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Doing business in Turkey RSM International Executive Office 11 Old Jewry London EC2R 8DU United Kingdom T: +44 (0)20 7601 1080 F: +44 (0)20 7601 1090 E: [email protected] www.rsmi.com The aim of this publication is to provide general information about doing business in Turkey and every effort has been made to ensure the contents are accurate and current. However, tax rates, legislation and economic conditions referred to in this publication are only accurate at time of writing. Information in this publication is in no way intended to replace or supersede independent or other professional advice. Copies of this booklet or additional information can be obtained from the RSM International Executive Office or Kapital Karden. RSM International is the name given to a network of independent accounting and consulting firms each of which practices in its own right. RSM International does not exist in any jurisdiction as a separate legal entity. The network is administered by RSM International Limited, a company registered in England and Wales (company number 4040598) whose registered office is at 11 Old Jewry, London EC2R 8DU. Intellectual property rights used by members of the network including the trademark RSM International are owned by RSM International Association, an association governed by articles 60 et seq of the Civil Code of Switzerland whose seat is in Zug. © RSM International Association, 2009
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Doing Business in Turkey | Alan Greenhalgh

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Page 1: Doing Business in Turkey | Alan Greenhalgh

Doing businessin Turkey

RSM International Executive Office 11 Old Jewry London EC2R 8DU United Kingdom

T: +44 (0)20 7601 1080 F: +44 (0)20 7601 1090 E: [email protected]

www.rsmi.com

The aim of this publication is to provide general information about doing business in Turkey and every effort has been made to ensure the contents are accurate and current. However, tax rates, legislation and economic conditions referred to in this publication are only accurate at time of writing. Information in this publication is in no way intended to replace or supersede independent or other professional advice. Copies of this booklet or additional information can be obtained from the RSM International Executive Office or Kapital Karden.

RSM International is the name given to a network of independent accounting and consulting firms each of which practices in its own right. RSM International does not exist in any jurisdiction as a separate legal entity. The network is administered by RSM International Limited, a company registered in England and Wales (company number 4040598) whose registered office is at 11 Old Jewry, London EC2R 8DU. Intellectual property rights used by members of the network including the trademark RSM International are owned by RSM International Association, an association governed by articles 60 et seq of the Civil Code of Switzerland whose seat is in Zug.

© RSM International Association, 2009

Page 2: Doing Business in Turkey | Alan Greenhalgh

DOING BUSINESS IN TURKEY

Foreword

The Republic of Turkey’s standing as a cultural and geographic crossroads spanning Europe, Asia, the Middle East, the Mediterranean and North Africa underscores the country’s growing importance as an economic and geopolitical world power.

The large and growing domestic market, mature and dynamic private sector, its leading role in the region, liberal and secure investment environment, supply of high quality and cost-effective labor force, customs union with EU countries, developed infrastructure, a growth economy and competitive tax system make Turkey an attractive place to do business. Coupled with the traditional cornerstones of the Turkish way of life, hospitality and tolerance, the country is open for business and for foreign investors.

Business in Turkey is personal and often done with friends and relatives and those whom are liked and trusted. So build friendships first, and expect to make long-term relationships. A seemingly endless trail of tea and coffee cups will lead you to the decision maker. Constantly pushing for yes or no answers does not bring results, but talk football and doors will open. Most of all be patient and the rewards of doing business in such an historically and culturally rich environment will be great.

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7 AboutRSMInternational

8 General

10 CompanyEstablishmentProcedures

11 TypesofBusinessEntities

13 ForeignExchangeControls

14 Taxation

22 Employment

22 Invoicing

23 Expenses

25 Accounting

26 IntellectualPropertyRights

27 InvestinginTurkey

30 ListingRulesinTurkey

31 Relevantwebsitesorfurtherreading

32 AboutKapitalKarden

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“In a world of different cultures, it’s good to have an advisor who is consistent everyvhere.”

RSM International is seventh largest network of independent accounting and consulting firms worldwide. RSM is represented in over 70 countries and brings together the talents of 30,000 individuals. RSM firms are driven by a common vision of providing high quality professional services to ambitious and growing organisations.

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DOING BUSINESS IN TURKEY

DOING BUSINESS IN TURKEY

General

The Republic of Turkey is a Eurasian transcontinental country that stretches from Southern Europe to Western Asia. It borders eight nations, Bulgaria, Greece, Georgia, Armenia, Azerbaijan, Iran, Iraq and Syria. To the south is the Mediterranean Sea, to the west the Aegean Sea and the Black Sea to the north. The coastal areas of Turkey in the south have a temperate Mediterranean climate, the central plateau of the interior has sharply contrasting seasons and in the west winter temperatures are cold and summers hot and dry. The time zone is GMT + 2 hours.

Turkey is 37th largest country in the world with a territory of over 780,000 square kilometers subdivided into 81 provinces in seven regions. Ankara is the capital and the largest city and its business heart is Istanbul with 13 million people. The total population is nearly 75 million people and growing. Turkey is a democratic, secular, constitutional republic whose political system was established in 1923 by Mustafa Kemal Ataturk, following the fall of the 500 year-old Ottoman Empire after World War I.

The population is predominantly Muslim, the majority of whom are Sunni (80%) with a large minority Alevi (20%). There are many minorities which follow other religions, mainly Christians, mostly Armenian Apostolic and Greek Orthodox and Jews, mainly Sephardi. The official language is Turkish with a minority of Kurdish speakers. The free-floating national currency is the Turkish Lira (TL). Office hours tend to be Monday to Friday, 9 – 6pm with workers working a 45 hour week. Public holidays of 14 days per year are a mix of secular and religious with the following dates: January 1st New Year’s Day, April 23rd National Sovereignty and Children’s day, May 1st Labor and Solidarity Day, May 19th Commemoration of Ataturk Youth and Sports Day, August 30th Victory Day, October 29th Republic Day. The following religious holidays are observed: the three day Seker Bayram holiday after the month of Ramadan, and four days of Kurban Bayram about two months later.

Turkey’s main industries are agricultural products, textiles, motor vehicles, transport equipment, construction materials, consumer electronics, home appliances, mining, steel, petroleum, lumber, and paper.

Turkey has the sixth largest economy in Europe (IMF April 2009) and the 5th largest labor force. It is the 15th largest economy in the world with $915,184 million GDP. Turkey is ranked the 15th most attractive destination for foreign direct investment (FDI) in the world (UNCTAD World Investment Prospects Survey, 2008-2010). Turkey stands to gain from the forthcoming liberalization of trade in the Euro-Mediterranean Area which includes all 27 member states of the European Union, along with 16 partners across the Southern Mediterranean and the Middle East.

AboutRSMInternational

RSM International is a worldwide network of independent accounting and consulting firms. RSM International and its member firms are separate and independent legal entities. RSM International does not itself provide accounting or consultancy services. All such services are provided by affiliate members practising on their own account.

RSM is represented by affiliate independent members in 76 countries and brings together the talents of over 30,000 individuals in 705 offices worldwide.

The network’s total fee income of US$3.8bn places it amongst the top seven international accounting organisations worldwide. Affiliate member firms are driven by a common vision of providing high quality professional services, both in their domestic markets and in serving the international professional service needs of their client base.

RSM International is a member of the Forum of Firms. The objective of the Forum of Firms is to promote consistent and high quality standards of financial and auditing practices worldwide.

RSMInternationalExecutive Office11 Old JewryLondon EC2R 8DUUnited KingdomTelephone: + 44 (0)20 7601 1080Fax: + 44 (0)20 7601 1090Email: [email protected]: www.rsmi.com

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Turkey’s population has an average age of 28.5 years old with 28% of the population under 14 years old and 64% are between 14 and 60 years old. In 2050 Turkey will have 25% of its population in the over 60 years-old group; a cushion against the ageing demographic of other nations in Europe. The per capita GDP of $10,436 is predicted to grow to $12,164 in 2011. Up to 2008 the GDP growth rate was 5% with a contraction in 2009. However, Turkey is predicted to bounce back quicker than other economies and forecasts growth of 4.5% by 2011.

Service industries make up half of the employment by economic activity followed by agriculture (34.9%), industry (18.5%) and construction (4.5%). From 1995 to 2001 inflation soared at over 70%, this was reduced to 13% in 2002-2008 period and stands at 5.33% in August 2009.

Since 2002, after the Banks’ Financial Crisis of Turkey, structural reforms aimed at increasing the role of the private sector in the Turkish economy, enhancing the efficiency and resiliency of the financial sector and putting social security system on a more sound footing have been made. The Turkish banking sector, with its strong capital base (around 18%) and effective risk management practices, is healthy and profitable. With its prudent fiscal policy, Turkey has reduced its debt stocks, becoming one of the best performers among OECD economies and has been meeting the EU Maastricht Criteria since 2004.

In fact, a monetary policy framework and notable structural reforms have helped to produce the best economic performance in Turkey’s modern history. However, according to the IMF, further structural reforms, the informality of its business sector, youth unemployment and regional disparities are just some of the challenges it faces.

Foreign trade, both in exports and imports, has grown rapidly and industrial products have now overtaken the predominant role of agricultural products. Turkey became a member of the World Trade Organization (WTO) in 1995. Following and agreed a Customs Union with the European Union on January 1, 1996. In 2008, the share of the European Union member countries in overall Turkish exports was around 50%. Between 2002 and 2008, Turkey’s exports to the member countries of the Black Sea Economic Cooperation (BSEC), the Organization of Islamic Conference (OIC) and the Commonwealth of Independent States (CIS) increased, and the total export value reached $67 billion with a share of 51% in 2008.

Turkey’s export markets are highly diversified. In 2008, Germany, with its share of 9.8%, continued to be the largest export market for Turkish products. Turkey’s second largest export market was the United Kingdom, with a share of 6.2%, and the UAE, with its share of 6.0%, was the third largest market for Turkish export products. Italy, France, the Russian Federation, the USA and Spain have been other major export markets. As the UN embargo on trade with Iraq was lifted in May 2003, Turkey realized USD 4 billion of exports to Iraq in 2008, with a share of 3% in total exports, and Iraq has been Turkey’s 10th major export partner. It will soon become

Turkey’s 5th largest export market and reach $20 billion by 2011. Reconstruction, hospitals, residence, infrastructure and superstructure in Iraq are opportunities for the Turkish construction sector which is the 3rd largest in the world.

Energy is another massive growth sector with Turkey as a major energy hub with an annual transit capacity of 221 million tons of oil and 43 billion M3 of natural gas. Turkey is also a leader in producing high standard Voluntary Emission Reductions (VERs) from renewable energy projects and has ratified the Kyoto Protocol in 2009. Voluntary carbon trading projects in Turkey have increased rapidly, reaching 45 from 30 in the first quarter of 2008.

In 2008 and 2009 over 26 million tourists visited Turkey and the country ranked 7th most visited holiday destination in the world and 9th in terms of revenue from the tourism sector. The Government’s target is 30 million visitors in 2010.

Turkey has 12 Free Trade Agreements with Albania, Bosnia and Herzegovina, Croatia, EFTA member countries (Iceland, Norway, Switzerland and Lichtenstein), Egypt, Georgia, Israel, Macedonia, Morocco, Palestine, Syria, Tunisia and is in talks with the Faroe Islands, member countries of the Gulf Cooperation Council, Jordan and Lebanon.

Since 1962, Turkey has been negotiating and signing agreements for the reciprocal promotion and protection of investments. Turkey has signed bilateral investment treaties with 80 countries, including with the United States, United Kingdom, Germany, the Netherlands, Belgium, Luxembourg, Denmark, Austria, Sweden, Switzerland, Spain, Finland, Italy, Portugal, Hungary, Poland, Romania, Tunisia, Kuwait, Bangladesh, China, Japan, South Korea, Indonesia, Croatia, Cuba, the Czech Republic, Estonia, Russian Federation, Azerbaijan, Kazakhstan, Georgia, Tajikistan, Ukraine, Uzbekistan, Belarus, Lithuania, Latvia, Slovakia, Macedonia, Pakistan, Turkmenistan, Moldova, Kyrgyzstan, Albania, Bulgaria, Argentina, Bosnia, Malaysia, Egypt, Mongolia, Greece, Israel, Afghanistan, Ethiopia, Iran, Lebanon, Syria, Slovenia, Jordan, and India. Turkey has avoidance of double taxation agreements with 71 countries.

In the World Bank’s 2009 “Ease of Doing Business” table Turkey ranks 59 out of 181 economies.

CompanyEstablishmentProcedures

No pre-establishment permits are required. The company gets its ‘legal entity’ upon registration at the Trade Registry. For a simple limited company it takes one day.

Applicants should check with a Trade Registry Office to find out if their trade names have already been registered. The trade name must be in Turkish and not include any sensitive words or expressions.

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The steps to establish a company are to prepare and notarize the Articles of Association, deposit 0.04% of the capital at the Central Bank, register the company at Trade Registry Office and Chamber of Commerce. Thereafter the Articles of Association are published in the Trade Registry Gazette. Once established the Company must be registered at tax the office and receive its tax plate which must be clearly displayed at the place of business. A tax inspector will make a visit to verify it and the place of business within a few days of incorporation. The Registry Office also notifies the Ministry of Labor and Social Security of the incorporation and both the company and its employees must be registered with that administration. The Registered address of the Company must be stated in the Articles of Association, and any changes must be registered. The legal books of the company – the Journal, Ledger, Case book and Inventory book, must be certified by a notary on the day the company is registered.

If all company capital is not paid in advance, 25% of the initial capital must be deposited within three months of company incorporation, and the balance of the subscribed capital must be paid within three years of incorporation. The capital can be used immediately. The transfer of capital from abroad must be clearly marked as ‘Capital Transfer’. Incorporation and pre-operating expenses are deductible.

Regulated sectors such as Banks, Private Finance Institutions, Insurance, Financial Leasing, Factoring, Holdings, Foreign Currency Exchange Offices, Public Warehousing, founders and operators of Free Trade Zones and companies are subject to the Capital Markets Law and must register with The Ministry of Commerce and Industry. These entities are also subject to an Independent Audit.

TypesofBusinessEntities

The main company types in Turkey are Limited companies, Joint Stock companies and partnerships of commandite and collective companies. Sole proprietors can be established. All business are can be 100% foreign owned. Foreign businesses can also open a Liaison Office or a Branch Office in Turkey. Participation to a previously established company can be done in two ways, through either share transfer or contribution to the companies’ capital increase.

Limited Companies - Limited Sirket (Ltd. Sti)A Limited Company is set up with at least two real persons or legal entities up to 50 maximum. The liability of the shareholders is limited with the share capital. Minimum capital requirement is 5,000 TL. No stock certificate is issued. Decisions such as a capital increase, dividend distribution, appointing a local manager and exit strategy are required to be taken by a majority of shareholders not by the size of the shareholding. Therefore, if there are only two shareholders, their availability is limited or disagreements arise then no decision can be taken. Four shareholders would be more effective.

Joint Stock Companies - Anonim Sirket (A.S) The company’s stock capital is divided into shares and the liability of the shareholders is limited to the capital subscribed and paid by the shareholder. At least five shareholders real persons or entities. Minimum capital of 50,000TL. The company must declare a general assembly, a board of directors with at least three members and a supervisory board. The Articles of Association can declare the voting rights of the shareholders to limit the power of the majority shareholder. Banks, private finance institutions, insurance companies, financial leasing companies, factoring companies, holding companies, companies operating as foreign currency exchange offices, companies dealing with public warehousing, publicly held companies subject to the Capital Markets Law, companies that are founders and operators of free zones should be established as Joint Stock Associations and these companies are subject to permit from Ministry of Industry and Trade.

Partnership Commandite Companies - Komandit Sirketi In this form of business company, some of the partners are liable for the association’s debts in the amount of capital which they contributed, while the other partners have unlimited liability. No minimum capital is required. The relationship between share holders is designated in the Articles of Association. In an Adi Komandit those partners with unlimited liability are called ‘active partners’ (commandite) and those with limited liability ‘silent partners’ (commanditer). There are two types of Komandit Sirket: Adi Komandit Sirket where there is no corporate taxation, only the partners pay personal income tax on their income; and Eshamli Komandit Sirket which has corporate taxation on the ‘silent partners’ share. These partners pay personal income tax on their income.

Partnership Collective Companies – Kollektif SirketiThis is an association which has been established with the purpose of engaging in commercial activities under a common trade name. Its most important characteristic is the unlimited liability of the partners for the debt of the association. No minimum capital is required. It is mandatory that all share holders should be real persons.

Co-operative Association This is a business association established by persons who want jointly to supply goods and services connected to their professions, crafts, and livelihoods. Arrangements related to co-operative associations are governed by the Co-operatives Law.

Branch Offices of Foreign Companies – SubeCompanies based abroad whose capital is divided into shares can open branches in Turkey. Opening a Branch requires prior approval from the Ministry of Industry and Commerce. Liability lies with the Parent Company. The process to open a branch is longer and more expensive than a simple limited company.

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Liaison Offices - Irtibat BurosuSpecial permission can be granted by the Directorate General of Foreign Investments for Liaison Office status. The office cannot issue invoices or generate revenue but solely acts as a sales and marketing office. Orders for goods are placed with the related entity abroad. Liaison offices have all their expenses such as rental, utilities, car leasing met from abroad. The liaison office permission is renewable on application every three years. An annual statement is sent to the Foreign Ministry to show all expenditures have been met by the foreign capital. Liaison office employees receive their salary in foreign currency sent from abroad and are not liable to income tax. The employer is liable to meet the social security costs of those liable employees in Turkey. However, many foreign nationals working in Turkey can apply for exemption if they continue to pay social insurance in their home country. Turkey has such agreements with 22 countries.

Holding CompaniesHolding Companies, whose main purpose is to participate in enterprises, may provide a variety of services to their subsidiaries, in such areas as research & development, procurement of finance, marketing and distribution, preparation of investment projects, determination of objectives, planning, organization, implementation of decisions, computer services, management, financial revision and tax consulting, market research, public relations, recruitment and training of personnel, accounting organization and control and legal consulting. Providing that the services are physically rendered, described in detail on the invoice and the price of each service disclosed separately. If those conditions are met then the subsidiaries are allowed to show the totals invoiced by the Holding Company as an expense.

Closing a businessLiquidation requires the appointment of a clerk who will be responsible for closing the business and, if there are no legal or tax issues, this may take up to 13 months.

ForeignExchangeControls

Turkish law guarantees the free transfer of profits, fees, and royalties, and repatriation of capital. There is no difficulty in obtaining foreign exchange, and there are no foreign exchange restrictions except in some circumstances connected to oil and gas exploration.

Taxation

Taxes are levied on income both personal and corporate, on property and motor vehicles. Taxes are levied on expenditures and include Value Added Tax, Excise Duty, Customs Duty, Banking and Insurance Transactions Tax, Special Communications Tax, Stamp Duty and Fees Tax. Other Taxes are Announcement and Advertisement Tax, Entertainment Tax, Communications Tax, Electricity and Gas Consumption Tax and Environmental Consumption Tax.

There is a special taxation method for multi-year construction and repair works that allow for the final determination of the profit and loss in the year in which the work ends, and declared in the tax return for that year. A withholding tax is levied on progress payments and when the total offset is greater than the taxes that are calculated the outstanding difference is refunded to the tax payer. However, the receivables of the taxpayers who don’t submit an application within one year become null.

Consolidation for tax purposes is not allowed. Each entity is subject to tax on a stand-alone basis.

Corporate Income Tax Corporation Tax Annual Returns are generally filed between 1st and 25th April.

Advance Corporate Income Tax returns are filed by the 10th and paid by the 17th of the second month after each quarter. Corporate income tax rate 20%

Corporate Income Tax StructureExampleofcalculationeffectivetaxburden

Corporate Income 100 Corporate Tax 20% -20 After-tax income 80 Distributable profit 80

Dividend WHT 15% -12 Net Dividend 68 Effective Tax Burden 32%

Payroll Taxes / CostsSocial Security is totally 33.5% of gross salary. The employer contribution is 19.5% and employee contribution 14%. Unemployment Fund contributions are 2% from employer and 1% from employee based on the gross salary, with an annual upper

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limit. A Payroll Stamp Tax of 0.6% based on the gross salary is paid by employee. Premiums paid by an employee for personal insurance should not exceed 5% of the wage that month and premiums, membership fees and contribution shares not to exceed 10%. Wages paid in foreign currency are converted at the market rate on the date of payment. The employer pays these taxes to tax office on behalf of the employee by 20th of the following month.

CosttoEmployerChartNetMinimumMonthlyWage $358GrossMinimumWage $453

EmployeeDeduction Social Security Premium (14%) $6 Unemployment Fund (1%) $5 Income tax (15%) $58 Minimum living allowance $-33 Stamp tax (0.6%) $3 Total deduction $96

CostforEmployer Gross minimum wage $453 Employer’s share of social security premium (19.5%) $88 Employer’s payment into unemployment insurance fund (2%) $9 Total Cost for Employer $55

Source: Ministry of Labor and Social Security of the Republic of Turkey Valid for the second half of 2009 For single individuals without children and may vary according to marital status and number of children.

USD 1 = TRY 1.53 as of June 2009

Personal Income Tax‘Resident tax payers’, who have their legal residence in Turkey and who reside in Turkey for a continuous period of more than six months within one calendar year, are considered to be settled in Turkey and are taxed over their earnings and revenues in Turkey and abroad. Businessmen, scientists, experts, officials, press correspondents, and other individuals whose situations resemble these, as well as those who have arrived for purposes of education, or of medical treatment, shall not be considered settled in Turkey, even if they have remained for more than six months in the country. Therefore, they are considered as ‘limited liability tax payers’ and are taxed solely on their income acquired in Turkey.

2009PersonalProgressiveIncomeTaxRate

15% for income between 0 – 8,700 TL 20% for income between 8,701 – 22,000 TL 27% for income between 22,001 – 50,000 TL 35% for income of 50,001 TL and over

Annual Personal Income Tax return filed by the 31st March of the year following the end of the tax year on 31st December. Self-employed people make advance payments 4 times in each year at a standard rate of 15% of the net profit.

Payments such as severance payments in Turkey and retirement pension paid by social security institutions located in foreign countries, as well as lump sum payments to surviving spouses are excluded from assessment Indemnity and Assistance for income tax.

Mass transit in shuttle vehicles for employees from and to their place is excluded from income tax but vehicles for upper level employees used exclusively as a private official car will be treated as wage payment. Providing there is a ‘contract’ between employer and employee, the expenses incurred using the employee’s personal car for business purposes can be deducted; as are the expenses in leasing a car in the name of the enterprise for the employee’s use and they are expenses in leasing a car in the name of the enterprise for the employee’s use and they are not treated as taxable income.

Value Added TaxVAT Rates are from 1% for certain agricultural products, 8% for basic foodstuff, textile products etc. and a general rate of 18%. VAT returns are submitted monthly by the 20th of the following month and paid by the 26th.

Deliveries and services, importation of goods and services, communications services including radio and television, games of chance, professional concerts and sports competitions, auctions, movement of energy through pipelines, delivery and importation of ornaments and coins that contain gold, property rental are liable to VAT. Non residence does not change the nature of these transactions. Goods are liable at the moment of delivery, and services from the performance, benefit or valuation of these services in Turkey.

Where the taxpayer has no legal residence, place of business, the Ministry of Finance holds the taxpayer in Turkey responsible for the transaction. The main purpose is to secure the collection of the tax receivable. VAT has to be recorded in the legal books and documents.

VAT Deduction MechanismVAT payable on local purchases and on imports is regarded as “input VAT” and VAT calculated and collected on sales is considered as “output VAT”. Input VAT is offset

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against output VAT in the VAT return filed at the related tax office by the 20th of the following month. If output VAT is in excess of input VAT, the excess amount is paid to the related tax office. However, if input VAT exceeds the output VAT, the balance is carried forward to the following months to be offset against future output VAT. There is no cash refund to recover excess input VAT, except for exportation.

There is also a reverse charge VAT mechanism, which requires the calculation of VAT by resident companies on payments sent abroad. Under this mechanism, VAT is calculated and paid to the related tax office by the Turkish company on behalf of the foreign company. The local company treats this VAT as input VAT and offsets it in the same month. This VAT does not create a tax burden for the Turkish and the non-resident company, except for its cash flow effect.

Export exemption for VATTo recognize an export delivery it must be made to a customer abroad, to a free zone, or bonded warehouse, it must cross the Customs Line of the Republic of Turkey and arrive in a foreign country. A service must have been performed for a customer abroad and the benefit derived abroad.

Non-residents can reclaim VAT for goods they purchase to take out of Turkey by presenting the invoice or sales document at the point the goods pass through customs.

Goods and services purchased in connection with transport activities, participation in fairs, markets or exhibitions are refunded on the principle of reciprocity.

VAT on goods delivered by manufacturers to exporters for subsequent export are not paid by the exporter. This tax, which is not collected from the taxpayer, is declared on the tax return, assessed, accrued and deferred. If the goods are exported within three months (or extension period of upto three months) the deferred tax is written off. If the export is not made, the deferred tax plus a delay surcharge is assessed. The VAT to be refunded to the manufacturer is paid following the completion of the export.

Import VATThe tax base is the total value of the following elements: the value of the imported article used for the assessment of customs duty or if the item is exempt then the value including insurance and freight charges (CIF); all taxes, duties, expenditures, and charges paid during importation; other expenditures such as price differentials and foreign exchange rate differentials based on the value of the article.

Tax Base for VAT In order for discounts to be excluded from the tax base they should be disclosed on the invoice or documentation, at that time, and conform with commercial practices.

Credit charges, price differentials, interest and premiums, even if disclosed separately to the invoice, are included in the tax base.

Where the cost has been quoted or indexed in foreign currency the foreign gains accrued in favour of the supplier are taxed as component of the tax base. In the case of the foreign exchange gain in favour of the buyer, an invoice should be drawn up by the buyer to the supplier covering the amount of foreign exchange gain that has been accrued. VAT is applied as of the date which the goods or services were delivered.

In the case of the return of the goods or non performance of the service the taxpayer subject to taxation can correct and deduct the tax during the period in which the change occurred.

VAT for Partnerships Ordinary partnerships have a separate tax payer status but are required to keep legal books, file tax returns and pay taxes separately from its partners. Transfers of shares when they do not result in the termination of the partnership are exempt from VAT. Although the VAT return isdrawn up in the name of the partnership and signed and filed by one of the shareholders, all shareholders are jointly responsible for the payment of the tax. A list is attached with the names, addresses and the tax offices of the partners.

VAT on Sales of Shares Sales of shares in an Joint Stock company (Anonim Sirket A.S) are exempt from VAT. A sale of shares in a Limited company (Ltd. Sti.) by another company is exempted from VAT, if the participation is held for at least two years. A sale of shares by an individual is not subject to VAT.

Withholding TaxCertain taxes are collected through withholding by the taxpayers in order to secure the collection of taxes. These include income tax on salaries of employees, lease payments to individual landlords, independent professional service fee payments to resident individuals, and royalty, licence and service fee payments to nonresidents. Companies in Turkey are responsible to withhold such taxes on their payments and declare them through their withholding tax returns.

Filed by the 20th day and paid on the 26th of the following month. Companies with less than 10 employees can apply to file quarterly.

Tax withholding on dividends distributed by corporationsWithholding tax of 15% is applied on the dividends distributed by resident taxpayers to resident and non-resident real persons and non-resident corporations. Declarations are filed by the 20th day and tax paid by the 26th of the month following the dividend distribution.

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Royalties, management fees, technical assistance fees and similar professional service fees paid to a non-resident are normally subject to withholding tax at source at 20 percent, unless a tax treaty provides relief. Dividends paid by a resident corporation to another resident corporation (or to a Turkish branch of a foreign corporation) are not subject to dividend withholding tax.

Some types of payments to entities in low tax jurisdictions have a 30 percent withholding tax in line with anti avoidance rules.

Other Taxes

Bank Taxes Withholding Tax on interest 15% Transaction tax on checks 1.6 TL per check Also Banking and Insurance company transactions remain exempt from VAT, but are subject to a Banking and Insurance Transaction Tax (BITT) of 5%.

Vehicle Taxes Fuel tax included in fuel price The amount of Motor Vehicle Tax for land transportation vehicles is determined according to their weight, age, cylinder capacity.

Property Tax Property transfer fee 1.5% based on sale price Property tax 0.2% and 0.3% (double in Istanbul) value of building and land Stamp duty on property sale 0.8%

Stamp Tax Some documents prepared in Turkey (contracts, share purchase agreements, loan contracts, and mortgage instruments, etc.) are subject to stamp duties, typically at 0.75% based on transaction value. Loan contracts (and security documents, such as a mortgage) for a loan from a local or foreign bank are exempt from the stamp duty. Merger agreements (taxable or tax-free mergers or tax-free divisions) are not subject to stamp duties. Stamp tax payments are recorded in a ledger and declared periodically. Stamp Tax is payable by the parties who sign a document. Each and every signed copy of the agreement is separately subject to Stamp Tax.

Special Consumption Tax (OTV)

There are different product groups that are subject to OTV at different tax rates:

Petroleum products, natural gas, lubricating oil, solvents and derivatives of solvents

Automobiles and other vehicles, motorcycles, planes, helicopters, yachts

Tobacco and tobacco products, alcoholic beverages

Luxury products

1.

2.

3.

4.

Environment Tax Environment tax 1,537TL plus 25% surcharge in Istanbul levied by the Municipalities towards the financing of certain services such as garbage collection. This tax is paid via the water bill of the property.

Advertising Tax Advertising tax at various rates especially for alcohol and tobacco advertising

Filing Periods

Corporate income tax

If filing by calendar year financial statements due by April 25 - late filing subject to a fine.

Advance corporate income tax

Filed by the 10th and paid by the 17th of the second month after each quarter.

Withholding tax Filed by the 20th day and paid on the 26th of the following month. Companies with less than 10 employee scan apply to file quarterly.

VAT Filed monthly by the 20th of the following month and paid by the 26th.

Personal income tax

Annual return filed by March 25 of the year following the end of the tax year on December 31. Payment at the end of March and June.

Other Tax Issues

Related Party DefinitionFor the Income Tax Code spouses, relatives by ancestry or descent up to and including third degree relations by blood or marriage, and parties under control from the standpoint of management, supervision and capital are considered as related parties. For debt as disguised equity a related party is legal or real persons who have at least 10 percent shareholding or control of those companies owned by the shareholders.

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Transfer PricingTransfer pricing regulations are based on the OECD guidelines and were introduced in 2006.

Disguised profit distribution through Transfer PricingThe four significant concepts are: if the person or entity is engaged in buying goods and services; from related parties; at prices or amounts that do not conform to ‘arm’s length’ or market value principles; and as determined by the Ministry of Finance. Taxpayers are allowed to chose from: Comparable Price Method; Cost Plus Method with the cost of the goods or services increased by a ‘reasonable gross profit ratio’; and Resale Price Method.

Thin Capitalisation Debt is reclassified as disguised equity, for tax purposes only, if all of the following tests are met: The lender is a related party and the debt-to-equity ratio exceeds three times the shareholders equity of the company at any time during the year. The ratio can be increased to six times of the shareholders equity, if the shareholder/related party providing the loan is a genuine financial institution. The effect of the thin-capitalization rules is that financial expenses such as interest expenses and foreign exchange losses associated with the amount in excess of a three-to-one debt equity ratio is disallowed for tax purposes.

Intangible Rights and Disguised Profit DistributionThe arm’s length value should be the price that the owner of an intangible asset would agree to transfer the right to a third party in an uncontrolled transaction.

Works undertaken as an Ordinary Partnership / Joint Venture /

ConsortiumOrdinary Partnerships do not have corporation tax liability and its partners are separately registered as liable for income tax or corporation tax. Joint Ventures are liable for corporation tax.

However, Consortiums are not clearly defined in the Turkish Tax Legislation, but typically used for construction work with separable segments. Although one partner is the addressee of the tax office, each member accounts for its own income and expenses and profit or loss per its own segment of the work. The consortium terminates on the completion of the work.

Tax Assessment for Non-resident Foreign Transport CompaniesFirms are taxed on revenue considered to have been generated in Turkey. For land transport the passenger, cargo and baggage transport fees within the borders of Turkey, sea and air transport fees from loading points in Turkey and commission on tickets sold in Turkey are considered revenue.

The corporation tax base is assessed from the sum of the revenue multiplied by the arm’s length ratios - land: 12%, sea: 15%, air: 5% e.g. Revenue of 150,000 x Sea Ratio 15% = 22,500 TL

CIT Base 22,500 TL x Tax Rate of 20% = 4,500 TL. A tax withholding will be applied on the portion of the gain transferred to the head office: 22,500 – 4,500= 18,000 x 15% = 2,700 TL.

Offset LossesLosses can be carried forward five years. No carry back is possible.

Employment

Employment is covered by Labor Law 4857. Under its terms there is no discrimination based on language, race, sex, political opinion, philosophical belief, religion or similar reasons. The minimum hourly wage for all employees over 16 years of age in Turkey in 2009 is 693 TL per month.

Turkey has signed many International Labor Organization (ILO) conventions protecting workers’ rights. Turkey’s labor force has a reputation for being hardworking, productive, and dependable.

Foreigners employed legally in Turkey can either apply for Work Permits from the Ministry of Labor and Social Security or from the Consulates and Embassies of the Turkish Republic abroad. Many visitors can buy a sticker visa on arrival and stay between 30 to 90 days, some passport holders have to apply in advance for a visa. Please check with the Ministry of Foreign Affairs.

Turkey has signed Social Security Agreements with 22 countries: Albania, Austria, Azerbaijan, Belgium, Bosnia and Herzegovina, Bulgaria, Canada and the Province of Quebec, Czech Republic, Denmark, France, Georgia, Germany, Libya, Luxembourg, Macedonia, Norway, Romania, Sweden, Switzerland, Turkish Republic of Northern Cyprus, The Netherlands, The United Kingdom.

Invoicing

Fake invoices (‘naylan fatura’) are a common occurrence in Turkey. Often issued to raise the expenses and costs in order to show less profit, reduce the tax assessment and avoid payment of VAT or to receive a VAT refund. Expenses that can’t be authenticated, such as the non-disclosure of employees’ actual wages, are often declared at minimum wage levels.

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All invoices must contain the following minimum information: the date, series and sequence number, the name and commercial title of the business, the business address; the company’s registered tax office and account number; the customer’s name, commercial title, address and its tax office and account number; the type, amount, price and total value of the goods or services; the date of delivery. A consignment invoice, which is a combination of invoice and waybill, is allowed but must be drawn up in at least three copies; with two copies accompanying the goods in the vehicle carrying the consignment. In the event of required information being missing the invoice is regarded as not having been issued at all.

Invoices are to be given consecutive sequence numbers; issued with at least one original and one copy, more than copy is to be marked with its number; the signature (which can be printed) of the owner or authorized representative of the business and company stamp should be at the top of the invoice.

Invoices have to be issued within ten days of the date of the delivery or performance of the service, otherwise they will be considered void. The customer is obliged to present its documents for identity and tax office account number if requested by the issuer of the invoice.

Invoices have to be printed by printers who have a special contract with the Ministry of Finance.

There are penalties for failure to issue receipts and invoices.

Expenses

Deductible Expenses

Expenses should be directly relevant to the acquisition and continuation of business profits, that they are commensurate with the volume of the business. Some non deductible expenses include cell phones that are not recorded to the name of the enterprise cannot be recorded as expense.

For expense recognition of hospitality and entertainment, there should be business relationship with the firm, the expenses in line with size of the business and expected outcome and should not breach public morality and laws. For business travel and accommodation the ‘actual expense method’ or the ‘allowance method’ can be used. Per Diem levels are set against those given to State civil servants with the same monthly salary, or the highest limit granted by the State. Allowances exceeding this amount are subject to taxation as a wage payment. Recently, expense documents by sales representatives abroad commensurate with the business have been recognized as deductible expenses, even in cases where they are drawn up to the employee’s own name and not that of the firm. Medical services in private polyclinics paid by

the enterprise are treated as wage expense and subject to withholding tax and are treated as a benefit provided to employees.

Expenditures incurred in tenders for construction work such as surveys, travel and miscellaneous expenses incurred in connection with the tender guarantee and stamp duties, even if the tender is not awarded, are deductible. However payments made for purposes of persuading other parties to withdraw a tender cannot be accepted as deductible expense. Payments that are not legal are disallowable. Expenses related to attorneys and lawsuits may be treated as deductible unless the lawsuits have been filed due to the personal fault of the enterprise.

Grants and donations to recognized foundations amounting to 5% of that year’s corporate earnings are deductible. Grants to educational and health facilities may be fully deductible as are donations made in cash or kind for national catastrophes.

Non-documented expenditures such as train, boat, bus and parking lot fees can be deducted with a detailed list of the date, amount and the name and location of the related parties. Sales slips/receipts including VAT and not above 670TL, for goods such as stationery, office supplies, cleaning materials for use in the workplace can be accepted as deductible expenses.

For tax purposes goods that are lost or stolen cannot be recorded as an expense. Normal shrinkage and in the cases of a ‘force majeure’ the cost of the goods may be written as an expense.

Sponsorship expenses cannot be deducted unless the sponsor has generated profits and then 100% can be deducted for amateur sports and 50% for professional sports sponsorships.

Sales staff can be reimbursed for daily transports costs and also one employee such as a messenger. Non sales staff cannot claim for a commuting allowance.

Company Cars

If the company purchases cars for the employees’ use all expenses and depreciation expenses are deductible.

Lease car hire costs for employees use are deductible. A contract is made between the lease car supplier and the company is invoiced monthly with deductible VAT at 18%. There is a 0.75% stamp tax payable by the company based on the total amount of the initial contract. You are required to have third party insurance and an optional comprehensive insurance. The employee signs a ‘consignment note’ to confirm receipt of the car, stating that the car will be used on company business. Expense claims for fuel, road toll fees and parking are deductible and submitted on a monthly expense claim form with receipts or invoices addressed to the company - not in the employee’s name. These are not payroll-related expenses and should be reimbursed directly to the employee by the company’s accountant

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If employees are using their own car for company business then there should be a written ‘agreement’ between the employee and the employer about ‘leasing’ the employee’s car so that expenses such as petrol, road tolls and parking are deductible on a monthly expense claim form. If the annual amount paid to the employee is less than 22,000 TL then this is not declared for personal income tax. However, the employer has to deduct 20% withholding tax on the amount paid to the employee for using their car and also offset the 18% VAT.

If employees use their own cars occasionally for business purposes then they can be reimbursed at approximately 0.60 to 0.80 TL per 1 km. This is based on a comparable journey by state controlled taxi of 1.3 TL per km.

Accounting

IA Draft Commercial Code is making its way through the Parliament and is broadly in line with Turkey’s accession targets for entry to the European Union. Under the Code all companies other than small and medium-sized entities (SMEs) present their legal and consolidated financial statements in accordance with Turkish Accounting Standards and which correspond to International Financial Reporting Standards (IFRS) and that all companies have an annual audit by a licensed independent auditor carried out in accordance with International Standards of Auditing (ISA).

The Turkish Accounting and Auditing Standards Board (TMUDESK), founded in 1994, is a member of the International Accounting Standards Committee (IASC). The standards issued by the Turkish Accounting and Auditing Standards Board are parallel to and in conformity with the IFAC standards and may bear some minor revisions. The Turkish Uniform Chart of Accounts was introduced 1 January 1994.

All types of commercial companies which are subject to corporation tax are considered Class I Merchants and must maintain their books on a balance sheet basis.

The statutory financial statements should include at least the following: Balance sheet, Profit and Loss Statement and Notes to the Financial Statements.

Accountants are governed by Law Number 3568 and authorized by The Union of Certified Public Accountants and Sworn-in Certified Public Accountants of Turkey (TURMOB). Certified Public Accountants are known as Serbest Muhasebeci Mali Musavirlik (SMMM) and Sworn-in Certified Public Accountants known as Yeminili Mali Musavir (YMM), the latter having at least 10 years work experience as a Certified Public Accountant. They are authorised to approve financial and tax statements with an authority similar to public officials of the Revenues Directorate of the Ministry of Finance.

The Turkish Accounting Standards Board, Turkish Auditing Standards Board, Revenues Administration, the General Directorate of Insurance of the Under Secretariat of

Treasury, Capital Markets Board and the Banking Regulation and Supervision Agency are the bodies overseeing accounting rules. However, accounting regulations by the Ministry of Finance take precedence over all other regulations with limited exceptions for banks, insurance companies and listed companies. Therefore, these entities are required to prepare multiple sets of financial statements from their single set of underlying accounting records. Traditionally many medium and large enterprises base their management information on tax accounting, which does not provide management with adequate information to manage their enterprises efficiently. The systems for internal controls are generally weak in Turkish enterprises.

Legal Books

Although maintain the General Ledger is mandatory there is no requirement to have it certified. However the following legal books need to be certified by a notary public: Journal and Inventory Registers; Operation Registers; Farmer’s Operation Registers; Manufacturing and Production Tax Registers; Transportation Tax Registers; Foreign Transport Proceeds Registers; Independent Professional Earnings Register.

There is a special Irregularity Fine for the company’s failure to have the daily cash register, daily retail sales and proceeds register, and self-employment earnings register at the place of business.

Depreciation

Depreciation is classified under four headings

(1) Straight Line Method (2) Double Declining Method for taxpayers who keep their accounts on the balance sheet basis (3) Depreciation in Mines determined separately for each quarry (4) Extraordinary Economic and Technical Depreciation as determined by the Ministry of Finance.

The foreign exchange buying rates announced by the Turkish Central bank are used to determine foreign exchange gains or losses on the cost of foreign loans.

IntellectualPropertyrights

Turkey’s legal system provides means for enforcing property and contractual rights, and there are written commercial and bankruptcy laws.

Turkish law generally accepts binding international arbitration of investment disputes between foreign investors and the state. Secured interests in property, both movable and real, are recognized and enforced. Real estate is registered at the land registry office.

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Turkey’s copyright law provides deterrent penalties for copyright infringement. The law contains several strong anti-piracy provisions, including a ban on street sales of all copyrighted products and authorization to take action without a complaint by the rights holder. Although pirated materials are still common, the law has minimum penalties of three months to two years imprisonment and/or a fine between 5,000 and 50,000 TL and a maximum penalty of three to six years imprisonment and/or fines between 50,000 and 250,000 TL.

Turkey is a signatory to a number of international conventions, including the Stockholm Act of the Paris Convention, the Patent Cooperation Treaty, the Strasbourg Agreement, and the WIPO Copyright Agreement and Performances and Phonograms Treaty.

Turkey’s Patent Law provides for penalties for infringement of up to 4 years in prison, or 46,000 TL in fines, or both, closure of the business for at least one year, and a prohibition on the owner’s participation in any commercial activity during that same period.

Trademark holders have reported counterfeiting of their marks in Turkey, especially in apparel, film, cosmetics, detergent and pharmaceuticals. Turkey provides protection for commercial seed under its Plant Variety Protection (PVP) Law.

InvestinginTurkey

The foreign investment legislation is based on the principle of equal treatment for the domestic and foreign investors.

In 2006, 2007 and 2008 Turkey attracted almost $20 billion a year in For eign Direct investment. In the first half of 2009 there was a reduced inflow of $3.5 billion with a third going to electricity, gas and water supply. USD 9 – 10 billion worth of investment is predicted for 2009. Historically Turkey has attracted the highest amount of FDI from EU member countries, Gulf Arab countries and the USA. China, Korea and India are expected to make significant investments.

In 2009 there were 22,250 companies with international capital operating in Turkey, the majority in the wholesale and retail trade sectors, followed by manufacturing in textile goods, chemical products, food beverage products and then real estate and construction. Half the companies with foreign capital are of EU origin – led by Germany with 3,806 companies, UK with 2,110 and Netherlands with 1721 companies. 12,172 companies are based in Istanbul followed by Antalya (2,827), Ankara (1471) and Izmir 1,300

66 Incentive Certificates issued by the Undersecretariat of Treasury for the first five months of 2009 with a capital value of $3.3 billion, half of this capital will be covered by international partners and mainly in the manufacturing and services sector. The

agriculture, food, infrastructure, energy and real estate sectors are expected to receive substantial investments.

TheInvestmentIncentiveSysteminTurkey

Investment Incentive schemes are: General investment incentive regime; Incentives for large-scale investments; Region and sector-based incentive system; Incentives on employment; R&D support; SMEs; Industrial Thesis (SANTEZ) program; Loans for technical development projects; Training supports and State aids for exports. The general investment incentive regime is mainly a tax benefit program, in some cases with credit possibilities. The implementation of the Turkish incentive regime varies depending on the location, scale and subject of investments. The major incentives instruments are exemption from customs duties for imported machinery and equipment for projects with an incentive certificate and VAT exemption for locally purchased or imported machinery and equipment for projects with an incentive certificate.

There are also incentives for large scale investments such as: Corporate Tax rates between 2-10% for investments started before 31st December 2010 and between 4-15% for investments from 2011; Social Security premium contribution for employers up to 7 years; and free land allocation.

Large scale investments in the following sectors and investment amounts qualify for an Incentive Certificate: raw chemical materials production and in the oil industry for over 1 billion TL investment; 300 million TL in other chemical production; transit pipeline services totaling a minimum of 50 million TL investment; automotive investments over 250 million TL; Railways over 50 million TL; Ports over 250 million TL; Electronics investments in LCD/Plasma screen manufacturing totaling a minimum of 1 billion TL and other electronics sector investments, including information and communication technologies, totaling a minimum of 50 million TL; Medical and optic devices over 50 million TL; Pharmaceuticals over 100 million TL; Aviation industry minimum of 50 million TL; Machinery minimum of 50 million TL; Mining investments in ore processing facilities and integrated metals production mills totaling a minimum of 50 million TL.

Region and sector-based incentives offer the same incentives as above. They are based on zones. In Zone 1: Investments that generally require the use of advanced technology, such as the automotive and supply industry, electronics, pharmaceuticals, machinery, medical and optical devices will be covered by incentives. In Zone 2: Technology-intensive sectors will be supported. In this framework, machinery, smart multi-functional textile, non-metal mineral product, paper, and food & beverage investments will be incentivized. In Zones 3 and 4: Investments in agriculture, agriculture-based manufacturing industry, ready-to-wear, plastics, rubber, metal goods, tourism, health and education will be covered by incentives. Some additional sectors will be incentivized regardless of location: Specialized Organized Industrial Zones (OIZ) established by the Ministry of Industry and Commerce; Investments related to the transportation of cargo and/or passengers by sea; Railway investments

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by the private sector for inter-city cargo and/or passenger transportation, as well as railway investments for local cargo transportation are subject to incentives in all regions; Housing heating/cooling investments, realized through geothermal energy and/or power plant waste energy, may benefit from regional incentives.

There are Employment Incentives for newly employed women and unemployed people between the ages of 18 and 29 recruited before July 1st, 2010 and incentives for additional employment.

Research and Development Incentives apply for projects in Turkey if a minimum of 50 personnel are employed in an R&D center. The incentives within the new law are valid until the year 2024 and include; 100% deduction of R&D expenditures from the tax base if the number of researchers is over 500; Income withholding tax exemption for the employees (this item will be effective until December 31st, 2013; 50% of social security premium exemption for employees for a period of 5 years; Stamp duty exemption for applicable documents; Techno-initiative capital for new scientists up to 100,000 TL; Deduction from the tax base of certain funds granted by public bodies and international organizations.

With the establishment of Technology Development Zones (TDZ) companies are provided with offices ready to rent, and infrastructure facilities are provided; Profits derived from software development and R&D activities are exempt from income and corporate taxes until 31.12.2013; Deliveries of application software produced exclusively in TDZs are exempt from VAT until 31.12.2013; Wages of researchers along with software and R&D personnel employed in the zone are exempt from personal income tax until 31.12.2013; and 50% of the employer’s share of the social security premium will be paid by the government for 5 years until 31st December 2024.

TUBITAK (Scientific and Technological Research Council of Turkey) and TTGV (Turkish Technology Development Foundation) both compensate or grant R&D related expenses and capital loans for R&D projects.

Small and Medium Enterprises (SMEs) operating in the manufacturing, agro-industry, tourism, education and healthcare, mining, and software development industries, employing less than 250 employees and earning less than 25 million TL in revenue or turnover per year can apply for incentives: Exemption from custom duties; VAT exemption for imported and domestically purchased machinery and equipment; Credit allocation; and New credit guarantee support. The Turkish Treasury announced the establishment of a new guarantee program with a 1 billion TL fund transferred to the Credit Guarantee Fund (KGF) to create credit capacity worth TRY 10 billion. The Treasury will also guarantee a 65% share of these credits. The Small and Medium Sized Industry Development Organization (KOSGEB) contributes to strengthening SMEs by various support instruments in financing, R&D, common facilities, market research, investment site, marketing, export and training.

An Industrial Thesis (SANTEZ) program offers direct financial support for new technology adaptation, process development, quality improvement and environmental modification projects to be realized with university partnerships.

The Technology Development Foundation of Turkey (TTGV) presents long term interest-free loans for technology development, renewable energy production, energy efficiency improvement and environmental impact-reducing projects. Exemplary support for environmental project with the maximum contribution rate is 50% per project; a maximum budget of USD 1 million per project; and the pay-back period is 4 years after the project execution.

ListingRulesinTurkey

The Istanbul Stock Exchange (ISE), 1986, is becoming a significant emerging market stock exchange. In 2009 there are 320 national companies listed on the exchange. The Market value at the Istanbul Stock Exchange is over 300 billion TL. Akbank is the stock exchange’s most valuable company with a 24.4 billion TL market value. Six out of the top 10 most valuable companies are banks, namely Garanti Bank, Is Bankasi, Yapi Kredi, Halkbank and Finans Bank. However, Turkey has yet to develop other capital markets. The Capital Markets Board is responsible for overseeing the activities of capital markets, including activities of ISE-quoted companies, and securities and investment houses. The Turkish private sector is dominated by a number of large holding companies, whose upper management is family-controlled. Most large businesses continue to float publicly only a minority portion of company shares in order to limit outside interference in company management. There has been no attempt at a hostile takeover by either international or domestic parties in recent memory. Capital market instruments are still developing in Turkey. Turkey’s first mortgage law was adopted in 2007. Hedging instruments are also very limited. Izmir’s futures market opened in 2003 and has recorded monthly transaction volumes of around $12 billion.

An independent Banking and Regulation Supervision Agency (BRSA) monitors and supervises Turkey’s banks. The BRSA is headed by a board whose seven members are appointed by the cabinet for six-year terms. In addition, bank deposits are protected by an independent deposit insurance agency, the State Deposit Insurance Fund (SDIF).

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Relevantwebsitesorfurtherreading

www.invest.gov.tr Investment Support and Promotion Agencywww.treasurywww.gov.tr The Turkish Treasury www.dtm.gov.tr Foreign Trade and General Directorate of Imports www.oib.gov.tr Privatization Administration www.deik.org.tr Foreign Economic Relations Board www.tusiad.org.tr Turkish Industrialists’ and Businessmen’s Association www.epdk.gov.tr Energy Market Regulatory Authority www.bddk.org.tr Banking Regulation and Supervision Agency www.cmb.gov.tr Capital Markets Board of Turkey www.tubitak.gov.tr Scientific and Technological Research Council of Turkey www.ttgv.org.tr Turkish Technology Development Foundation www.kosgeb.gov.tr Small and Medium-sized Entities Development Organization www.yased.org.tr International Investors Association www.mfa.gov.tr Ministry of Foreign Affairs (for visa requirements)

AboutKapitalKarden

Kapital Karden is a financially-focused, professional business services provider that serves growing organisations with independent audit, accounting and payroll, tax, consulting, VAT refunds, corporate finance, restructuring, energy audit, forensic accounting and wealth management throughout Turkey, Azerbaijan and The Caucasus. Kapital Karden was established in 1994 and became the correspondent firm of RSM International in 1996 and member firm in 2008. Kapital Karden is proud to be a part of such a strong international network that helps it attract, serve and partner global clients as they grow their businesses. The International Accounting Bulletin, June 2009, named Kapital Karden ‘the fastest growing accountancy firm in Turkey’.

Kapital Karden’s strengths lie in their being a well-known and trusted adviser; their understanding of the client, the nature of its business and the scope and timing of the assignment; and also that the partners of the firm came from the Turkish Revenue Service and Capital Markets Board. Weathering the storm of the financial crisis of 2001 the firm emerged stronger and better able to serve its clients. The firm provides a high quality service in Turkish, Azeri, English, Japanese and Russian.

Clients of Kapital Karden include Turkish and international clients in the Technology, Construction, Energy, Banking and Insurance, Retail, Manufacturing, Legal, Finance, Conference and Textiles sectors with operations throughout the Euro Med Area, China, the Middle East and Russia.

Contact

KapitalKarden1SiklamenSokakLevent3IstanbulTurkey

Tel: +902122843900Fax: +902122843901

Email: [email protected]: www.kapitalkarden.comWeb: www.kapitalsmm.com

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GlobalContacts

RSM International headquarters

Chief Executive Officer - Ms Jean StephensTel: +44 20 7601 1080Email: [email protected]

Regional liaisons

AfricaRegional Contact - Mr Clive Betty

Tel: +27 11 329 6000

Email: [email protected]

AmericasInternational Director - Mr Bob Burdett

Tel: +1 312 782 2124

Email: [email protected]

Asia PacificRegional Director - Mr Neil Hough

Tel: +61 3 9286 1862

Email: [email protected]

CaribbeanRegional Contact - Ms Judit Petho

Tel: +44 20 7601 1080

Email: [email protected]

Europe Regional Director - Mr Paul Langhorn

Tel: +44 20 7601 1097

Email: [email protected]

Middle EastRegional Contact - Shuaib A. Shuaib

Tel: +965 2241 0010

Email: [email protected]