A draft law called "Istanbul Financial Center Bill of Law" (the "Draft Law") was brought before the Grand National Assembly of Turkey ("TBMM") by the ruling party on June 1, 2022.

Having looked at the Draft Law, it is worth noting that the importance of financial services in sustainable economic development has been greatly emphasized throughout the general preamble. Exportation of financial services has been set as a goal in order to increase the role of financial services in economy (and eventually to decrease the current deficit). It is also stated in the general preamble that the legislative proposal aims to make Istanbul a leading international finance center by bringing the international finance authorities as well as the qualified work force into the country. To that end, a finance center which is to be called "Istanbul Financial Center" is aimed to be established to gather banks, capital markets institutions, participation finance companies, financial investment and portfolio management companies as well as the insurance companies in one place.

The Draft Law proposes certain discount, exemption and tax advantages in relation to the activities performed within Istanbul Financial Center. The highlights of what the Draft Law proposes are as follows:

  • Participant Certificates: Those who want to carry on business within office areas that are to be located at the Istanbul Financial Center are required to obtain participant certificates from the Presidency Finance Office.
  • Exportation of Financial Services: Financial services that are rendered by the corporations which carry on financial services by obtaining the participant certificate (as mentioned above) to the non-residents will be deemed as "exportation of financial services" provided that those services are benefitted abroad.
  • Exemptions and discounts in relation to taxes and other financial obligations for (i) the activities having the characteristics of "exportation of financial services" (ii) performed by financial companies (iii) which have obtained participant certificate:
    1. %75 of the earnings gained out of those activities will be reduced from the taxes calculated on the basis of the company's earnings.
    2. Said transactions and monies obtained due to those transactions will be exempt from banking and insurance transaction tax.
    3. Those transactions will be exempt from any kind of fees; and papers in relation to those transactions will be exempt from stamp tax.
    4. There will be certain income tax advantages for the employees hired within the Istanbul Financial Center by the financial companies holding the participant certificate.
    5. Leasing of immovable properties located at the Istanbul Financial Center will be exempt from any kinds of fees; and papers in relation to those transactions will be exempt from stamp tax.
    6. Regional treasury and financial management centers of the participants who carry on active business in at least three countries will also benefit from these tax advantages.
  • Choice of Law: Participants are free to choose the law which is to be applied to the agreements concluded between themselves within the Istanbul Financial Center provided that the choice of law does not contradict with the legislations that the activities of the participants are subject to.

The institutions and activities which will fall into the scope of the Draft Law will be determined by the subsequent regulations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.