1. GENERAL LEGISLATIONS IN TURKEY (TR) PREPARED BY KURUMSAL DENETİM 1

2. FOREING INVESTMENTs IN TURKEY  Turkey wants to have more foreign investment and supports all foreign investors  It is easy to establish company with only foreign capital and possible to transfer money-profit to mother company  There are lots of incentives to support all investments including foreign ones. Main incentives gives advantages on VAT exemption, Custom Duty and Social Security payments. 2

3. CORPORATION FORMAT 1.There 3 types of formats that easily establish a.Company : Capital amount is not depend on business type a.Jointly Stock I.Minimum 50.000 TL capital is required II.Even one partner enough to establish company III.Foreigner partners must declared to Foreign Investment Directorship IV.There is no nationality restrictions V.Board of directors must be registered to office b.Limited I.Minimum 10.000 TL capital is required II.Even one partner enough to establish company III.There is no nationality restrictions IV.No need board of directors, but Managers manages the company b.Branch office I.Almost same procedure with Jointly stock or limited company II.Allowed to limited business operations III.Branch must be managed a representative resident in TR c.Liaison office : I.Not allowed to trade (issuing invoices etc.) II.Only for representation 3

4. TAXATION Basically taxes in TR, Corporate income tax, withholding tax, VAT, Stamp Duty. 1.Corporate Tax a.General rate is %20 over annual profit b.Annual profit is calculated as total expenses (such as operating expenses, depreciation, previous year losses up to 5 years etc.) deducted from total revenues c.Operating expenses includes, salaries, rent payments, travel expenses, etc. d.Depreciation costs is depend on the fixed asset list announced by Finance Minister 2.Withholding Tax a.There are a few source of W/H tax such as salaries, rent payment to individuals, receipt of self employed, interest/royalty payment to abroad b.W/H tax for salaries is calculated over net salary with the rate of %15 to %35 4

5. TAXATION 3.VAT a.General rate for VAT is %18 (%1 and %8 is applicable only a few limited purchases) b.Reverse charge VAT is applicable for service imports 4.Stamp Duty a.Applies to all signed contracts and rate is %0,948 b.Also salaries are subject to stamp duty. Rate is %0,759 5

6. TAXATION PERIODS (DECLATARION/PAYMENT) 1.Calendar year is generally accepted as fiscal year. 2.Corporate Tax a.Corporate tax is paid as advance to deduct from corporate tax for each quarter b.Corporate tax for previous year is declared 01-25 th of April and paid by 30 th of April c.If pre-paid corporate taxes more than corporate tax, differences can be request as refund 3.W/H Tax a.W/H tax paid for every month for previous month b.W/H tax paid for previous month is declared 01-23 th and paid by 26 th 4.VAT a.VAT paid for every month for previous month b.VAT is paid for previous month is declared 01-23 th and paid by 26 th 6

7. SOCIAL SECURITY SYSTEM 1.All employees must be declared to Social Security Institution before start to work 2.All foreign to be employed have to get work permission 3.Total of social security payments is %36,5 of gross salary. But there is an up-limit of the salaries. For 2013 first semi-annual, limit is 6.360 TL. 4.There are two types of social security payments : (In practice, all payments are made by employer) a.Employee payments I.%19,5 of gross salary as social security premium *** minimum rate %19,5. But rate depends on the danger level of company business type I.%2 of gross salary as unemployment contribution b.Employer payments I.%14 of gross salary as social security premium II.%1 of gross salary as unemployment contribution 7

8. ACCOUNTING OF COMPANIES 1.All companies need to keep books with the compliance of Turkish GAAP 2.All official declarations must be submitted to official authority by CPAs 3.We want to warn you that there are lots of official declarations to be given. Even if it does not require to make any payments, missing to give them will causes penalties. So choosing CPA company is very important decision. 8

9. Example for Salary Cost Employee A gets 7000 TL gross salary January Cost for Employee A Social Security Base: 7.000 Calculation of Income Tax Base; Social Security employee premium : 7.000 TL x %14 = 980 TL Social Security employee unemployment contribution : 7.000 TL x %1 = 70 TL Income tax Base : 7000 TL - 980 TL – 70 TL = 5.950 TL Income Tax calculation; 5.950 TL x %15 (income tax rate) = 892,50 TL Stamp Duty;7.000 TL x %0.759 (stamp duty rate) = 53,13 TL Net salary to be paid to Employee A : 7.000 TL – 980 TL – 70 – 892,50 TL – 53,13 TL = 5004,37 TL (* calculated over minimum rate level) Social Security employer premium : 7.000 TL x %19,5 = 1.365 TL Social Security employer unemployment contribution : 7.000 TL x %2 = 140 TL 9

10. Example for Salary Cost Net Salary (to be paid to employee): 5.004, 37 TL Social Security employee premium: 980 TL Social Security employee unemployment contribution: 70 TL Social Security employer premium: 1.365 TL Social Security employer unemployment contribution: 140 TL Total of Social Security payments (%36,5 of gross salary): 2.555 TL Income Tax calculation: 892,50 TL Stamp Duty: 53,13 Total of Employee cost: 8.505 TL 10

11. WE HOPE TO WORK TOGETHER THANK YOU END OF THIS PRESENTATION 11