New tax incentives prop Istanbul as a finance hub
ANKARA - Reuters
This photo shows Istanbul’s Levent neighborhood, which is currently Istanbul’s finance center. The government plans to make Istanbul a major regional finance hub. DAILY NEWS photo
As a part of the Turkish government’s project to transform Istanbul into a regional financial hub, a draft bill passed Parliament’s General Assembly on May 31 that will change some tax regulations that have been seen as an obstacle preventing fund management firms from opening offices in Turkey.
The new bill provides government incentives and related regulations for asset management companies founded in Turkey and the international funds run by these companies. The bill also encourages the management of foreign funds from Istanbul, to develop and deepen local financial markets.
Companies other than banks and financial institutions will no longer be able to write off up to 10 percent of interest and other costs from debts obtained from foreign sources.
Firms can exempt up to 10 percent of their incomes from income tax based on funds invested in venture capital investment trusts, which allocate financial sources to entrepreneurial firms, according to the new regulation. It enables firms to deduct a particular rate of venture capital funds from earnings and profits. Dividends from venture capital investment trust shares and partners in venture capital trusts are exempted from corporate income tax.
Another incentive is that revenues from securities issued by asset rental firms are included in the scope of tax cuts.
The bill creates tax incentives for investments of at least 500 million Turkish Liras of fixed investments. The portion of the value-added tax on an investment that is not redeemed within the year will be returned to the tax payer in the following year. Companies can begin to take a reduction in their corporate taxes in the investment period, as well.
The law also creates tax concessions for public electricity companies, which will be privatized, until December 31, 2023.
The law exempts donations granted to religious institutions built with official authorization from taxation.
Under the law, a 100-lira duty will be charged on mobile phones brought into the country from abroad.
The lump-sum tax collected on liquor and cigarettes will be automatically updated every January and July, based on the producer price index. This regulation will take effect starting Jan. 1, 2013.