Draft Law on Amendments to the Unemployment Insurance Law and Certain Other Laws

This legislative proposal aims to implement a set of legal regulations to mitigate the adverse effects of the Covid-19 (“Coronavirus”) pandemic on employment, to distribute and alleviate the burdens on workers and employers caused by the pandemic, to fulfill the goals of the economic program, and to ensure compliance with the principles of justice in taxation. The draft, published on 16.10.2020, introduces several significant changes to business and commercial life, as outlined below.

Incentive for Long-Term Social Security Premium Payments from the Fund for Periods Covered by Unemployment Benefits

Individuals who benefit from unemployment insurance and are re-employed in private sector workplaces within 90 days of termination, and who work continuously under an employment contract for at least 12 months, may apply to have the long-term insurance premiums—based on the minimum wage in effect on the date of payment by İŞKUR to the Social Security Institution (SGK)—fully covered by the Unemployment Insurance Fund. This incentive can be used only once per unemployment benefit entitlement.

This provision is intended to encourage the swift reintegration into the workforce of individuals who previously received unemployment benefits, by covering their long-term social security premiums through the Unemployment Insurance Fund, provided they are re-employed within 90 days and remain continuously employed for at least 12 months.

Extension of the Incentive Period Under Law No. 4447 Until the End of 2020

Articles 2 through 5 of the proposal amend provisional Articles 10, 19, and 21 of Law No. 4447 to grant the President the authority to extend the implementation period of existing incentives—originally valid until the end of 2020—for combating unemployment, protecting and increasing employment, and promoting the employment of disadvantaged groups, until 31/12/2023 if necessary.

Specifically, Article 2 introduces incentives for additional employment of women, youth, and holders of vocational qualification certificates. Article 3 offers 12 months of incentives for employers who hire additional employees compared to the previous year’s average between 01.01.2018 and 31.12.2020, and 18 months if the employee is a woman, young person, or disabled individual. The proposed change allows the President to extend these incentives until 31.12.2023. Article 4 extends the income tax withholding and stamp tax relief associated with such employment until the same date.

Postponement of the Effective Date of the Craftsmen’s Social Security Fund

Article 5 of the proposal postpones the effective date of the Craftsmen’s Social Security Fund, established by an additional article to the Unemployment Insurance Law, from January 1, 2021 to December 31, 2023, due to the adverse impacts of the Covid-19 pandemic.

Extension and Relaxation of the Short-Time Working Allowance

Article 6 aims to both extend and ease the conditions of the short-time work allowance due to the Covid-19 outbreak. The eligibility criteria are proposed to be changed to require the employee to have been under an employment contract for 60 days (currently 120) prior to the start of short-time work and to have paid unemployment insurance premiums for 450 days (currently 600) within the past three years.

Considering that the pandemic remains uncontrolled and its economic impact continues under challenging conditions, the proposal seeks to extend the President’s authority to prolong the short-time work scheme from 31/12/2020 to 30/6/2021.

Extension of the Normalization Support Period

Article 26 of the Unemployment Insurance Law, added by Law No. 7552 dated 23/7/2020, offers support for employers who return to normal operations after placing employees on short-time work or unpaid leave due to the Covid-19 pandemic. The support covers insurance premiums calculated based on the average number of days covered by short-time work allowance or cash wage support and the minimum wage, for up to three months until 31/12/2020. The President is authorized to extend this period to six months.

With this legislative proposal, the President would be authorized to extend the application of normalization support under Provisional Article 26 of the Unemployment Insurance Law until 30/6/2021 for private sector workplaces that applied for short-time work before 1/7/2020 and later resumed normal weekly working hours.

SUPPORT FOR THE REEMPLOYMENT OF WORKERS WHOSE EMPLOYMENT CONTRACTS WERE TERMINATED OR WHO WORKED WITHOUT SOCIAL SECURITY REGISTRATION

Article 8 of the proposal introduces a regulation aimed at promoting the reemployment of individuals whose employment or service contracts were terminated without just cause between 01/01/2019 and 17/04/2020 or who were employed without being reported to the Social Security Institution (SGK). If such individuals apply to their most recent employer (as of the effective date of the law) within 30 days and are actually reemployed, both the employer and the employee will benefit from a set of incentives.

Under this scheme:

  • Employers will receive a monthly incentive of 44.15 TL per eligible employee, to be offset against all premiums payable to SGK.

  • Employees who are hired and placed on unpaid leave will be eligible for a daily cash wage support of 39.24 TL.

  • Additionally, individuals who are not reemployed but meet certain criteria will receive a daily support of 34.34 TL.

SUPPORT FOR ADDITIONAL EMPLOYMENT OVER THE LOWEST-REPORTED INSURED PERIOD BETWEEN JANUARY 2019 – APRIL 2020

According to Article 9 of the draft: Employers hiring additional employees beyond the number of insured persons reported in the month/period with the lowest reported figures between January 2019 and April 2020 will be provided with a daily support of 44.15 TL per employee, to be offset from SGK premiums.

Furthermore, those hired under this scheme but placed on unpaid leave will be eligible for daily cash support of 39.24 TL, with the overall aim of boosting employment.

EXEMPTION FOR INDIVIDUALS SELLING HANDMADE PRODUCTS ONLINE

Article 10 proposes that individuals who manufacture goods at home (without opening a separate workplace or using industrial or mass-production machinery) and sell them via the internet or similar electronic platforms may benefit from a tax exemption—provided that:

  • They obtain a certificate of tax exemption;

  • They open a bank account at a Turkish bank;

  • All income is collected exclusively through that account.

Sales revenue will then be subject to withholding taxation instead of regular income tax declarations.

50% INCOME DEDUCTION ON EXPORT EARNINGS FOR FULLY TAXABLE INDIVIDUALS

Article 11 provides that 50% of the income earned by fully taxable individuals from the export of goods may be deducted from their declared income in the annual tax return. The President is authorized to reduce or double this rate, amount, or limits.

TAXATION OF DIVIDENDS IN CASE OF SHARE REPURCHASES BY COMPANIES

Article 12 proposes that when fully taxable capital companies acquire their own shares under the Turkish Commercial Code, the following rules will apply:

  • If the shares are canceled via capital reduction, the difference between acquisition cost and nominal value will be deemed a distributed dividend as of the date of registration.

  • If the shares are sold below acquisition cost, the difference will be treated as a dividend on the date of sale.

  • If neither cancellation nor sale occurs within two years, the difference between acquisition cost and nominal value will be considered a distributed dividend on the last day of the two-year period.

A 15% withholding tax will be applied to these amounts. This provision is aimed at preventing tax-free profit distributions through share buybacks. Additionally, the withheld tax cannot be offset against other taxes. The President is authorized to increase the rate up to 30% or reduce it to 0%.

AUTOMATIC REVALUATION OF TAX EXEMPTION LIMITS

Article 13 introduces an amendment to Article 9 of the Income Tax Law, which stipulates that the threshold amount used to determine exemption eligibility will be automatically adjusted each year according to the revaluation rate determined under the Tax Procedure Law.

REGARDING AMENDMENTS TO TEMPORARY ARTICLE 67 OF THE INCOME TAX LAW NO. 193

With Article 14 of the Draft Law, amendments are proposed to Temporary Article 67 of the Income Tax Law, which governs the taxation of income derived from the disposal and holding of securities and other capital market instruments, interest from deposits, income from repo transactions, and income from participation in private finance institutions. The implementation period of this article is to be extended until 31.12.2025. The amendment also aims to clarify under which circumstances exempt income would be subject to withholding tax under this article.

In this context:

  • It is explicitly stated that the nature of the income earner—whether an individual or a legal entity, resident or non-resident, subject to tax or exempt, or whether the income itself is tax-exempt—shall not affect the withholding to be applied under this article.

  • Disputes have arisen as to whether institutions whose income is exempt or excluded from tax under various laws should be subject to withholding under Temporary Article 67. The amendment clarifies that unless another law explicitly provides an exemption or exclusion covering taxes withheld at source, income earned by such institutions shall be subject to withholding under this article.

  • Another amendment stipulates that income derived from leveraged trading (forex) transactions conducted through banks or intermediary institutions shall be taxed through withholding at source under Temporary Article 67.

REGARDING REGULATIONS ON HORSE RACING

Article 15 of the Draft Law proposes to extend the provision stipulating a 20% income tax withholding on payments made to jockeys, apprentice jockeys, and trainers who participate in horse races organized by licensed entities or persons authorized by the licensee under the Law on Horse Racing, until December 31, 2025.

REGARDING THE PROMOTION OF PART-TIME WORK AND ASSOCIATED INCOME AND STAMP TAX EXEMPTIONS

Article 16 introduces an exemption from income tax and stamp duty for employees who accept part-time work, with the aim of encouraging part-time employment and increasing job creation.

To benefit from this exemption, an existing employee must switch to part-time work and a new part-time employee must be hired to cover the days not worked, who must remain employed for at least six months. The exempted income tax amount shall not exceed 10% of the gross monthly minimum wage per employee. The wages corresponding to this exempt amount will be excluded from income tax. This exemption shall apply for a maximum of 12 months as long as the new part-time employee remains employed. Moreover, wages exempt from income tax shall also be exempt from stamp duty.

This aims to support existing employees who opt for part-time work and promote new employment for the unworked periods. The President is authorized to increase the duration and rate specified in the article, and the Ministry of Treasury and Finance is authorized to determine the implementation procedures and principles.

REGARDING THE ASSET PEACE REGULATION

Article 17 introduces a regulation allowing the repatriation of money, gold, foreign currency, securities, and other capital market instruments located abroad, thereby contributing them to the national economy. It also enables the registration in statutory books of money, gold, foreign currency, securities, other capital market instruments, and real estate located in Turkey but not recorded in the books of business entities, owned by income or corporate taxpayers.

Assets declared or disclosed under this article will not be subject to tax audits or additional tax assessments, provided that the conditions stated in the article are fulfilled.

The President is authorized to extend the deadlines in this article up to one year in six-month increments. The Ministry of Treasury and Finance is authorized to determine procedures and principles regarding the repatriation, declaration, and inclusion of the assets in businesses, as well as how values will be calculated and which documents and methods will be used in implementation.

REGARDING THE EXTENSION OF TIMEFRAME IN VALUE ADDED TAX APPLICATIONS

With Article 21 of the Draft Law, the validity period of the implementation stipulated in Temporary Article 17 of Law No. 3065 is extended until December 31, 2025. The aim is to allow continued application of the VAT deferral and cancellation mechanism outlined in Article 11/1-c of the same law for domestically sourced materials by taxpayers holding inward processing permits, in order to prevent competitive disadvantage for domestic producers due to the tax-free supply of imported goods under the inward processing regime.

REGARDING PROPOSED REGULATIONS ON AGE AND DURATION FOR FIXED-TERM EMPLOYMENT CONTRACTS

Fixed-term employment contracts are defined as contracts made in writing between employer and employee based on objective conditions such as the nature of the work, completion of a specific task, or occurrence of a particular event. Such contracts cannot be consecutively renewed without a valid reason.

However, under Article 28 of the Draft Law, a new regulation is introduced whereby fixed-term contracts can be made in writing without requiring the usual objective conditions if the employee is either under the age of 25 or 50 years old or older. The duration of fixed-term contracts signed with employees under 25 cannot exceed the date when the employee turns 25. Furthermore, the total duration of such contracts, whether signed once or renewed, shall not exceed two years.

REGARDING INCENTIVES FOR EMPLOYEES UNDER THE AGE OF 25

According to Article 32 of the Draft Law, for individuals under the age of 25 at the time of employment, who are employed under a service contract by one or more employers and work less than 10 days in a month for any given employer (based on calculated work hours), the employer shall pay:

  • A 2% occupational accident and disease insurance premium based on the daily minimum earning threshold,

  • A general health insurance premium at a rate of 12.5% (7.5% by the employer and 5% by the insured).

It is mandatory to top up general health insurance premiums for these employees to cover a full 30-day period.

Those falling within this provision may voluntarily pay a disability, old-age, and survivors’ insurance premium at a rate of 20% of thirty times their reported income, by the end of the month following the month in which the premium was reported. These paid periods will count as insured service periods.

The provision will not apply to those who have paid more than 120 days of insurance premiums in the year preceding their employment date, or to those who have reached the age of 25.

REGARDING THE PRESIDENT’S AUTHORITY TO REDUCE THE CORPORATE TAX RATE

An amendment is made to the first paragraph of Article 32 of the Corporate Tax Law No. 5520 dated 13.06.2006, allowing the President to reduce the statutory corporate tax rate—currently 20%—by up to 5 percentage points and to reinstate it to its original level.

With the newly added paragraph to Article 32:

In order to promote public listing, transparency, and institutionalization, a regulation is introduced that allows for a 2-point reduction in the corporate tax rate for a period of five fiscal years for companies—excluding banks, financial leasing companies, factoring companies, finance companies, payment and electronic money institutions, authorized currency exchange institutions, asset management companies, capital markets institutions, insurance and reinsurance companies, and pension companies—which are publicly offered for the first time with at least 20% of their shares traded on Borsa Istanbul Equity Market, starting from the fiscal year in which the shares are first publicly offered.

REGARDING THE RIGHT TO APPEAL AGAINST ADDITIONAL MEASURES SET OUT IN LAWS ENACTED UNDER THE STATE OF EMERGENCY

Individuals subjected to additional measures under laws enacted during the state of emergency, or their legal representatives or heirs, may submit an application to the public institutions or organizations that implemented the measures, within three months from the effective date of this article. Following an evaluation of the application, these institutions must decide to reject the application or lift the measure within a maximum of six months. Commissions may be established within such institutions to assess and conclude the applications.

Public institutions and organizations may request any necessary information and documents from relevant parties in order to evaluate applications.

Subject to laws governing investigation confidentiality and state secrets, institutions, organizations, and judicial authorities are required to promptly share any necessary information and documents with the applicant institution or provide access for on-site review.

Officials appointed by public institutions for activities under this article are prohibited from disclosing or using, for their own or third parties’ benefit, any confidential information, personal data, or trade secrets they may access while performing their duties. This obligation continues even after termination of their employment. Decisions of public institutions can be challenged through annulment lawsuits filed at the Ankara administrative courts designated by the Council of Judges and Prosecutors.

REGARDING THE POSTPONEMENT OF THE EFFECTIVE DATE OF THE ACCOMMODATION TAX

The effective date of the accommodation tax is proposed to be postponed from January 1, 2021, to January 1, 2022.

REGARDING THE LEASING OF REAL ESTATE OWNED BY THE GENERAL DIRECTORATE OF FOUNDATIONS AND MAZBUT FOUNDATIONS

Articles 33 and 34 of Law No. 7226 dated March 25, 2020, introduced various amendments to the Foundations Law. These amendments include:

  • In lease agreements involving real estate owned by the General Directorate of Foundations or mazbut (managed) foundations, where the property is leased in exchange for construction or renovation, a guarantee equivalent to the first six months of the initial year’s rent must be collected at the beginning of the contract.

  • In cases where rent is not paid for three consecutive months during the lease term, the property may be vacated by order of the district governor.

  • Procedures for applying these new provisions to existing leases were established.

Due to the ongoing impact of the pandemic and the continued presence of compelling circumstances, the effective date of these provisions—originally set as January 1, 2021—is proposed to be postponed to June 30, 2021.

EFFECTIVE DATES

  • Articles 8, 9, and 32 will enter into force at the beginning of the month following their publication date.

  • Articles 10, 11, and the amendment to Temporary Article 67/14 of Law No. 193 (as per Article 14) shall apply to income generated as of January 1, 2021, and will take effect on the date of publication.

  • Article 33 will apply to income earned as of January 1, 2021, or from the beginning of the special accounting period starting in the 2021 calendar year for taxpayers subject to a special accounting period, and will also take effect upon publication.

  • All other articles shall enter into force on the date of publication.

Kind regards,

Motto Hukuk

Regarding the Incentive for Long-Term Social Security Premium Payments from the Unemployment Insurance Fund Based on the Duration of Unemployment Benefit Received

Individuals who have received unemployment benefits and are employed in private sector workplaces within 90 days of leaving their previous job, and who continuously work under a service contract for at least 12 months from the date of employment, may request an incentive. According to Article 4-1(a), these individuals will be considered insured, and for the period they last received unemployment benefits prior to starting the new job, the employer and employee shares of the long-term social security premiums—calculated based on the minimum wage at the time of payment made by İŞKUR to the Social Security Institution (SGK)—will be fully covered by the Unemployment Insurance Fund. This incentive can only be used once per unemployment benefit entitlement.

The draft regulation aims to encourage quicker reintegration of unemployment benefit recipients into the workforce by providing full coverage of long-term social security premiums by the Unemployment Insurance Fund, provided the individual starts working within 90 days and remains employed uninterruptedly for 12 months.

Regarding the Extension of the Incentives in Law No. 4447 Until the End of 2020

Articles 2, 3, 4, and 5 of the proposal amend Provisional Articles 10, 19, and 21 of Law No. 4447. These amendments aim to preserve and increase employment by providing support and incentives for private sector employers—particularly in the employment of disadvantaged groups—through the end of 2020. The President is authorized to extend the implementation of these incentives until December 31, 2023, if deemed necessary.

The second article of the proposal includes additional employment incentives for women, young people, and individuals with professional competence certificates. The third article provides for a 12-month incentive for additional employment compared to the previous year’s average between January 1, 2018, and December 31, 2020, with an 18-month incentive if the new employee is a woman, young person, or disabled. The President is authorized to extend these incentives through December 31, 2023. The fourth article also grants the President authority to extend the income tax withholding and stamp tax incentives for such employment.

Regarding the Postponement of the Implementation of the Artisans’ Solidarity Fund

The fifth article of the proposal postpones the implementation of the Artisans’ Solidarity Fund, which was added as an annex to the Unemployment Law, from January 1, 2021, to December 31, 2023, due to the negative effects of the Covid-19 pandemic.

Regarding the Extension and Relaxation of the Conditions for Short-Time Working Allowance

The sixth article of the draft proposes to both extend and ease the conditions for accessing the short-time working allowance due to the Covid-19 pandemic. The eligibility criteria are amended so that employees must have been under a service contract for the last 60 days (instead of 120 days) and must have paid unemployment insurance premiums for at least 450 days (instead of 600 days) in the last three years.

In light of the ongoing pandemic and its projected long-term effects, it is proposed that the President be granted authority to extend the short-time work scheme until June 30, 2021, instead of the previously set date of December 31, 2020.

Regarding the Extension of the Normalization Support Period

Article 26, added to the Unemployment Insurance Law by Law No. 7552 dated July 23, 2020, grants support to employers who transition back to normal working conditions after previously implementing short-time work or unpaid leave due to the Covid-19 pandemic. This support covers social security premiums calculated on the average number of days for which short-time working allowance or cash wage support was received, and is limited to three months until December 31, 2020. The President may extend this three-month period up to six months.

The proposed law grants the President the authority to extend this support period until June 30, 2021, for private sector workplaces that applied for short-time work before July 1, 2020.

Regarding Support for the Reemployment of Workers Whose Contracts Were Terminated or Not Reported to SGK

The eighth article proposes that workers whose employment contracts were terminated without just cause between January 1, 2019, and April 17, 2020, or who worked without being reported to the Social Security Institution (SGK), may apply to their last employer within 30 days from the date this law comes into effect. If the employer hires and actively employs these individuals, both the employer and employee will receive financial support. Employers will receive 44.15 TL per month per employee, deducted from their SGK premium payments. Employees hired but placed on unpaid leave will receive a daily cash wage support of 39.24 TL. Workers whose applications are not accepted may still receive a daily support of 34.34 TL if they meet the necessary conditions.

Regarding Additional Employment Support for the Period with the Lowest Reported Insured Workers (Jan 2019–Apr 2020)

The ninth article aims to increase employment by offering employers daily support of 44.15 TL for each additional insured employee hired and actively employed beyond the number reported in the month with the lowest number of insured declarations during January 2019–April 2020. If such employees are hired but placed on unpaid leave, they will be eligible for a daily cash wage support of 39.24 TL.

EXEMPTION FOR INDIVIDUALS SELLING HANDMADE PRODUCTS ONLINE OR THROUGH SIMILAR ELECTRONIC PLATFORMS

Article 10 of the draft bill proposes an exemption regulation for individuals who manufacture products at home—without establishing a separate workplace and without using industrial-type or mass-production machinery—and sell them via the internet or similar electronic platforms. These activities will be considered exempt from taxation, provided that the individual:

  • Obtains a tax exemption certificate,

  • Opens a dedicated bank account at a bank established in Turkey, and

  • Ensures that all revenue is collected exclusively through this account.

Under these conditions, the income derived from such activities will be subject to withholding taxation.

50% INCOME TAX DEDUCTION FOR FULL TAXPAYER INDIVIDUALS EARNING INCOME FROM EXPORTS

Article 11 of the proposed law allows full taxpayer individuals to deduct 50% of their income derived from the export of goods from their total declared income in the tax return. The President is authorized to reduce this percentage, amount, and related figures by half or increase them up to twofold.

TAXATION ON SHARE BUYBACKS BY CORPORATIONS AND DEEMED DIVIDEND DISTRIBUTION

Article 12 introduces new rules for full taxpayer corporations that repurchase their own shares or partnership interests under the Turkish Commercial Code. The following scenarios will be considered deemed dividend distributions, subject to 15% withholding tax:

  • If redeemed via capital reduction: the difference between the acquisition cost and the nominal value on the registration date of the capital reduction.

  • If sold at a price below the acquisition cost: the difference between the acquisition and sale price on the date of disposal.

  • If not redeemed or sold within two full years of acquisition: the difference between the acquisition cost and nominal value as of the end of that two-year period.

This regulation is intended to prevent corporations from avoiding dividend taxation through share buybacks. The withheld tax is not creditable against any other taxes. Additionally, the President is authorized to increase the withholding rate up to 30% or reduce it to 0%.

AUTOMATIC ANNUAL ADJUSTMENT OF THE INCOME TAX EXEMPTION THRESHOLD

Article 13 proposes an amendment to Article 9 of the Income Tax Law, whereby the monetary threshold for benefiting from exemption—specified in subparagraph (10)—shall be adjusted annually based on the revaluation rate determined under the Tax Procedure Law (VUK).

TEMPORARY ARTICLE 67 OF THE INCOME TAX LAW NO. 193 – EXTENSION AND CLARIFICATIONS

Article 14 of the draft law extends the application of the provisions under Temporary Article 67 of the Income Tax Law—concerning the taxation of income derived from the disposal and holding of securities and other capital market instruments, deposit interest, repo earnings, and income from participation in private financial institutions—until 31 December 2025.

The following clarifications are introduced:

  • Whether the income earner is a natural or legal person, a full or limited taxpayer, subject to taxation or tax-exempt, or whether the income itself is exempt or not, shall not affect the applicability of withholding tax under this article.

  • Income of institutions that are granted tax exemptions or exclusions under separate laws may still be subject to withholding under Article 67, unless another law specifically provides an exemption that includes withholding taxes.

  • Income from leveraged trading (forex transactions) executed via banks or brokerage firms shall be taxed through withholding under this article.

Clarifications Regarding Temporary Article 67 of the Income Tax Law No. 193

Within this scope:

  • It is explicitly regulated that whether the income earner is a natural or legal person, a full or limited taxpayer, has a tax liability or not, or whether the income is exempt from taxation or not, shall not affect the withholding tax to be applied under this article.

  • There have been disputes regarding whether the income of institutions granted tax exemptions or exclusions under other laws are subject to withholding under Temporary Article 67. This proposal aims to clarify that unless such laws explicitly provide an exemption or exclusion that also covers taxes withheld at source, the income of these institutions will be subject to withholding under Temporary Article 67.

  • Another amendment stipulates that income derived from leveraged trading (forex transactions) carried out through banks and intermediary institutions will be taxed at source under Temporary Article 67.

Regulation on Horse Racing

Article 15 of the proposal extends until 31 December 2025 the provision under the Law on Horse Racing that imposes a 20% withholding tax on payments made to jockeys, apprentice jockeys, and trainers participating in races organized by license holders or persons authorized by license holders.

Incentive and Tax Exemption for Part-Time Employment

Article 16 introduces an incentive to promote part-time work and create new employment by providing income tax and stamp duty exemptions for employees who agree to switch to part-time work.

To benefit from this exemption, the employer must hire a new part-time employee for the same number of days the existing employee is not working. The new employee must work for at least six months. The amount of forgone income tax due to the exemption shall not exceed 10% of the gross monthly minimum wage per employee. The part of the wage subject to the exemption will be exempt from income tax and stamp duty.

This exemption will apply for up to 12 months, as long as the new part-time employee remains employed. The regulation also authorizes the President to increase the specified durations and rates and empowers the Ministry of Treasury and Finance to set procedures and principles for implementation.

Asset Peace (Asset Repatriation) Regulation

Article 17 allows the repatriation of cash, gold, foreign currency, securities, and other capital market instruments held abroad to Turkey and their inclusion in the national economy. It also allows taxpayers subject to income or corporate tax to register such assets—held in Turkey but not recorded in company accounts, including real estate—into their statutory books.

If the conditions specified in the article are met, no tax audit or assessment will be conducted concerning the declared or reported assets.

The President is authorized to extend the deadlines mentioned in this article for up to one year in increments not exceeding six months. The Ministry of Treasury and Finance is authorized to determine the procedures and principles regarding the repatriation, declaration, and registration of such assets, including valuation methods, forms, required documents, and application procedures.

Extension of the VAT Incentive Period

Article 21 proposes to extend the temporary VAT incentive under Article 17 of the VAT Law No. 3065 until 31 December 2025. This measure is intended to maintain fair competition for domestic producers by allowing the continued application of the deferred-deducted VAT mechanism for inputs supplied domestically under the inward processing regime.

Amendments on Age and Duration in Fixed-Term Contracts

Fixed-term employment contracts are typically established in writing between an employer and an employee for specific jobs or conditions, and successive renewals are only allowed if there is a justified reason.

However, Article 28 proposes that fixed-term employment contracts may be concluded in writing without the usual objective conditions if the employee is under the age of 25 or over 50. The duration of such contracts for employees under 25 cannot exceed the date they turn 25, and the total term (including renewals) cannot exceed 2 years.

Incentive for Workers Under the Age of 25

Article 32 provides that individuals under the age of 25 who are employed under one or more service contracts and whose working time per month corresponds to fewer than 10 days of work (based on hours worked) shall be subject to the following contributions:

  • 2% of the minimum daily earnings base for occupational accident and disease insurance,

  • 12.5% for general health insurance, of which 7.5% is the employer’s share and 5% the employee’s.

Under this provision, it is mandatory to complete the general health insurance premium up to 30 days.

Furthermore, individuals covered by this provision may voluntarily pay 20% of thirty times the monthly earning base by the end of the month following the premium month to obtain creditable service periods under disability, old-age, and death insurance.

Those who have more than 120 premium payment days within the 12 months prior to employment and those aged 25 and above are not eligible for this provision.

AUTHORITY GRANTED TO THE PRESIDENT TO REDUCE THE CORPORATE TAX RATE

An amendment has been introduced to the first paragraph of Article 32 of the Corporate Tax Law No. 5520 dated 13 June 2006, stating that “The President is authorized to reduce this rate by up to five percentage points and to restore it to the statutory level.”

Accordingly, the President is granted the authority to reduce the statutory corporate tax rate of 20% by up to five percentage points (to a minimum of 15%) and to reinstate it to its original level.

Furthermore, with the additional paragraph to Article 32 of the same law, and in order to encourage public offerings, transparency, and institutionalization, a regulation is introduced whereby the corporate earnings of companies—excluding banks, financial leasing companies, factoring companies, financing companies, payment and electronic money institutions, authorized foreign exchange offices, asset management companies, capital market institutions, insurance and reinsurance companies, and pension companies—whose shares are publicly offered for the first time on the Borsa Istanbul Equity Market at a minimum rate of 20%, shall benefit from a two-percentage-point reduction in the corporate tax rate for five fiscal periods starting from the year of the initial public offering.

APPLICATION RIGHTS REGARDING ADDITIONAL MEASURES UNDER STATE OF EMERGENCY LEGISLATION

Persons subject to measures under laws enacted during the state of emergency, or their legal representatives or heirs, shall apply to the implementing or related public institution or authority within three months from the effective date of this article.

The relevant public institutions shall evaluate the application and decide, within six months, whether to reject the application or lift the imposed measure. Commissions may be established within these institutions to review and conclude the applications.

Public institutions are entitled to request all necessary information and documents from relevant parties during the evaluation process.

Subject to the provisions concerning investigation confidentiality and state secrets, public authorities and judicial bodies must provide, without delay, the requested documents or allow on-site inspection to the receiving public authority.

Officials appointed under this provision are prohibited from disclosing or using for personal or third-party benefit any confidential information, personal data, trade secrets, or related documents obtained during the performance of their duties—unless legally authorized. This obligation remains in force even after termination of their duties.

Appeals against decisions made by these institutions may be filed before administrative courts in Ankara designated by the Council of Judges and Prosecutors.

POSTPONEMENT OF THE EFFECTIVE DATE OF THE ACCOMMODATION TAX

The effective date of the accommodation tax is proposed to be postponed from 1 January 2021 to 1 January 2022.

LEASES OF PROPERTIES OWNED BY THE GENERAL DIRECTORATE OF FOUNDATIONS AND MAZBUT FOUNDATIONS

Articles 33 and 34 of Law No. 7226 dated 25 March 2020 introduced several provisions amending the Law on Foundations:

  • For leases made in exchange for construction or renovation of immovable properties owned by the General Directorate of Foundations and mazbut foundations, an additional security deposit equivalent to six months’ rent for the first year of operation must be paid on the date the contract is signed.

  • If three months of rent remain unpaid during the contract period, the property may be evicted by the competent administrative authority.

  • The method for applying these new provisions to existing leases has also been regulated.

Due to the continuation of pandemic-related challenges, the proposed amendment aims to defer the effective date of these provisions—originally set for 1 January 2021—to 30 June 2021.

EFFECTIVE DATES

  • Articles 8, 9, and 32 shall enter into force at the beginning of the month following their publication date.

  • Articles 10, 11, and 14 (regarding the amendment to Temporary Article 67 of the Income Tax Law No. 193) shall apply to income earned from 1 January 2021 onwards and enter into force on the date of publication.

  • Article 33 shall apply to income earned as of 1 January 2021, or from the beginning of the special accounting period starting in the 2021 calendar year for taxpayers subject to a special fiscal period.

  • All other articles shall enter into force on the date of publication.

Kind regards,
Motto Law Office

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