Istanbul Finance Center Law (“IFC Law”) entered into force on 22.06.2022.
As per the IFC Law in order to operate in the office area, a participant certificate will be issued to the participants by the Presidential Finance Office.
A one-stop office will be established to evaluate the applications such as permits, licenses, and similar approval applications of the participants, as well as the permits and approvals of their employees and their dependents, and to accelerate the application process.
Some advantages of being located in IFC
To begin with, financial services provided by financial institutions located in IFC to non-residents by obtaining a participant certificate are considered as financial service export, provided that the service is ultimately utilized abroad. Accordingly as per the IFC Law,
(i) With respect to the financial service exports realized at IFC by financial institutions that have received participation certificates;
a) 75% of the earnings obtained within the scope of the activities are deducted from the corporate income in the determination of the corporate tax base, provided that it is separately shown on the corporate tax return. This rate shall be applied as 100% until 2031.
b) Transactions and money received in favour of these transactions are exempt from banking and insurance transactions tax.
c) Transactions related to activities are exempt from all kinds of fees, and papers issued regarding these transactions are exempt from stamp tax.
(ii) 60% of the net value of the monthly wage paid to the personnel employed by the financial institutions that have obtained the participation certificate at IFC people with at least five years of professional experience abroad and 80% the net value of the monthly wage paid to the personnel employed by the financial institutions that have obtained the participation certificate at IFC people with at least ten years of professional experience abroad are exempt from tax. The exception stated in this paragraph is applied to the wage income of the personnel who did not work in Turkey in the last three years before starting to work at IFC.
(iii) Transactions regarding the leasing of immovables in IFC are exempt from all kinds of fees and documents issued regarding these transactions are exempt from stamp tax.
iv)Regarding commercial book keeping requirements and issuance documents in foreign currency, the Treasury and Finance Department will not be bound by the provisions of the Tax Procedure Law dated 4/1/1961 and numbered 213 and the Turkish Commercial Code numbered 6102 dated 13/1/2011.
(v) Compulsory use of Turkish language shall not apply to any kind of transaction, contract and communication arranged within the scope of the activities carried out by the participants among themselves and at IFC.
vi) Within the scope of the activities carried out by the participants among themselves at the IFC, free choice of law can be made in all kinds of transactions and contracts made under private law, provided that the activities of the participants are not contrary to the legislation to which they are subject.
(vii) Financial activity fees, which are required to be collected from the headquarters and branches of financial institutions are will not be collected until 22.06.2027.
The secondary legislation has not been issued yet and therefore the conditions for being a part of IFC is yet to be clarified.