax.Nofurtherfilingisrequired,and

• Theproceedsofsaleofrealestateandincomefrommovablesthathavenotbeensubjectedtowithholdingtaxmustbedeclaredonindividualdeclarations.

10. Labour10.1 Labour Legislation

TheTurkishConstitutionof1982standsasthemostprominentsourceandone,whichtakesprecedenceoverotherareasoflegislation.TheLaborLegislationinTurkeyconsists,atpresent,ofthefollowingacts:theLaborCodenumbered4857,SocialSecurityAndGeneralHealthInsuranceLawnumbered5510,MaritimeLaborActnumbered854,ActConcerningLabor/ManagementRelationsinthePressnumbered5953,OccupationalHealthAndSafetyLawnumbered6331,LawOnTradeUnionsAndCollectiveLaborAgreementsnumbered6356,UnemploymentInsuranceLawnumbered4447,LawOnWorkPermitsOfForeignersnumbered4817,LaborCourtsActnumbered5521,NationalHolidayandGeneralVacationsActnumbered2429,WeekendHolidayActnumbered394,TurkishLaborInstitutionActnumbered4904andrelevantregulations.

Weekly Working Hours and Vacations Ingeneraltheworkingweekconsistsofamaximumof45hours.Weeklyworkinghoursmaybeunequallydistributedthroughouttheworkingdaysoftheweek.However,employeesmustnotworkformorethanatotalof11hoursinonedayincludingovertime.Inaddition,workinghoursinanightshiftmustnotexceed7.5hoursper day.

UnderWeekendHolidayAct(No:394),itisobligatorytoholdaholidayonedayinaweek.

Employeesareentitledtouseminimumsubsequent24hoursweekendholidayina7daysworkingperiod.Nevertheless,onconditionofobtainingpermission,itispossibletokeeptheworkplaceopen7daysaweek.Forexample,largedepartmentstorescanholdtheirworkplacesopenwithoutholdingaweekend

holiday.Incasetheemployeesdonotworkondaysacceptedasnationalandgeneralholidaysinthelaws,theyarepaidthewagespertainingtosuchdaycompletelywithoutanyworkcorrespondenceandincasetheydonotgoonholidayandworkonsuchdays,theyareadditionallypaidthewageofonedayforeachworkedday.

Under theNationalHolidayandGeneralVacationsAct, theofficialholidaysarethefollowing:

• January1st,NewYear’sDay.• April23rdNationalSovereigntyandChildren’sDay,1day.• May1st,LaborandSolidarityDay• May19th,YouthandSportsDay,1day.• July15th,DemocracyandNationalSolidarityDay,1day• August30thVictoryDay,1day.• October29ththeRepublicDay,startsat13.00pm.onOctober

28andcontinuesonOctober29.• RamadanHolidays,3.5days,thedatesvary,startsat13:00pm

onthedaybeforethereligiousday• SacrificeFeastHolidays,4.5days,thedatesvary,startsat13:00

pmonthedaybeforethereligiousday

Overtime WorkOvertimeworkisdefinedastheworkinghours,whichexceeds45hoursinaweek.Hourlywagesforovertimeis50%morethanthatforordinaryworkinghours.Whereanemploymentcontractstipulateslessthan45hoursofworkinaweek,anyworkupto45hoursthatexceedstheweeklyworkinghoursprovidedbythecontractaredeemedasextrahours.Thesalarypayableforeachextrahouris25%morethanthesalarypayableforonestandardhourofwork.Anemployeewhoworksovertimeorextrahoursis,athisdiscretion,entitledtorequest1.5hoursoffreetimeforeachhourofovertimeworkedand1.25hoursoffreetimeforeachextrahourworked,inlieuofincreasedsalary.Thedaysonwhichovertimeworkisdonecannotexceed270hoursayear.

Whenovertimeworkisundertakenintheweekendholidayoronofficialholidays,theemployeeisentitledtoanadditionalfulldayworkingwage.Thewrittenconsentoftheemployeemustbeobtainedannuallyforovertimeworking.

Annual Paid Leave Employeeswhohaveworkedforatleastoneyear,includingtheprobationperiod,fromthedateofrecruitmentareentitledforannualpaidleave.Therightforannualpaidleavecannotbewaived.Thedurationofannualpaidleavetobeallowedtoemployeescannotbelessthan;

• 14workingdaysforthosehavingaserviceperiodbetweenoneyearandfiveyears(includingfiveyears),

• 20workingdaysforthosehavingaserviceperiodmorethanfiveandlessthanfifteenyears,

• 26workingdaysforthosehavingaserviceperiodoffifteenyears(included)andmore.

Incaseofterminationforanyreasonunusedannualleaveaccruedmustbepaidtoemployee.

Employment ContractsWork,whichcontinuesformaximum30workdaysonaccountofitsnature,iscalledtemporarywork,andworkthatlastslongeriscalledpermanentwork.Incaseoftemporarywork,alargenumberofprovisionsoftheLaborCodearenotapplied.

Employmentcontractsthathavedurationofoneyearorlongershouldbeconcludedinwrittenform.Itisnotnecessarytoexecutetheseattheofficeofthenotarypublic,andemploymentcontractsareexemptfromalltaxes,dutiesandcharges.Nevertheless,shouldthenotarypubliccertifythecontract;afeemustbepaidtoit.Incaseswherenowrittencontractismade,theemployerisobligedtopresenttotheemployeeawrittendocumentindicatingthegeneralandspecialworkingconditions,dailyorweeklyworkperiod,basicwageandwageadditions,ifany,wagepaymentperiod,termofcontract,ifdefinite,andtheprovisionsthatthepartiesshouldobserveincaseofterminationwithintwomonthsatthelatest.

Work on Call BasisThelaborrelationwhereitisagreedthroughawrittencontractthattheactionofworkingshallbeperformedwhenemployeeisrequiredinrelationwiththeworkundertakenbyhim/herisapart-

timelaborcontractbasedonon-callwork.Insuchacase,ifnototherwisestatedintheemploymentcontract,theworkinghoursareacceptedas20hoursinaweekandatleast4hoursinaday.Thecallshouldbemadeatleast4daysbeforethestartingdateofthework.

“Distantwork”isanewlydefinedemploymentagreement,wheretheemployerrequestsfromtheemployeetoperformhis/herworkathis/herhomeorviatechnologicaldevicesoutofofficeandthetermsofsuchagreementshouldbedrawninwritten.

Compensating WorkEmployerhastherighttorequestforcompensatingworkwithintwomonthsiftheworkisstoppedduetothecompulsoryreasonsoriftheemployeeshaveholidaysbeforeandaftertheofficialandgeneralholidaysorwork less thanordinaryworkinghoursor if a vacationright isgiven to theemployeeathisown request.Compensatingwork cannot bemore than three hours in a day and cannot alsoexceedmaximumworkinghourswhichis11hoursperday.

Termination of the ContractThefixedtermemploymentcontractsterminatesautomaticallyattheendofthedeterminedperiodwithoutpriornotice.Beforeterminatinganemploymentcontractwithanindefiniteterm,anoticemustbeservedtotheotherparty.

Statutory NoticeTheindefinitetermemploymentcontractwillbeconsideredasannulledin:

• 2weeksfromthedateofnotificationforemploymentof0-6months,

• 4weeksfromthedateofnotificationforemploymentof6months-1.5years,

• 6weeksfromthedateofnotificationforemploymentof1.5years-3years,and

• 8weeksfromthedateofnotificationforemploymentofexceeding3years.

Theseintervals,socalledtheperiodofnotice,maybeextended,butnotcurtailed,throughcontracts.

Theemployermayimmediatelyterminatetheemploymentcontractbypayingthesalarycorrespondingtothenoticeperiod(paymentinlieuofnotice)inadvance.Whereanemploymentcontractisterminatedbypayinginlieuofnotice,allotherentitlementsarisingfromtheemploymentrelationshipmustadditionallybetakenintoconsideration.

Severance PayAseverancepaymentintheamountof30dayssalary(limitedwithasemi-annuallydeterminedthreshold)foreachcompletedemploymentyearispaidinthecasesoftheterminationoftheemploymentcontract:

• bytheemployerwithoutanycause;• bytheemployeewithjustcauses;• becauseoftheemployeeistakenunderregularmilitary

service;• becauseofretirementordisability,orsinglepaymentfromthe

legalinstitutionorthefundthattheemployeeisrelatedto;• employee’sownrequestbycompletingtherequiredperiodof

insuranceandpaymentofpremiumstotakeold-agepension;• femaleemployee’sterminationwithherownwillwithinone

yearbeginningfromhermarriagedate;or• becauseoftheemployee’sdeath.

Severancepayisassessedaccordingtothelastwagereceivedandnumberoftheyearsworkedfortheemployer.Suchpaymentsarecalculatedataminimum30days’wageperyearofemploymentattherateofpayofwhichmaximumamountisannouncedbythegovernmentapplicableatthedateofretirementortermination.Incalculatingthewagethatwillformthebasisoftheseverancepay,anybenefitsotherthanwagesthatweregiventotheemployeeduringthelastyearundervariousnamesandallprivilegesthataccruefromthecontractandcanbemeasuredinmoneywillbetakenintoconsideration.

Presently,themaximumseverancepayforeachyearofemploymentisTRY4.426,16(fortheperiod01.01.2017-30.06.2017).

Collective DismissalCollectivedismissaloftheemployeesfromaworkplaceisdefinedunderArticle29oftheTurkishLaborCode.Accordingly,whentheemployerintendstodismissemployeesinmassduetoeconomic,technologic,structuralandsimilarenterprise,businessorworkrequirements,he/shenotifiesthistothebusinesstradeunionrepresentative,respectiveregionaldirectorateandTurkishEmploymentAgencyinwritingatleastthirtydaysinadvance.

Thedismissalofthefollowingnumbersofemployeesinaccordancewiththeirnoticeperiodsandonthesamedateordifferentdateswithinthesamemonthisconsideredasmassdismissal:

• between20and100,atleast10employees• between101and300,atleast10%oftheemployees• 301andmore,atleast30employees.

Thenotificationshouldincludeinformationonthereasonsofemployeedismissal,thenumberandgroupofemployeeswhowillbeaffectedandtheperiodoftimethatthedismissalprocedureswilltakeplacein.

Noticesofterminationbecomeeffectivethirtydaysafterthenotificationofregionaldirectoratebytheemployerofhis/herintentionofmassdismissal.

Incasetheemployerintendstoemployemployeesforaworkwiththesamequalificationswithinsixmonthsfromthefinalizationofmassdismissal,he/shepreferablyinvitesqualifiedonesforthework.Theemployerwhowishestoreemployemployeesforworkofsamenatureduringthisperiodpublishesthesituationthroughsuitablemeans,andnotifiestheformeremployeesofthefactthroughthenotarypublic.Employeeswhodonotapplytotheworkplacewithin15daysforfeitthisright.

10.2 Labour Costs

Wage RegulationThereisnoceilingtothewagesthatcanbegiven.Ontheotherhand,wagescannotbebelowtheminimumwage.TheminimumconditionsconcerningwageshavebeenspecifiedintheLaborCode.

However,therestrictionsstipulatedbythelawmaybealteredinfavoroftheemployee.Therepresentativesofthegovernment,employeesandemployersdeterminetheminimumwagestobegivenintheagriculturalandindustrialsectorslatesteverytwoyears.Inrecentyearstheminimumwagehasbeendeterminedbeforethetwo-yearperiodwasover.

Monthlyminimumwageapplicablefortheperiodof01.01.2017-31.12.2017isdeterminedasTRY1.777,50ingrossterms.Itisforbiddentoemployemployeesatwagesbelowthisminimum.Theemployerisobligedtopayortoadvancetoallemployeesusingtheirannualvacationthewagesforthevacationperiodbeforetheemployeestartshis/hervacation.Wagesfortheweekendholidays,nationalholidaysandgeneralholidaysthatcoincidewiththeannualpaidvacationperiodarepaidseparately.

Bonuses and Other Extra PaymentsTherearenolegalobligationsinthisrespect.Theyaredeterminedtotallybytheownaccordoftheparties.Shouldacertainsumbegivenasamonthlywageorbonus,therewillbenotaxadvantages.

10.3 Social Insurance - General Health Insurance

Social InsuranceAllemployeesandfunctionariesareconsideredassecuredfromthemomenttheystarttowork.TheemployerisobligedtosubmittheSocialSecurityInstitution(“Institution”)theworkplacenotificationatthelatestonthedatetheinsuranceholderstartsworking.

EmployersareobligedtonotifytheInstitutiontheemployeeswithaninsuranceholderemploymentreport,beforethedateofinsurancestart.However,incasetheemploymentisnotifiedbytheemployertotheInstitution;

a) atthelatestonthedateofstartingtoworkforinsuranceholdersemployedforworkplacesofconstruction,fishingandagriculture,

b) atthelatestuptotheendofonemonthtimeperiodfromthedatetheystarttoworkforinsuranceholderswhostartworkingwithinonemonthfromthedateonwhichtheinsuranceholdersareemployedforthefirsttimeintheworkplaceswhichwillsubmitthefirstworkplacereporttotheInstitutionandfortheoneswhoareemployedduringtravelinthetransportationvehicleswhichtraveltoforeigncountries,

c) withinmonthfromthedateofstartingtoworkofcontractedpersonnelwhoarenotsubjecttounemploymentinsurancepursuantUnemploymentInsuranceLawNumber4447andareemployedbypublicadministrationsorofindividualswhoareemployedbypublicadministrationsinordertoworkinabroadduties,

Thenitisconsideredthatthesubmissionismadebeforethestartofinsurance.

Socialinsurancecoversworkaccidentsandoccupationaldiseases,illness,maternity,disability,oldageanddeath.

Incaseaworkaccidentoccursinconnectionwithhisjobattheworkplaceorinanotherlocationoranoccupationaldiseaseoccurs,he/shereceivesassistancefortreatment,ispaidwagesfortheperiodshe/sheisunabletowork,andwhennecessaryhe/sheisprovidedwithartificialdevicesandappliances.

Thisinsurancebranchisappliedingeneralillness,accidentanddisablementcasesotherthanworkaccidentsandoccupationaldiseases.Forthispurposeaphysician,hospitalization,medicationandtreatmentgivetheemployeeassistanceforexamination.

Thespouse,childrenandparentsoftheemployeealsobenefitfromthesicknessinsurance.

ThehospitaltreatmentsoftheinsuredpersonsarecarriedoutattheSocialSecurityhospitalsestablishedforthispurpose.

Maternityinsuranceprovidesfortheextensionofacertainandnecessaryassistancetotheinsuredwomenandthenon-insuredwivesofinsuredmenincaseofpregnancyandchildbirth.

Social Insurance PremiumsSocialsecuritypremiumsarecompulsoryinrespectofallpersonsearningsalariesandwages.

Socialinsurancepremiumsarecalculatedonthebasisofthemonthlywagesandarepaidjointlybytheemployeeandtheemployeratthefollowingrates:

BranchesEmployee

(%)Employer

(%)Total(%)

ShortTermSocialSecurityBranchesincludingworkaccidentsandoccupationaldiseases(variesdependingonthejob)

Disability,OldAge,Death 9 11 20

GeneralHealthInsurance 5 7,5 12,5

Total Minimum 14 20,5 34,5

UnemploymentInsurance 1 2 3

Theaboveratesareappliedtothegrosstotalofsalaries,wagesandbonusesuptoacurrentmaximummonthlyofTRY13.331,40fortheperiodof01.01.2017-31.12.2017.

ThepremiumsarepaideachmonthtotheSocialInsuranceInstitutionattheplacewheretheemployeeisemployedpriortothe30thdayofthefollowingmonth.

Incalculatingtheincomewithholdingtaxonthewagesbytheemployer,theemployeecontribution(e.g.15%)isdeductedfromthewithholdingtaxbase.

General Health InsuranceAsexplainedabove,socialinsurancealsoincludeshealthinsurance.Furthermore,socialinsuranceiscompulsory.Individualsorenterprises,whichwishtodoso,cannotbereleasedfromtheobligationofsocialinsuranceonthegroundsthattheyhavesubscribedtoaprivatehealthinsurancescheme.

SocialSecurityandGeneralHealthInsuranceLawnumbered5510willbeimplementedafter01.01.2012.Accordingly,anyoneresidentinTurkeywillbecoveredbytheGeneralHealthInsuranceaccordingtotheconditionsofthe60tharticleoftheSocialSecurityandGeneralHealthInsuranceLaw.

EffectiveJanuary1,2012thislawappliestoforeignerswhohavebeenresidentinTurkeymorethan1year.

TheforeignersarerequiredtoapplytoSocialSecurityInstitutionwithintheonemonthafterthecompletionofoneyearresidencewithoutinterruptioninTurkey.Otherwise,accordingtomentionedlawarticle102;theseforeignerswillbechargedwithinterestappliedbytheSocialSecurityInstitution.

ForeignersentitledtosocialsecurityintheirhomecountriesarenotcoveredbytheGeneralHealthInsuranceinTurkey.

InTurkeymanyemployerssubscribetoprivatehealthinsuranceschemesfortheiremployeesinadditiontothesocialinsurance.Theycan,inthismanner,ensurethattheiremployeesareexaminedandtreatedinbetterhospitals.However,aprivatehealthinsuranceisnotobligatory.Therearemanyinsurancecompaniesthatofferhealthinsuranceschemes.

10.4 Rules Applicable to Expatriates

AforeignindividualsentbyaforeigncompanyestablishedabroadtocarryoutbusinessonitsbehalfinTurkeywhohasnotifiedtheDepartmentofSocialSecuritythatheisinsuredabroadwillnotbesubjecttoSocialSecuritydeductionsinTurkeyincasetheyprovidetheofficialdocumentstoTurkishSocialSecuritythattheyareinsuredintheirhomecountry.

International AgreementsTurkeyhasagreementswithGermany,Austria,Belgium,Denmark,Sweden,Libya,Norway,UK,Switzerland,Netherlands,France,T.R.N.Cyprus,Azerbaijan,Romania,Albania,BosniaHerzegovina,CzechRepublic,Georgia,Canada,Quebec,Macedonia,Luxembourg,Bulgaria,Italy,Slovenia,Montenegro,Korea,Croatia.Incaseofindividualswhoarenationalsofoneoftheabovecountries,whichhavesocialsecuritytotalizationagreements,theprovisionsoftheaboveagreementshavetobeconsideredtodeterminetheirsocialsecuritystatusinTurkey.Exceptinthecasesreferredtoabove,aforeigneremployedbyaTurkishcompanyisliableforfullSocialSecuritydeductionsasisthecaseforaTurkishnational.

10.5 Collective Agreements - Trade Union Rights

MatterspertainingtotradeunionsandcollectiveagreementshavebeenregulatedbyLawonTradeUnionsandCollectiveLaborAgreementsnumbered6356.

Collective Labor AgreementsAccordingtothelaw,collectiveagreementsareagreementsconcludedbetweenthetradeunionandtheemployers’associationorthenon-affiliatedemployerfordrawingupaservicecontractandregulatingitscontent,terminationandrelevantmatters.

Collectiveagreementscanalsocontainprovisionsregulatingthemutualrightsandobligationsoftheparties,theimplementationandsupervisionoftheagreementandthemethodstobeappliedforthesettlementofthedisputes.

Collectiveagreementshavetobemadeinwritingandcanhavedurationofminimumoneyearandmaximum3years.Thisperiodcannotbeshortenedorextendedaftertheagreementhasbeensigned.

Theprocedureforcontractingacollectiveagreementhasbeenstipulatedbythelaw.Thisconsistsof,inthestatedorder,determiningtheunionsthatwillmaketheagreementandobtainingthecertificateofauthorizationformakinganagreement,callingtheotherpartytocollectivenegotiationswithin15daysfromthedateofreceiptofcertificateofauthorization,specifyingthevenue,dateandhourofthecollectivenegotiationswithin6workdaysfollowingtheforwardingofthecalltotheotherparty,carryingoutthecollectivenegotiations,andfinallysigningtheagreement.

StrikesTheexpression“strike”meansanyconcertedcessationbyemployeesoftheirworkwiththeobjectofhaltingtheactivitiesofagivenestablishmentorofparalyzingsuchactivitiestoaconsiderableextent,oranyabandonmentbyemployeesoftheirworkinaccordancewithadecisiontakentothateffectbyanorganization.Lawfulstrikemeansanystrikecalledbyemployeesinaccordancewiththislawwiththeobjectofsafeguardingorimprovingtheireconomicandsocialpositionandworkingconditions,intheeventofadisputeduringnegotiationstoconcludeacollectivelaboragreement.

Strikecanbeexecutedwithin60daysprovidedthatthenotificationhasbeenmadetotheotherparty6daysbefore.Unlessthestrikedecisionistakenorthestrikedateisnotifiedtotheotherparty,theauthoritytoexecutecollectiveagreementwilldrop.Strikesexecutedwithoutfulfillinglegalconditionswillbedeemedasillegalstrikes.

Thecasesofoccupationoftheworkplace,slow-downs,decreasingefficiencyandothertypesofjobactionsaresubjecttothesamesanctionsasillegalstrikes.Astrikeorlockoutthatisinthenatureofendangeringpublichealthornationalsecuritycanbepostponedfor60daysbytheCouncilofMinisters.

Lockouts Lock-outmeansanyactiontakenbyanemployerorhisrepresentative,eitheruponhisowninitiativeorinaccordancewithadecisiontakenbyanorganization,tocollectivelysuspendemployeesfromworkinamannerthatcompletelystopstheactivitiesintheworkplace.

Theemployers'tradeunion,ortheemployernotbelongingtoanyunion,thatispartytothedisputemaytakeadecisiontoorderalock-outwithinsixtyworkingdaysofthedateonwhichthedecisiontocallastrikeiscommunicatedtohimandshallputintopracticewithinthisperiodandthedateofthelock-outshallbecommunicatedtotheoppositepartysixworkingdaysbefore.

Special arbitratorThepartiesmayagreetoresorttospecialarbitrationatanystageinthecollectivedisputeinvolvingrightsandinterests.

Provisionsprovidingforrecoursetospecialarbitrationattherequestofeitherofthepartiesmaybeincludedinthecollectivelaboragreement.

Wherethepartiesagreeinwritingtoresorttospecialarbitrationinadisputeinvolvinginterests,theprovisionsgoverningmediation,strikeandlock-out,statutoryarbitrationshallnotthereafterapply.Inthedisputesinvolvinginterests,thedecisionsofspecialarbitrationshallhavethesameforceandeffectasacollectivelaboragreement.

11. Taxation of Mergers, Acquisitions and Reorganizations

Thischapteraimstoexplainthebasictaxationrulesandconsiderationsforaninvestorplanningamerger,acquisitionorare-organizationinTurkey:

11.1 Mergers

TheabsorptionofoneormorecompaniesintoanexistingcompanywheretheabsorbedcompanyisdeemedtobedissolvedwithoutliquidationisdefinedasamergerunderTurkishCommercialLaw.UndertherecentchangesinTurkishCommercialLawcompaniesofdifferentlegaltypecanalsoparticipateinamerger.

Taxable MergersAmergerundertheTurkishCommercialLawprovisionsisconsideredtobeataxablemergerifthespecificrequirementsforataxfreemerger(pursuanttoprovisionsofArticles18,19and20ofCorporateTaxLaw)arenotsatisfied.Inataxablemerger,theassetsoftheabsorbedcompanyaredeemedtohavebeentransferredatmarketvaluetotheabsorbingcompanywhichleadstotaxablecapitalgains.Theabsorbingcompanyisentitledtobooktheassetsattheirmarketvaluesastheirtaxbasisfordepreciationpurposes.

Inataxablemerger,taxlossesoftheabsorbedcompanycannotbetransferredtotheabsorbingcompany.Nevertheless,theabsorbedcompanycanusetheexistingtaxlossestooffsetagainstthecapitalgainsarisingfromthetransferofassetsthroughataxablemerger.

Tax Free MergersAmergerundertheTurkishCommercialLawprovisionsisrecognizedasataxfreemerger(alsoreferredtoasa“takeover”)ifthefollowingtestsaresatisfiedalltogether:

• Boththeabsorbingandabsorbedcompaniesaretaxresidents

• Theabsorbingcompanyincorporatesallassetsandliabilitiesoftheabsorbedcompanyintoitsbalancesheetonacarryoverbasis(i.e.thewholebalancesheetistransferredonthebasisofbookvalues)

• Otherproceduralandfilingrequirementswithrespecttothemergeraresatisfiedonatimelybasis

Under a tax free merger• Theabsorbedcompanyissubjecttotheusualtaxationrulesfor

profitsuptothedateofthemergerhoweverthegainsarisingfromthemergeritself(andtherelatedtransferofassets)isnotcalculatedandtaxed

• Theabsorbingcompanyassumesallknownorunknowntaxliabilitiesoftheabsorbedcompany

• Taxlossesoftheabsorbedcompanycanbetransferredtotheabsorbingcompany,iftheabsorbingcompanycontinuesthebusinessactivitiesoftheabsorbedcompanyminimumfor5yearsfollowingthedateofthemerger.However,taxlossesthatcanbetransferredtotheabsorbingcompanyare

• limitedtotheshareholdersequityoftheabsorbedcompanyasofthedateofthemerger.

• Thetaxfreemergerdoesnotaffectthetaxattributesoftheabsorbingcompany

• Therearealsotaxexemptionsinotherlaws(suchasVAT,stamptax,realestatetransfertax)inreferencetoataxfreemergerconductedasperCorporateTaxLawprovisions.

Simplified merger processAccording to the new Turkish Commercial Code, a simplifiedmerger process is allowed if; oneof the parties owns all sharesthat provide voting rights in the other company or the mergingcompanies are sister companies. Through the simplified mergerprocess,someobligationssuchasdraftingofamergerreportand

providingtheauditrighttorelatedinstitutionsorpersonsstatedintheTurkishCommercialCodewillnotbeapplied,hencethemergercanbeimplementedinarelativelylesstimeframeandadministrativeburden.

Asimplifiedmergercanalsoqualifyasa“taxfreemerger”subjecttotherulesandconditionsexplainedabove.

11.2 Acquisitions

AninvestormayexecuteanacquisitioninTurkeyeitherthroughacquisitionofacompany(sharedeal)oracquisitionofacertainbusiness(assetdeal).ThefollowingrepresentsthekeyconsiderationswhenplanninganacquisitioninTurkey:

Regulations for AcquisitionTherearenogeneralgovernmentcontrolsorrestrictionsoninvestmentsinassets,businessentitiesoracquisitionofotherrightsinTurkey.However,certainspecificbusinessactivitiesrequirearegulatoryapprovalbeforechangeofownership(e.g.,bankingandinsurance,telecommunications,tobaccoandalcoholicbeverages,productionanddistributionofenergy,etc.).AcquisitionofrealestateinTurkeybyforeigninvestorsisalsosubjecttospecificregulationswhichneedtobeobservedbytheforeigninvestors.AmergeroracquisitiontransactionmayalsotriggerapprovalrequirementfromTurkishCompetitionBoardbasedoncertaincriteria.

Asset vs. Share AcquisitionAforeigncompanycanacquireaTurkishcompanybyacquiringeithertheassetsorthesharesofthetargetcompany.Incaseofanassetacquisition,thiscanbedoneeitherviaabranchoftheforeignentity,whichistaxableinTurkeyonnon-residentstatus,orviaaTurkishsubsidiaryoftheforeigncompany.Therespectivetaximplicationsaresummarizedbelow:

• Purchase of assets

AcquisitionofassetscanonlybedonethroughaTurkishcompanyoraTurkishbranchofaforeigncompany.

Purchase PriceInprinciple,thetransferofassetsshouldbeconductedatfairvalue,whichshouldrepresentthemarketvalue.Transfersbetweenrelatedpartiesmustbedocumentedtocomplywithtransferpricingrequirements.

GoodwillIncaseofanasset-deal,theexcessofthepurchasepriceoverthefairvalueoftheassetsbeingtransferredrepresentthegoodwill,whichcanbecapitalizedbythebuyeranddepreciatedfortaxpurposes.Turkishtaxlawdoesnotrequirerecognitionofinternallydevelopedgoodwillandrightsinthetaxbasisbalancesheet,sothereisusuallynotaxbasiscostforthegoodwillintheseller’sbooksandit,therefore,representspuretaxableincome.

DepreciationThedepreciationperiodofassetsarerefreshedinanassetdeal.Thesellingentityhastherighttodeductallremainingnetbookvalueofassetsasthetaxbasiscostagainstthetransfervalue;andthebuyerhastobooktheassetsattheirtransfervalueandstartdepreciatinganewtermofusefullifeforeachasset(asprescribedbytheCommuniquésoftheMinistryofFinance).

Tax AttributesThetaxattributes(i.e.taxlossesandincentives)arenottransferredtoabuyerinanassetdeal.However,thesellingentityhastherighttouseitsexistingtaxlossesandVATcreditsagainstthetaxableprofits(suchascapitalgains)andVATobligationsarisingfromtheassettransfer.

Value Added Tax (VAT)TransferofassetsthrougharegularassetpurchaseagreementissubjecttoVATatregularratesdependingonthetypeofassetsbeingtransferred(normally18%).

RealestatepropertiesthatareincludedintheassetpurchaseagreementcouldpotentiallybeexemptfromVATifheldforaperiodofmorethan2years.ThebuyerhastherighttogetadeductionoftheVATincurredonassetdealagainstVATgeneratedfromitssales.However,thefullrecoveryofVATcantaketimedependingontheVATgenerationoftheacquiringentity,whichmayleadtoanadditionalcashflowproblemonassetpurchasetransactions.

Transfer TaxesInanassetdeal,assetpurchaseagreementwouldusuallybesubjectto0.948%stamptaxonthebasisofcontractvaluewhereastransferoftitletorealestateissubjecttoatitledeedregistrationfeeof2%forbothsellerandbuyerseparately.Incaseoftransferofanexistingagreementtotheacquiringentity,stampdutyispayableat1/4thofthestampdutythatwaspayableontheoriginalagreement.

• Purchase of shares AcquisitionofsharesbyaforeignentityhasnoimmediateTurkishincometaxconsequences.

GoodwillIftheacquisitionisviaaTurkishbranchorsubsidiary,goodwillimplicitinthesharepricecannotberecognizedfortaxpurposes.Thereisnostep-upavailabilityfortargetcompanyassetsduringashareacquisition.

DepreciationATurkishcompanybuyingthesharesinanotherentitycannotdepreciatethevalueofsharesfortaxpurposes.Thesharesarebookedathistoricalacquisitionvalueandoffsetagainstfutureproceedsfromsalesasataxbasiscost.

Tax AttributesAchangeintheshareholdingwillnothaveanyeffectonthetaxattributesofthetargetcompany.Followingtheacquisitionofshares,thetargetcompanycancontinuetocarryforwarditstaxlosses.

Value-Added Tax (VAT)SharetransfersbyanindividualareoutofthescopeofTurkishVAT.Wherethetransferorofsharesisacorporateentity(e.g.acompanyorabranch)inTurkey,thetransactionisprincipallyinthescopeofTurkishVAT.Inthiscase,transferofshares(inJointStockCompanies)areexemptedfromVAT,howeversaleofparticipationshares(inLimitedLiabilityCompanies)byaTurkishentitycanpotentiallyattractTurkishVATat18%unlesstheparticipationsharesareheldforaperiodofmorethan2years.

Tax Indemnities and WarrantiesInasharedealtransaction,thehistoricaltaxliabilitiesofthetarget(knownorunknown)remaininthecompanyandareacquiredbythenewshareholder(s).Itis,therefore,usualforthebuyertoaskfortaxindemnitiesandwarrantiesinashareacquisition.

Transfer TaxesAccordingtoarecentchangeinstamptaxlaw(Number6728),enactedon29September2016,documentsconcludedforsharetransfersofjoint-stockcompanies,limitedliabilitycompaniesandlimitedpartnershipsshallbeexemptedfromstamptax.

• Concerns for the Seller

Sale of assetsThesaleofassetsofanentityissubjecttousualcorporatetaxonthegainsrealizedfromthesaleoftheassets.Lossesarisingfromthesaleofassetsareavailableforimmediatedeductionorcarry-forward.Withrespecttosaleofcertainfixedassets(e.g.realestateproperty),75%ofthegainsrealizedfromsuchsalesmaybeexemptedfromcorporatetaxationprovidedthattherealestatehasbeenheldforatleasttwoyearsandthegainsareretainedinaspecialreserveaccountinthebalancesheetforatleastfiveyears.NotethatthetransferoftherealestatepropertywhichhasbeenheldatleastfortwowholeyearsbythecompaniesisexemptfromVAT.

Sale of sharesThesaleofsharesinanothercorporationissubjecttocorporatetaxonthegainsrealizedfromthesaleofshares.Lossesareavailabletooff-setincomefromotheractivitiesoftheentity.Thecorporatetaxexemptionon75%ofsuchgainsisavailableundertheconditionsmentionedabove(i.e.2yearholdingperiodandrequirementtoretainthegainsinaspecialreserveaccountforatleast5years)inrespectofsaleofrealestateproperty.

Ifthesellerofthesharesisanindividual,capitalgainsderivedbyindividualsonthesaleofshares(ofaJointStockcorporation)heldformorethantwoyearsarefullyexemptfrompersonalincometax(Pleasenotethat,theproposedchangestotheIncomeTaxLawmaylimittheexemptionsgrantedtosharesaletransactions,howeveritisyetsubjecttofurtherdiscussionandpossiblechanges

intheParliament);otherwise,ifthesharesareheldlessthantwoyear,thenthecapitalgainsaresubjecttopersonalincometaxatusualrates(i.e.15%to35%).TherearenosimilarexemptionsforindividualsinrespectofcapitalgainsarisingfromtransferofparticipationrightsinaLimitedLiabilityCompany.

PleaserefertoourcommentsabovewithrespecttoVATimplicationsincaseofsharetransfertransactions.

• Comparison of Assets and Share Purchases

Inviewoftheabove,pleasefindbelowasummaryofthetaxconsiderationscomparinganassetpurchasetransactionvs.asharepurchasetransaction:

Advantages Disadvantages

Asset Acquisition

Purchasepricecanbedepreciatedfortaxpurposes

Potentialneedtorenegotiatethecontracts,renewthelicensesetc.

Step-upintaxbasisofassetsispossible

Taxattributeslikecarriedforwardlossesremainwiththeseller

Previoustaxliabilitiesnotinheritedbythebuyer(exceptforcertainanti-avoidancerulesforrelatedpartytransactions)

Moretransactionscosts(stampduty,transfertaxes,registrationfeesetc.)

Possibletoacquirepartofabusiness

Potentiallyrepresentsmoretaxcosttotheseller(comparedtoshareacquisition)

Share Acquisition

Possibletopurchaseonnetassetbasis;hencelowercapitaloutlays

Acquisitionofpotentialtaxliabilityduetodifferencebetweenmarketvalueandbookvalueofassetsinthetargetcompany

Likelytobemoreattractivetothesellersduetopossibletaxexemptions

Inabilitytorecognizeagoodwillfortaxpurposes

Taxattributeslikecarriedforwardlossesarealsoacquiredwiththecompany

Acquisitionofcontingent(unknown)taxliabilitieswiththecompany

Continuetoenjoyexistingcontracts,licenses,incentivesetc.

Potentialneedforpost-acquisitionstructuringifnon-coreassetsarealsoacquiredwiththecompany

11.3 Corporate Reorganizations

TaxFreeDe-mergerTherearetwotypesoftaxfreede-mergerallowedundertheTurkishtaxlaws:

• Afullde-mergerisreorganizationwhereacompanyisdividedintotwoormoreexistingornewcompanieswhilethetransferringcompanyisdissolved,pursuanttotheprovisionsofArticle19-3-aofCorporateTaxLaw.Thistypeofde-mergerallowstransferoftaxlosses.BytheintroductionofthenewTurkishCommercialLaweffectivefromJuly2012,italsobecamepossibletoimplementsuchade-mergerfromaCommercialLawperspective.

• Apartialde-merger(alsocalleda“partialde-merger”)isreorganizationwherecertainassets(i.e.participationsharesorrealestatepropertythathasbeenheldforaperiodofmorethan2yearsorcompleteproduction/servicefacilities)ofacompanyarecontributedintoaneworexistingcompanyascapitalinkindonacarryoverbasis,pursuanttotheprovisionsofArticle19-3-bofCorporateTaxLaw.AreorganizationofaTurkishbranchofaforeigncompanybywayofapartialde-mergerhasrecentlybecomepossibleprovidedthatthetransfereecompanyisataxresident.Taximplicationsaresimilarasataxfreemerger,exceptthattransferoflossesisnotpossibleunderapartialde-merger.

TaxFreeShareSwapsAshareswapisataxfreetransactioniftheacquiringcompanyreceivesthetargetsharesinexchangeforitssharestoacquirecontrolofmanagementaswellasamajorityofsharesinthetargetcompany.Althoughataxfreeshareswapisprincipallydefinedasanon-cashtransaction,itisallowedtopaytheshareholdersofthecompanywhoseshareshavebeenacquiredupto10%ofthenominalvalueofthesharestobegiventothem.

Conversions Conversions(i.e.changeoflegalformofacompany)carriedoutundertherequirementsfortax-freemergerswillnotbeconsideredasataxablereorganization.

Liquidations ATurkishCorporationmayliquidateitsassetsanddistributetheproceedstoitsshareholdersthroughaformalliquidationprocesstobecarriedoutinaccordancewithTurkishCommercialLawrequirements.

Inthetaxationofliquidations,financialperiodisreplacedbyliquidationperiod,whichstartswhenacompanyisputintoliquidation.Theperiodbetweenthisdateandtheendofthesamecalendaryear,aswellaseverycalendaryearfollowingthisdate,isconsideredasaseparateliquidationperiod.Whenliquidationisfinalized,thefinalliquidationprofitorlossiscomputedandtheliquidationreturns,whichwerepreviouslyfiled,arecorrectedand,ifnecessary,taxesoverpaidarerefunded.

Thecompanywillbesubjecttousualtaxationrulesduringtheliquidationperiodandwillberequiredtomaintainalllegalbookkeepingandfilingobligationsasanormalcompany.

Therepaymentofcapitaltoshareholdersattheendofliquidationdoesnottriggeranytaxes,butdistributionofexcessprofits,reserves(orhiddenreservessuchasthecapitaladjustmentdifferences)totheshareholderswillattractdividendwithholdingtaxat15%(maybereducedbyDoubleTaxTreatyprovisions).Notethatitisastatutoryrequirementforthetaxofficetocarryoutataxauditupontheclosingofliquidation.

12. International Corporate TaxationResidency and Taxation of Non-Resident EntitiesAcompanyisconsideredtoberesidentinTurkeyifithaseitheritslegalseatorplaceofeffectivemanagementinTurkeyorboth.Legalseatreferstotheplaceofofficialcenterofcompany,definedin,suchas,thearticlesofassociation.Theplaceofeffectivemanagementreferstotheplacewherethetopmanagementofthecompanyislocated.Asageneralrule,residenceofacompanyisdeterminedbythedomesticrulesofthecontractingstates.However,insomecasesprovisionsoftaxtreatiesmightbeapplied.

IfneitheroftwoconditionsismetfortheresidencyinTurkey,thenacompanyisconsideredtobenon-residentfortaxpurposes.Non-residententitiesaresubjecttotaxationinTurkeyontheirTurkeysourcedincome.

Taxableincomeofnon-residentsisdetermined-butnotlimitedtothese-basedonthefollowingtypeofincome:

• Profits fromcommercial (business)activitiesearnedthroughaplaceofbusinessorapermanentrepresentativeinTurkey

• IncomederivedfromprofessionalservicesperformedinTurkey(orthefeesthatareobtainedinTurkey)

• Income derived from income from lease of immovableproperties,intangiblesandmachineryinTurkey(alsotransferofintangiblesinTurkey)

• InterestincomeobtainedfromTurkey• DividendincomeobtainedinTurkey• CapitalgainsoftransactionsperformedinTurkeyorobtainedin

Turkey

ForeignentitiesmayoperateinTurkeytorunabusinessinformofbranchorthroughtheirsubsidiariesasseparateentity.Theseformsareelaboratedinmoredetailbelow.Besides,operationsofnon-residententitiesmightbeconsideredtoconstituteapermanentestablishmentfortaxpurposes.Thesecreatetheconceptofbusinessplaceinlocalrules.Ofcoursetheprovisionsoftaxtreatiesshouldalsobetakenintoaccount.Businessprofitsofnon-residententitiesareassessedinthesamewayasthatofresidentcompaniesfortheirTurkishsourcedincome(pleaseseetheothersectionsin“CorporateTaxation”).

Permanent EstablishmentUnderTurkishCorporateIncomeTaxLegislation;theincomederivedbynonresidententitiesthroughtheirPermanentEstablishment(“PE”)orPermanentRepresentative(“PR”)inTurkeyaresubjecttotaxinTurkey.TurkishCorporateTaxLawreferstoprovisionsofTaxProceduralLawregardingthedefinitionofPEandprovisionsofIncomeTaxLawregardingthedefinitionofPR.

Inthisrespect,aworkplace(PE)isdefinedastheplacesofbusinesswhichisdedicated/allocatedtothecarryingoutcommercial,industrial,agriculturalorprofessionalactivities.Abusinessplaceofanon-residententityoperatinginTurkeysolelyforthepurposeofbuyingorproducinggoodsinTurkeytobelaterexportedisnotconsideredtobeaPE.

Ontheotherhand,aPRisdefinedasthepersonwhoisboundtoaprincipalbyaserviceorrepresentationact,andisauthorizedtocarryouttransactionsonbehalfandonaccountoftheprincipalforadefiniteorindefiniteperiodoftime.

TherearenofurtherspecificdefinitionsorguidelinesinrespectofthedefinitionofaPEunderdomesticlaw.Basedonthegenerallyacceptedinterpretationoftheabovementionedtaxlawprovisions,thefollowingareseenascommonfeaturesofaPEofaforeignentityinTurkey:

• Thereshouldbeanincomegeneratingactivityperformedbytheforeignentity(oritsrepresentatives)inTurkey

• The foreign entity should have a fixed place of presence inTurkeywheretheactivitiesareconcentrated

• Thereshouldbeacloselinkbetweenthisfixedplaceofpresenceandincomegeneratingactivities

Based on the above, it is usually accepted that Turkish tax lawsfollow thePEdefinitionOECDmodel tax treatieswhereactivitiescarriedoutinTurkeywhodonothaveastrongconnectionwiththeincomegeneration (e.g. preparatory and auxiliary services) shouldnotleadtorecognitionofPE;ontheotherhand,thepersonswhocarryoutcommercialtransactionsonbehalfofaforeignentitymaystillleadtotaxationinTurkeyifdeemedasPRasexplainedabove.

Incontrasttotheprovisionsunderdomesticrules,warehousesandindependent agents aregenerallynot included in thedefinitionof“permanentestablishment”underTurkey’streaties.

BranchesBranchesaretreatedasnon-residententitiesfortaxpurposesandsubjecttocorporatetaxationinTurkeyfortheirprofitsgeneratedinTurkey.

Underlocalforeigninvestmentlegislation,abranchofaforeigncompanyisatypeofforeigndirectinvestmentandtheestablishmentofabranchissubjecttothesamerequirementsandproceduresasaforeigncompanythatintendstorunabusinessinTurkey.Abranchofficemayonlyoperateintheareasofactivitiesoftheheadoffice.Itismanagedbyarepresentative(couldbeaforeignerbutisrequiredtobeaTurkishresident)whoisappointedtothiseffectbyapowerofauthorizations.TherepresentativemustbeauthorizedtorepresenttheforeignentityinTurkeybeforeallpublicandprivateauthorities.

ABranchhastofulfillallstatutorybookkeepingandfilingrequirementsinTurkeysameasausualresidententity.

SubsidiariesAnotherformwhichcanbeusedtorunabusinessinTurkeyistosetupasubsidiaryasaseparatelegalentity,whichcanbeestablishedasLimitedLiabilityCompany(Ltd.)orJointStockCompany(A.Ş).

ThesetwoformsofcompaniesareconsideredasTurkishresidentfortaxpurposesandsubjecttocorporatetaxationontheirworldwideincomeasopposedtoPEandBranches.

Withholding TaxationThetaxationofincomereceivedbynon-residententitiesinTurkeyisregulatedundertheArticle30ofCorporateIncomeTaxLaw.AccordingtotheArticle,partieswhomakethepaymenttonon-residentsareresponsibleforwithholdingandthepaymentoftaxes.Thegeneralwithholdingtaxrateis15%underthearticle,howevertheCouncilofMinistersareauthorizedtodeterminetheratesbetweentherangeof0%and30%.

DividendsDividendsdistributedtonon-residententitiesaresubjectto15%withholdingtax.Thewithholdingtaxapplieswhenthedividendsareactuallydistributedincashoronaccount.Theuseofprofitstoincreasethecapitalofthecompanyisnotconsideredasprofitdistributionandhencenotsubjecttodividendwithholdingtaxation.Thisisthefinaltaxfornon-residentsandthereisnofurtherfilingrequirement.

IncomeofBranchesinTurkeyisnotsubjecttowithholdingtaxationunlessremittedtoheadquarters.The15%withholdingtaxationappliesforremittanceofincometoheadoffice.ThetransferofincomeofPEsisalsosubjectto15%remittancewithholding.Therateof15%withholdingtaxcanbereducedto5%-10%throughtheuseoftaxtreaties.

RoyaltiesRoyaltiespaidtonon-residentsaresubjecttowithholdingtaxat20%.Inacasethatthenon-residentcompanyhasaPEinTurkey,nowithholdingtaxapplies,howeverthoseroyaltiesshouldbedeclaredintheannualcorporateincometaxreturnandsubjecttotaxationaccordingly.Thisisthefinaltaxfornon-residentsandthereisnofurtherfilingrequirement.

Gainsreceivedfromthesaleofcopyrights,patents,trademarksandotherintangiblerightsaresubjecttoafinalwithholdingtaxof20%.

ThereducedratesofwithholdingtaxovertheroyaltypaymentsareavailableforallTurkishTaxTreatiesandtheratesvarybetween5%and15%(thegeneralcapof10%appliesfornearlyalltaxtreaties)

InterestInterestpaidtonon-residententitiesissubjecttowithholdingtaxationatthegrossamountofinterestpaidtonon-residententity.Inacasethatthenon-residententityhasaPEinTurkey,theinterestincomeisincludedintheannualtaxreturnandsubjectedtotaxationaccordingly.Thisisthefinaltaxfornon-residentsandthereisnofurtherfilingrequirement.

Withholdingtaxratesappliedtointerestpaymentstonon-residentcompaniesareasfollows,unlessatreatyprovidesforalowerrate;

Arateof0%appliesto:• InterestonTurkishgovernmentbondsanddebentures(including

thoseissuedabroad);• Interestonbondsanddebentures issuedbycompaniesonor

after1January2006;• Loaninterestpaidtoforeignbanksorstates,ortointernational

institutions;• Loan interest paid to other companies that are authorized

habitually to provide loans in the country in which they areestablishedandprovideloansnotonlytorelatedcompaniesbutalsotoallindividualsandlegalentities.

• Interest on debentures issued by Turkish resident companieswiththematurityoverthan5years.

• Income on lease certificates issued by Turkish resident assetleasecompanieswiththematurityoverthan5years.

Arateof1%appliesto:• Interestpaidbybanksonsubordinatedloanssimilartoequity

andinterestpaidbybanksandothercompaniesonloansreceivedbywayofsecuritizationabroad.

Arateof3%appliesto:• InterestondebenturesissuedbyTurkishresidentcompanies

withthematuritybetween3and5years.• IncomeonleasecertificatesissuedbyTurkishresidentasset

leasecompanieswiththematuritybetween3and5years

Arateof5%appliesto:• Interestinrelationtothesaleofgoodsoncredit.

Arateof7%appliesto:• InterestondebenturesissuedbyTurkishresidentcompanies

withthematuritybetween1and3years.• IncomeonleasecertificatesissuedbyTurkishresidentasset

leasecompanieswiththematuritybetween1and3years

Arateof10%appliesto:• Interestonotherloans• InterestondebenturesbyTurkishresidentcompanieswiththe

maturitylessthan1year• IncomeonleasecertificatesissuedbyTurkishresidentasset

leasecompanieswiththematuritylessthan1year• Interestondepositaccountswiththematuritymorethan1

year• Portionofprofitsreceivedfromprofit/losspartnership

accounts/certificatesinparticipationbanks(interest-free)withthematuritymorethan1year;

Arateof12%appliesto:• Interestondepositaccountswiththematuritybetween6

monthsand1year• Portionofprofitsreceivedfromprofit/losspartnership

accounts/certificatesinparticipationbanks(interest-free)withthematuritybetween6monthsand1year;

Arateof13%appliesto:• Interestonforeigncurrencydepositaccountswiththematurity

morethan1year;

Arateof15%appliesto:• Interestondepositaccountswiththematuritylessthan6

monthsordemanddepositaccounts• Interestoverprofitparticipatingloans• Portionofprofitsreceivedfromprofit/losspartnership

accounts/certificatesinparticipationbanks(interest-free)withthematuritylessthan6months

• Interestonforeigncurrencydepositaccountswiththematuritybetween6monthsand1year

• Incomefromrepotransactionsfortreasurybondsanddebentures;

Arateof18%appliesto:• Interestonforeigncurrencydepositaccountswiththematurity

lessthan6monthsorforeigncurrencydemanddeposits.

Capital GainsInaccordancewiththeprovisionsofIncomeTaxLaw,capitalgainsreceivedbynon-residentsupondisposalofsharesandotherassetsaretaxableinTurkeyaslongastherelatedgainsaredeemedtobeTurkishsourced.InreferencetoTurkishincometaxcodeprovisions,suchcapitalgainisdeemedtobeTurkishsourcedifthesaletransactionisperformedinTurkeyorthetransactionisevaluatedinTurkey(i.e.thepaymentisbornbyaTurkishtaxpayer).

Ifcapitalgain,receivedbynon-residententities,isconsideredasTurkishsourcedthenitwouldbesubjecttocorporateincometaxatusualrateof20%.Furthermore,theremainingamountaftercorporatetaxeswouldalsobesubjectto15%dividendwithholdingtaxation(taxationofremittanceofcapitalgains).Hence,theeffectivetaxratereachesupto32%.

Thetaxationrightofthecapitalgainsoverthedisposalofsharesisgenerallyremainswiththecountryofwhichthesellingentityisaresidentprovidedthattheminimumholdingperiodshouldbemorethan1yearundermanyofTurkishTaxTreaties.

Professional ServicesProfessional service fees paid to non-resident companies aresubject to20%withholding if theservice is rendered inTurkeyorthepayment ismade inTurkey.Turkeygenerally follows183daystestintaxtreaties.Accordingly,inmostofTurkishTaxTreaties,theprofessionalservicesaretaxableinTurkeyiftheemployeesofthenon-residententitystayinTurkeymorethan183daysina12monthsperiodorhasfixedplaceofbusinessinTurkey.

Withholding tax rate is reducedto5%foroilexplorationactivitiesperformedinTurkey.

Income from Lease of Tangible AssetsAccordingtolocalrules,paymentstonon-residentsfortheleaseofmovableorimmovablepropertiesaretaxableinTurkeyiftheassetsareinTurkeyortherelevantrightsareusedinTurkey.Suchleasingpaymentstonon-residentsaresubjecttowithholdingtaxat20%.Thepaymentsforthefinancialleasing,however,aresubjectto1%reducedrateofwithholdingtaxes.

Construction and Repair Works, Spread Over the YearsPaymentsforconstructionworksandrepairprojectswhichspreadmorethanonecalendaryeararesubjectto3%withholdingtaxes.

Turkey’s Treaty NetworkTurkey’sdoubletaxtreatynetworkconsistof94countries,82ofthisarealreadyineffect,4newtreaties(Philippines,Senegal,IvoryCostandSomalia)havebeensignedbutnotyetineffectand8newtreaty(Palestinian,Gabon,Gambia,Uganda,Kenya,HongKong,BurundiandChad)havebeeninitialedbutnotyetineffect.PleaserefertoAppendix13.4wherethetableforthetreatycountriesandrelevantprovisionsaresummarized.

Inadditiontothedoubletaxtreaties,TurkeyhasstartedtosignExchangeofInformationTreatieswiththejurisdictions,socalledastaxheavens,withinthescopeofmeasuresfortheprevention/controlofcapitalmovementsandtaxavoidance.Inthisview,Turkeyhassignedexchangeofinformationtreatieswith5countries(Jersey,Gibraltar,IsleofMan,GuernseyandBermuda)inadditiontotheongoingnegotiationswith5countries(Barbados,Panama,CaymanIslands,BritishVirginIslandsandBahamas).

Tax Treaties Signed but not yet in ForceTurkey has signed tax treaties with the below list of Countriesand these treaties will be in effect following the approval of theParliamentsofbothCountries.

Country Date of Signature

Philippines* 18.03.2009

Palestinian** 15.11.2012

Gabon** 03.09.2015

Gambia** 11.02.2014

Uganda** 14.07.2016

Kenya** 19.07.2016

HongKong** 18.07.2016

Burundi** 19.12.2016

IvoryCoast*** 29.02.2016

Chad** 10.04.2015

Senegal*** 14.11.2015

Somalia*** 03.06.2016

(*) After signature, Treaty has been ratified by Turkey and Philippines, and would be in effect from 1 January following the year of completion of process by the contracting states.

(**) Treaty has been initialed only.

(***) Treaty has been signed only and would be in effect following the completion of ratification process in both countries.

13. Appendices13.1 Appendix I: Chart of Principal Turkish Taxes

CorporateincometaxAdvancecorporateincometaxIndividualincometax

IncreaseinnetworthNettaxableincome

20%20%

15-35%(allsourceof

incomeincludingsalaryincome)

ValueAddedTax–VAT•General•Certainproductsandservices•Certainproductsandservices

Salesvalue18%8%1%

Banking&InsuranceTransactionTax•General•Interbankdeposittransactions•Repos•Moneymarkettransactionsbetweenbanksandbrokers

•SaleofGovernmentbondsandT-bills•Saleofforeigncurrency

5%1%1%1%

StampDuty(Wherethestampdutiesarepayable,theamountofthestampdutypayableoneachdocumentislimitedtoTRY1.865.946,80fortheyear2017.)

Valuespecifiedinthedocuments

generallyat0,948%(0,189%forrentalcontracts,0,759%

forsalaries

GiftandInheritanceTax Value 1–30%

CustomsDuties Value Various

Transferofrealestate SalesValue 2%,eachbuyerandseller

SpecialConsumptionTax•Petroleumproducts•Vehicles

•Alcoholicbeverages&tobaccoproducts

•Certainluxurygoods

Perliter,kg,etc.ValueandenginesizeValue,retailsalepricefortobaccoproductsValue

Specific0,5to160%

25%-65,25%(*)

andspecific

3%-6,7%-20%-25%

SpecialCommunicationTax• Mobiletelecommunicationservices• Radio&Televisionbroadcastingservices

throughsatelliteorcable• Wired,non-wiredandmobileinternet

serviceprovidingfacility• Othertelecommunicationservices

Service fee25%15%

Lotterytaxes(NationalLottery,horseracing,Toto,lotto,etc.)

Various Specificandadvalorematat5%-7%-10%

MotorVehicleTax Model,engine,weight

Certainamountsrevisedeachyear

MajorMunicipal&LocalTaxes:RealEstateTaxes *Buildings*Lands

EntertainmentTax

CommunicationTax

Electricity&GasConsumptionTax

SanitationTax

TaxValuePertariff,grossprofitFeeSalesValuePerflatandbusinesspremises

0,1-0,4%0,1-0,6%

Specific(TRY5–100)and

advaloremat5–50%

5–15%

Certainamountsrevisedeachyear

(*)Onlythepercentagetaxrateisappliedprovidedthatnotbeinglessthanthetaxcalculatedbyusingtheminimumlump-sumtaxamounts.

13.2 Appendix II: Chart of Withholding Tax

Description Tax Base

Non Resident Company

(*) (%)

Non Resident Individual (***)(%)

Resident Company

(**)(%)

Resident Individual(***)(%)

Technical/ProfessionalServices-General

Grossbillings 20 20 na 20

Constructionprojectslastingmorethanacalendaryear

Progressbillings 3 3 3 3

Salaries•TurkishPayroll

Grosslesssocialsecuritycontributions

- 15-35 na 15-35

Rentals/Royalties Gross 20 20 n.a 20

FinancialLeases Gross 1 n.a n.a n.a

Dividends Gross 15(****) 15 n.a 15

BranchprofitsNetprofitslesscorporatetaxes

15 na na 20

Interestonloans Gross 0(*****)1/5/10 - - -

Salesproceeds:•ofcopyrightsandpatents

•ofotherintangiblerights

Grossbilling20

*IntheArticle30ofCorporateTaxLaw,withholdingtaxrateappliedtocertainpaymentstonon-residentcompaniesissetas15%.Ontheotherhand,theCouncilofMinistersisauthorizedtoreducewithholdingtaxratetozeroortoincreaseitto30%.

**IntheArticle15ofCorporateTaxLaw,withholdingtaxrateappliedtocertainpaymentstoresidentcompaniesissetas15%.Ontheotherhand,theCouncilofMinistersisauthorizedtoreducewithholdingtaxratetozeroortoincreaseitto20%.

***Withholdingtaxratesapplicabletoresidentandnon-residentindividualsarebasedontheCouncilofMinistersDecreesnumbered2013/4962,2013/4552,2012/3141,2011/1854,2009/14593-4,2006/11449,2006/10731and2003/6577.

****Exceptthosewhoarereceivingdividendsviaafixedbusinessplaceorapermanentrepresentative.

*****Zeroratewithholdingtaxisavailabledependingonstatusoftheforeignlender(i.e.banksandfinancialinstitutions).1%interestonsubordinatedloanfacilitiestotheTurkishbanksbeingsubjecttotheprovisionsofthesupplementarycapitalincomplianttotheTurkishBankingLawandinterestonloansreceivedbybanksandothercorporationsbywayofsecuritizationbasedonacashfloworanassetportfoliofromabroad.5%withholdingtaxisappliedforinterestoninstallmentsorcreditforthepurchaseofimportedgoods.10%withholdingtaxisavailableonotherloansandtransactionsthatarenotwithintheabovementionedloans.

13.3 Appendix III: Computation of Taxes on the Year-end Profits

Thecorporateincometaxwillbecalculatedinitssimplestformasfollows:

Explanation Calculations

Bookprofitsadjustedfortaxpurposes 100

Corporationtaxat20% 20

Availablefordistribution 80

Thefollowingtaxcomputationmaybemoreapplicableinmostofthecases.

Operatingprofits 500

Dividendsfromaresidentcompany 250

Totalbookprofits 750

Disallowableexpenses 100

“Nodividendpolicy”isassumed.Computationofcorporationtaxwouldbeasfollows:

Bookprofits 750

Disallowableexpenses 100

Taxadjustedprofits 850

Exemptincome 250

• Dividends 250

Taxableprofits 600

Corporatetaxbase 600

Corporatetaxat20% 120

Totaltaxes 120

Availablefordistribution 630

Dividenddistributionandlegalreserverequirements

DividenddistributionpaidfromaTurkishcompanytoanotherTurkishcompanyisexemptedfromwithholdingtax(withoutanyfurthercondition).DividendsreceivedbyaholdingcompanyinTurkeyfromanotherTurkishsubsidiaryareexemptfromcorporateincometax(withoutanyfurtherconditions).DividenddistributionfromaTurkishcompanytoaTurkishindividualoranon-residentshareholder(whetherindividualorcorporate)issubjecttowithholdingtax15%.Therateofdividendwithholdingtaxappliedforanon-residentshareholdermaybereducediftheshareholderislocatedinajurisdictionhavingafavorabledoubletaxtreatywithTurkey.Profitsretainedinthecompanyarenotsubjecttowithholdingtaxunlessdeclaredasdividendtoshareholders.

Considerthefollowingexample,withassumptionthatthepaidincapitalofthecompanyisTRY100.000andafulldividendpolicyisadopted.

Explanation Calculations

Bookprofit 100,000

Corporateincometaxat20% 20,000

Availablefordistribution 80,000

Firstlegalreserves(5%ofnetprofits,cappedat20%ofpaidincapital)

1stlevelgrossdividends(5%ofpaidincapital) 5,000

Availableforsecondarydividends 71,000

Secondarylegalreserves(1/11ofavailableforsecondarydividends)

2ndlevelgrossdividend 64,545

Grossdividends(firstandsecondarydividends) 69,545

Withholdingtaxesondividendsat15% 10,432

Netdividends 59,113

13.4 Appendix IV: Turkish Withholding Taxes by Treaty Countries

1 Austria2 Ireland3 SouthKorea4 Jordan5 Tunisia6 Romania7 Netherlands8 Pakistan9 UnitedKingdom10 Finland11 T.R.N.Cyprus12 France13 Sweden14 Belgium15 Denmark16 Italy17 Japan18 U.ArabEmirates19 Hungary20 Kazakhstan21 Macedonia22 Albania23 Algeria24 Mongolia25 China26 India27 Malaysia28 Egypt29 Poland30 Turkmenistan31 Azerbaijan32 Bulgaria33 Uzbekistan34 UnitedStates35 Ukraine36 Israel37 Belarus38 Russia39 Kuwait40 Slovakia41 Indonesia

5/155/10/1515/2010/1512/1515

15/2010/1515/205/1515/2015/2015/2015/2015/2015

10/155/10/1210/15

105/105/1512101015

10/155/1510/15

10/1510

15/2010/15

1010/15

10105/1010/15

Country Dividend(%)

BranchProfit(%)

Interest(%)

Royalty(%)

55---157.5

10/15155/15157.515157.515

10/155/10/12

10105512101015105151012101015101015101010

10/1510/1510/15

101010

10/151015

5/10/15151515151515

10/151010101010101010

10/1515101010101010

15/1010101010101010

10101012101010101010101010101010101010101010101010151010101010101010/510101010101010

Country Dividend(%)

BranchProfit(%)

Interest(%)

Royalty(%)

42 Lithuania43 Croatia44 Moldova45 Singapore46 Kyrgyzstan47 Tajikistan48 Sudan49 CzechRepublic50 Bangladesh51 Latvia52 Spain53 Slovenia54 Greece55 Syria56 Estonia57 Thailand58 Luxembourg59 Iran60 SaudiArabia61 Lebanon62 Morocco63 Rep.ofSouthAfrica64 Portugal65 SerbiaMontenegro66 Ethiopia67 Bahrain68 Qatar69 BosniaHerzegovina70 Canada71 NewZealand72 Norway73 Oman74 Georgia75 Yemen76 Germany77 Switzerland78 Brazil79 Australia80 Malta81 Mexico82 Kosovo

10/1510/15

1010101010105/1510151010

10/155/10/2015/205/1010/157/1010/155/155/1510

10/1510/155/1515/205/155/1510/15

10105/155/1510/155/1510/155/155/15

10/15101010101010105/1510151010

10/1510155/1010710551015

10/155/1515/205/155101010-

5/15105/151055

101010

7.5/10101010101010

10/1510121010

10/1510/15

1010101010

10/15101010101015

10/155/10/15

101010105/10151010

10/1510

10/510101010101010105/10101010

15/1010/5151010101010101010101010101010101010101010

10/1510101010

Fikret ÇetinkayaTax,PartnerTaxComplianceServicesT:+902166819100-9007E:fcetinkaya@kpmg.com

Nihat SönmezTax,PartnerTaxComplianceServicesT:+902166819100–9048E:nsonmez@kpmg.com

Emrah AkınTax,PartnerTaxComplianceServicesT:+902166819100-9040E:eakin@kpmg.com

Murat PalaoğluTax,PartnerHeadofCustomsandForeignTradeServicesT:+902166819100-9162E:mpalaoglu@kpmg.com

Eray BüyüksekbanTax,PartnerHeadofDealAdvisoryandInternationalTaxServicesT:+902166819100-9049E:ebuyuksekban@kpmg.com

Neslihan RaepersTax,PartnerHeadofAccountingandTaxOutsourcingServicesT:+902166819100-9041E:nraepers@kpmg.com

Yavuz ÖnerTax,PartnerHeadofIndirectTaxServicesT:+902166819100-9042E:yoner@kpmg.com

Onur KüçükPartnerHeadofLegalServicesT:+902166819100-9021E:onurkucuk@kpmg.com

Başak DiclehanTax,DirectorTransferPricingServicesT:+90(216)6819100-9118E:bdiclehan@kpmg.com

Abdulkadir Kahraman Tax,PartnerHeadofTaxServicesT:+902166819100-9004E:akahraman@kpmg.com

Authors

Yusuf PenezoğluPartnerHeadofDisputeResolutionServicesT:+902166819100-9064E:ypenezoglu@kpmg.com

Hakan UçakTax,DirectorCustomsandForeignTradeServicesT:+90(216)6819100-9107E:hucak@kpmg.com

Fatma BüyükdemirciTax,DirectorDealAdvisoryandInternationalTaxServicesT:+90(216)6819100-9120E:fbuyukdemirci@kpmg.com

Hakan TüfekçilerTax,DirectorGlobalMobilityServicesT:+90(216)6819100-9177E:htufekciler@kpmg.com

Aslı Melek GülserenTax,SeniorManagerDealAdvisoryandInternationalTaxServicesT:+90(216)6819100-9116E:agulseren@kpmg.com

Pınar Asaryan Tax,SeniorManagerIndirectTaxationServicesT:+90(216)6819100-9179E:pasaryan@kpmg.com

Özlem VuralTax,ManagerCustoms&ForeignTradeServicesT:+902166819100–9333E:ovural@kpmg.com

Arek FerahyanTax,ManagerDealAdvisoryandInternationalTaxServicesT:+90(216)6819100-9204E:aferahyan@kpmg.com

Burak DöşTax,SeniorManagerTransferPricingServicesT:+90(216)6819100-9214E:bdos@kpmg.com

Bora YargıçTax,SeniorManagerTaxComplianceServicesT:+902166819100–9168E:byargic@kpmg.com

Senem ÖzbilenSeniorCounselTaxDisputeResolutionServicesT:+90(216)6819100-9869sozbilen@kpmg.com

Beyza ÖzsoySeniorManagerDealAdvisoryandInternationalTaxServicesT:+90(216)6819100-9216E:bozsoy@kpmg.com

Seçil KısakürekSeniorCounselLegalServicesT:+90(216)6819100-9363skisakurek@kpmg.com

Erdem ErdemTax,ManagerGlobalMobilityServicesT:+90(216)6819100-9230E:erdemerdem@kpmg.com

Cem BengisuTax,Manager,TaxComplianceServicesT:+90(216)6819100-9313E:cbengisu@kpmg.com

Kadir ÖzdemirTax,Manager,OutsourcingServicesT:+90(216)6819100-9482E:kadirozdemir@kpmg.com

Can DoğrusözTax,Manager,DealAdvisoryandInternationalTaxServicesT:+90(216)6819100-9221E:cdogrusoz@kpmg.com

İstanbulRüzgarlıbahçeMh.KavakSk.No:29Kavacık34805Beykoz/İstanbul/TürkiyeT:+902166819000

AnkaraTheParagonİşMerkeziKızılırmakMah.UfukÜniversitesiCad.1445Sok.No:2Kat:13Çukurambar06550Ankara/TürkiyeT:+903124917231

İzmirHerisTower,AkdenizMah.ŞehitFethiBeyCad.No:55Kat:21Alsancak35210İzmir/TürkiyeT:+902324642045

InformationKPMGTürkiyeKurumsalİletişimvePazarlamaBölümütr-fmmarkets@kpmg.com

Theinformationcontainedhereinisofageneralnatureandisnotintendedtoaddressthecircumstancesofanyparticularindividualorentity.Althoughweendeavourtoprovideaccurateandtimelyinformation,therecanbenoguaranteethatsuchinformationisaccurateasofthedateitisreceivedorthatitwillcontinuetobeaccurateinthefuture.Nooneshouldactuponsuchinformationwithoutappropriateprofessionalafterathoroughexaminationoftheparticularsituation.KPMGinternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGinternational.KPMGinternationalprovidesnoclientservices.NomemberfirmhasauthoritytoobligateorbindKPMGinternationaloranyothermemberfirmvis-a-visthirdparties,nordoesKPMGinternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.

Investment in Turkey 2017 - KPMG · PDF fileIncentives for International Investors 19 2.2....

Documents

Transcript of Investment in Turkey 2017 - KPMG · PDF fileIncentives for International Investors 19 2.2....

Investment Support and Promotion Agency of Turkey ISPAT

Portfolio Investment in Turkey

Foreign Direct Investment Statistics In Turkey

Foreign Direct Investment in Turkey

Investment in Turkey 2013 - KPMG

Property investment Turkey – four star resort

Investment in Turkey - · PDF fileInvestment in Turkey for US investors* ... • Mainly specialized in the international tax structuring and ... 9 Treaties of Turkey 5 Investment Incentives

investment in turkey 01015800500-01062080446

Management of public investment in Turkey - Hakan Ay, Turkey

Sustainable Investment in Turkey 2010 - World Bankdocuments.worldbank.org/curated/en/412591468318868104/...Sustainable Investment in Turkey 2010 Public Disclosure Authorized Public

Sustainable Investment in Turkey 2010

Turkey Investment Environment

IFC Turkey Investment Projects

Investment Support and Promotion Agency of Turkey ... 2009 REPUBLIC OF TURKEY PRIME MINISTRY Investment Support and Promotion Agency of Turkey TURKISH FOOD & BEVERAGE INDUSTRY REPORT

INTERNATIONAL DIRECT INVESTMENT CLIMATE IN TURKEY/media/IE Singapore/Files/Events... · october, 2012 international direct investment climate in turkey republic of turkey ministry

Moving Forward: An Investment Climate Assessment for Turkey

Investment Support and Promotion Agency of Turkey REPUBLIC OF TURKEY PRIME MINISTRY Investment Support and Promotion Agency of Turkey ISPAT Istanbul Finance.

New Investment Incentives Scheme In Turkey Presentation

Investment Incentives in Turkey

TURKEY CITIZENSHIP BY INVESTMENT...Greece, Bulgaria TURKEY CITIZENSHIP BY INVESTMENT TURKEY The Republic of Turkey is a transcontinental country located in both Europe and Asia and