IFM Law Comes into Force

IFM Law in Effect Istanbul Financial Centre Law has been published in the Official Gazette. According to the law, provisions regarding the scope of IFM, its management and operation, as well as activities conducted in IFM and incentives, discounts, exemptions and waivers related to these activities are being regulated. Financial activities are defined with reference to relevant legislation; it was clarified that securities, derivative instruments, payment systems, electronic money and similar activities, services and transactions falling under banking, capital markets, insurance, financial leasing, factoring and similar markets can be conducted as financial activities in IFM. The operator company is defined as "a joint-stock company established by the Turkey Wealth Fund to exercise the duties and powers granted under this law and operating subject to private law provisions."

Participant certificates to be issued

The operation and management of all infrastructure and superstructure in IFM, the leasing of independent units and areas, as well as all management activities related to roads, squares, green areas, parks and similar places designated for public services, except for areas allocated to relevant institutions in accordance with functions determined in the development plan and owned by the state, will be carried out by the operator company for a period of 20 years. The powers of the condominium owners' assembly, block representatives' assembly and collective building representatives' assembly under the Condominium Law will be exercised by the operator company for immovable properties located in IFM for a period of 20 years. Participant certificates will be issued by the Presidential Finance Office to participants seeking to conduct activities in office areas. The procedures and principles regarding participant certificates, including the issuance of participant certificates, exemption conditions for participant certificates, and the suspension and cancellation of participant certificates, will be regulated in the implementing regulation.

Single-window office application

A "single-window office" will be established with the involvement of relevant units of public institutions and organisations to enable participants to file applications for permits, licenses and similar approvals related to their activities, as well as applications for permits and approvals related to their employees and persons dependent on these employees, and to accelerate these application processes. The single-window office will include representatives of the Ministry of Labour and Social Security, the Ministry of Environment, Urbanism and Climate Change, the Treasury and Finance Ministry, the Ministry of Interior, the Ministry of Trade, and where deemed necessary by these ministries, representatives of their affiliated, related organisations or public institutions under their supervision, and representatives of the relevant district municipality. The single-window office will be directed and administered by the Presidential Finance Office, provided that relevant legal provisions remain intact, in order to conduct single-point follow-up of business and transactions to be conducted in IFM and to ensure coordination among public institutions and organisations located in the single-window office. If necessary, different ministries and public institutions may be included in the single-window office. The procedures and principles regarding the operation of the single-window office will be regulated in the implementing regulation. Financial services provided by organisations holding participant certificates and conducting financial activities to persons residing abroad will be considered financial service exports, provided that the service is ultimately utilised abroad. Derivative transactions conducted by financial institutions on their own behalf and account, acquiring assets to or selling assets from their portfolios, and activities, services and transactions by which domestic persons export their savings abroad will not be considered financial service exports. With respect to activities constituting financial service exports conducted in IFM by financial institutions holding participant certificates, 75 per cent of gains obtained will be deducted from corporate income when determining the Corporate Income Tax base, provided that it is separately shown in the Corporate Income Tax return. Transactions and amounts received in favour as a result of these transactions will be exempted from Banking and Insurance Transactions Tax; transactions related to activities will be exempted from all fees, and documents drawn up relating to these transactions will be exempted from Stamp Tax. Monthly salaries paid to personnel employed in IFM by financial institutions holding participant certificates will be subject to the following income tax exemptions: 60 per cent of the actual net value for persons with at least 5 years of professional experience abroad, and 80 per cent for persons with at least 10 years of professional experience abroad. The exemption specified in this scope will apply to wage income of personnel who have not worked in Turkey in the 3 years preceding the start of work in IFM. Transactions relating to the leasing of immovable properties located in IFM will be exempted from all fees and documents drawn up relating to these transactions will be exempted from Stamp Tax. These provisions will also apply to regional treasury and financial management centres of participants operating actively in at least 3 countries.

No Turkish language requirement for accounts and records

The Treasury and Finance Ministry will be authorised to make arrangements independent of the provisions of the Tax Procedure Law and the Turkish Commercial Code regarding the keeping of records and preparation of documents by participants in foreign currency. Participants will not be required to keep any records, documents and accounts drawn up among themselves and in the scope of their activities conducted in IFM in Turkish. Participants will be free to choose the applicable law in any transactions and contracts they conduct subject to private law, among themselves and in the scope of their activities conducted in IFM, provided that they do not conflict with the legislation applicable to their activities. These provisions will also apply to regional treasury and financial management centres of participants operating actively in at least 3 countries.

Foreign national personnel

Participants who will conduct activities in IFM and regional treasury and financial management centres of participants operating actively in at least 3 countries may employ foreign national personnel with work permits issued by the Ministry of Labour and Social Security in accordance with the International Labour Law. Work permit applications made in this scope will be assessed exceptionally. Immovable properties located in IFM can only be used in accordance with the purposes determined in the project and management plan. The Ministry of Environment, Urbanism and Climate Change will be authorised to prepare, have prepared and approve all types and scales of spatial plans, parcelation plans, land and plot arrangements, geological and geotechnical studies, micro-zoning, mapping and urban design projects in IFM. The IFM management plan and operating project will be prepared by the operator company and registered ex officio. Should a participant certificate be cancelled for any reason, the lease agreement entered into by participants for conducting activities in IFM will also automatically terminate. If the lease agreement has been registered as a caveat, the caveat will be withdrawn upon request of the operator company. The procedures and principles relating to the implementation of the law and other matters will be regulated in the implementing regulation issued by the President.  

Exemptions relating to Corporate Income Tax and fees

In the initial period of IFM's operation, in order to encourage relocation and to make IFM globally competitive, the Corporate Income Tax reduction rate will be applied at 100 per cent for gains obtained between 2022-2031 from activities constituting financial service exports conducted in IFM by financial institutions that have obtained participant certificates and conduct financial activities. Financial activity fees to be collected from the head offices and branches in IFM of financial institutions holding participant certificates will not be collected for a period of 5 years from the date this law enters into force.