Stamp tax in Turkey is only applicable to transactions that take place in within Turkish borders. In transactions where the deal volume is high, stamp tax can often be a hindrance since it can be a real burden on the parties. Stamp tax is regulated by the Stamp Tax Code (Numbered 488) and applies to a wide range of papers such as agreements, surety, guarantee and pledge documents, settlement letters or bills of lading. The term “paper” within the scope of Stamp Tax Code means any paper which is written, signed, marked or created as electronic data through a magnetic medium by using electronic signature and which will be used to prove a specific matter.
Even papers signed in foreign countries or the papers signed in foreign embassies, legations and consulates in Turkey may be subject to stamp tax if they are submitted to governmental authorities.
Stamp tax has a wide application area, therefore the amount of stamp tax that is applied to a transaction is of great importance both for national and multinational investors in Turkey.
The amount of the stamp tax is regulated by the Stamp Tax Law. Accordingly, there are two types of stamp tax: (i) proportional stamp tax and (ii) fixed stamp tax. Stamp Tax Law lists the papers which are subject to proportional or fixed stamp tax and the proportional or fixed amounts that must be applied to those papers. In proportional stamp tax, according to the type and essence of the paper, stamp tax is calculated as a proportion of the amount of money written in the paper whereas in fixed stamp tax only the essence of the paper is taken into account and the fixed amount specified by the Stamp Tax Law is applied.
Although the Stamp Tax Law specifies the amounts to be applied for calculation of proportional stamp tax, there have previously been controversies regarding the amount to be taken as the basis for the calculation of the stamp tax. Usually, the highest amount (which sometimes appear to be the penalty clause or a target sales amount) on the paper is considered as the basis. As a consequence, such an uncertainty sometimes prevents the signing of agreements containing especially high monetary amounts as it can lead to unanticipated high transaction costs that exceed the essence of the transaction for the parties.
Another problematic issue used to be the repetitive stamp tax arising from each signed copy of a paper. Therefore, parties tended to sign their agreements in as fewer copies as far as possible to limit the stamp tax expenses.
On August 9th, 2016, the Law Amending Certain Laws for Improvement of the Investment Environment (Numbered 6728), hereafter referred to as “Amendment Law”, came into force. The Amendment Law aims to remove burdens on investors and introduces important amendments to a number of laws including the Stamp Tax Law. As per the Amendment Law, the below issues were introduced and clarified:
Stamp tax obligation arising from execution of contracts may be an issue when parties do not consider it in advance as it may create a big expense item in transactions when not duly planned. Moreover, the ambiguities in Stamp Tax Law and the tendency of the tax officers to apply the stamp tax over the highest figure on the contract has been argued and sometimes deemed an important barrier for concluding agreements in Turkey. These ambiguities also played a role for parties to find ways to circumvent the law. The Amendment Law aims to remove these barriers and sets forth stamp tax exceptions and clarifies certain issues arising from the application of stamp tax.
Begüm Yavuzdogan Okumus
Gün + Partners
Selin Basaran Savuran
Gün + Partners