TURKISH TAX SYSTEM AND INCENTIVE SYSTEM

Our dear readers wish Allah mercy on those who lost their lives primarily due to the earthquake that occurred in our country and convey our urgent wishes of healing to the wounded. While our suffering is still fresh, we have decided to resume our postponement papers so that you precious readers will not suffer the loss of rights.

In addition, we started publishing some of our writings in English in 2023.

IT HAS BEEN ANNOUNCED THAT 2% FOREIGN EXCHANGE SUPPORT WILL BE PROVIDED TO COMPANIES IN TURKEY THAT CONVERT FOREIGN CURRENCY ASSETS INTO TURKISH LİRAS.

Turkey has been working to support the Turkish Lira for some time and decisions are being made. Within this framework, the decision published in the official gazette on 26 January 2023 decided that if companies bring foreign currency assets abroad to Turkey, they will receive foreign currency support of 2% of the amount translated into Turkish lira.

Let us explicitly examine the details of the decision by dividing it into headlines.

WHAT ARE THE REQUIREMENTS FOR BENEFITING FROM FOREIGN EXCHANGE SUPPORT?

Foreign currency, including foreign currency amounts earned in exchange for services offered domestically to foreigners, is covered by foreign currency revenues generated by firms from foreign currencies based abroad and foreign currency support provided by firms from foreign currency assets abroad.

In addition, foreign currency assets, which account for more than 40% of the export costs made by companies, which must be translated to TL.

WHAT ARE THE REQUIREMENTS FOR BENEFITING FROM % 2 EXCHANGE SUPPORT?

The terms for benefiting from the relevant support were set separately for firms whose foreign currency assets were brought in, and separately for exporting firms.

Let us first examine the conditions for companies that do not have to bring their assets overseas but voluntarily bring them in and convert them to TL. The relevant firms may benefit from the support provided if they commit not to receive foreign currency for 3 months with the commitment they will make during the currency breakdown.

Companies that bring export costs and convert more than 40% to Turkish Lira must deposit the amount they have translated into KKM (Turkish Lira Deposit and Participation Account) account to benefit from the support. In addition, the companies involved will be able to benefit from foreign currency conversion support of 2 percent of the amount translated into Turkish lira at the conversion rate, provided that there is a commitment for 3 months to no more foreign currency purchases than the amount sold to the Central Bank.

THE MOST ELABORATE TITLE OF OUR WRITING

So what will happen if firms benefit from the stated support but fail to meet the commitment? Here's where the highlight of our summer is hidden. If firms fail to fulfill their obligations, the interest in support will be reversed. Still, a much more significant commitment has been made, which is that firms' requests for the use of loans from the Central Bank will not be accepted for a year from the date the commitment has been found not to have been met.

WHAT CURRENCIES ARE SUBJECT TO SUPPORT?

The currencies subject to that support are the USD, the EURO, and the British Pound. For other currencies to be changed, first through banks, they must be changed to applicable currencies.

CONCLUSION

The relevant regulation aims to ease some exporters by providing 2% support to exporters who complain that the rate has not increased in spite of the high inflation experienced in our country. In addition, a return to the Turkish lira was attempted.

But regulation has been tied to hugely important outcomes. Firms have recently been using TCMB-sourced loans at extremely attractive interest rates and are achieving significant amounts of financing. Those who would benefit from 2% support would need to identify assets well and manage their foreign currency needs very carefully so that they would then face failure to fulfill the commitment and would not be deprived of CBT loans, both to return 2% support with interest.

Yours Sincerely

Doğan Accounting Office

14.02.2023

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