28 June 2022
Istanbul Finance Center Law (“Law”) numbered 7412 which aims to make Istanbul Finance Center one of the leading global finance centers, was published on the Official Gazette dated 28.06.2022 and numbered 31880 and entered into force the same day.
You may find the summary of the new regulations coming with the Law below.
With the Law, it is intended to increase the financial competitiveness of the Republic of Turkey in the international arena, contribute to the development and deepening of financial markets, products, and services, strenghten integration with international finance and capital markets and because of this make Istanbul Finance Center (“IFC”) one of the leading global finance centers.
The Law consists of the area of IFC, articles regarding management and operation of IFC, activities of IFC and incentives, discounts, exceptions, and exemptions of these activities.
The financial institutions that are able to operate in the IFC are legal entities engaged in financial activities, their branches, liaison offices, their representative offices, and sovereign wealth funds.
Financial activities are defined in the Law as the activities, services and transactions specified within the scope of the laws listed below:
However, derivative transactions carried out by financial institutions on their own behalf and account, transactions of buying or selling assets from their portfolios, and activities, services and transactions that take the savings of domestic residents abroad shall not be considered as financial service exports.
The opportunity to benefit from the discounts, exemptions and other tax advantages regulated in the Law is subject to the conditions of (i) obtaining a participant certificate, (ii) being in the office area and (iii) exporting financial services.
Participants who want to operate in the IFC are given a participant certificate by the Presidency Finance Office. The participant refers to the real and legal persons who will operate in the office area by obtaining a participant certificate, their branches and representatives, ordinary partnerships, liaison offices, regional management centers and national wealth funds. The procedures and principles regarding the participant certificate, including the issues regarding the issuance of the participant certificate, the conditions for the exemption of the participant certificate, the suspension and cancellation of the participant certificate, will be regulated in the implementing regulation.
The office area is defined as an area that can be used within the boundaries of the IFC and consists of independent sections dedicated to the purpose of the office use. The boundaries of the IFC are determined with the coordinated sketch and list numbered (1) in the appendix of the Law.
Financial services provided by financial institutions to non-residents by obtaining a participant certificate are considered as financial service exports, provided that the service is ultimately utilized abroad.
The Ministry of Treasury and Finance is authorized to make regulations, regardless of the provisions of the Tax Procedure Law numbered 213 and the Turkish Commercial Code numbered 6102, regarding the keeping and issuing of the books and the documents, that the participants shall keep, in foreign currency.
Articles 1 and 3 of the Law on Compulsory Use of Turkish in Economic Institutions numbered 805 shall not apply to all kinds of transactions, contracts, communications arranged within the scope of the activities carried out by the participants among themselves and at the IFC.
Within the scope of the activities carried out by the participants among themselves at the IFC, provided that the activities of the participants are not contrary to the legislation to which they are subject, a free choice of law can be made in all kinds of transactions and contracts made under private law.
Exceptions and discounts, explained under the headings IV and V, regarding tax and other financial liabilities together with other common regulations for participants are also applied to the regional treasury and financial management centers of the participants who are active in at least three countries.
A “one-stop shop” will be established in which the relevant units of public institutions and organizations will take charge in order to make applications such as permits, licenses and similar approval applications regarding the activities of the participants, as well as the permits and approvals of their employees and their dependents, and to accelerate these application processes. Representatives of the Ministry of Labor and Social Security, the Ministry of Environment, Urbanization and Climate Change, the Ministry of Treasury and Finance, the Ministry of Interior, the Ministry of Commerce and, if deemed necessary by these ministries, their affiliated, related institutions or representatives of public institutions and organizations under the supervision of these ministries and relevant district municipality representatives take part in the one-stop shop.
The one-stop shop will be managed by the Presidential Finance Office, without prejudice to the provisions of the relevant legislation. In case of need, different ministries, public institutions and organizations can also be included in the one-stop shop. The procedures and principles regarding the operation of the one-stop shop will be regulated in the implementing regulation.
Except for the operation and management of all infrastructure and superstructure, the rental of independent sections and areas, and the areas allocated to the relevant institutions in line with the functions determined in the zoning plan; all kinds of management activities regarding roads, squares, green areas, parks and similar places reserved for public services will be carried out for a period of twenty years by a joint-stock company (managing company) operating under the provisions of private law and to be established by the Turkey Wealth Fund.
The Law seems to be aimed the IFC to become a global center, and in this direction, to ensure competition with financial institutions operating in other international financial centers by providing convenience for the activities of public and private sector banks, portfolio management companies, intermediary institutions, insurance companies, professional service companies and national and international financial institutions from different categories in the form of financial service export and other international financial services.
Finally, the above-mentioned implementing regulation, which will be containing details on the implementation of the Law, is expected to be published shortly.
Should you have any queries on the above, please do not hesitate to contact us.
Güner Law Office was established in 1996 and has since grown into one of the major corporate, M&A, banking and finance, energy, TMT and dispute resolution practices in Turkey.