1. The Implementation Period of the Individual Participation Investor Incentive has been Extended, and its Upper Limit has been Updated

Provisional Article 82 was added to the Income Tax Law No. 193 (“ITL“) and individual participation investors were granted the right to deduct 75% of their investments in venture companies (and 100% of their investments in companies whose projects have been supported within the last five years within the scope of research, development and innovation programs determined by the Ministry of Industry and Technology, TÜBİTAK and KOSGEB) from their income tax bases by recording them as expenses. Pursuant to the amendment to the ITL on 09.11.2022, implementation period of the incentive granted to individual participation investors was extended until 31.12.2027 and the upper limit of the annual deduction amount was increased from TRY 1,000,000 to TRY 2,500,000.

2. Thresholds in the Communiqué on Crowdfunding has been Updated

The Communiqué on Crowdfunding (no. III-35/A.2) has entered into force through its publication in the Official Gazette dated 27.10.2021 and numbered 31641, and regulated debt-based crowdfunding along with share-based crowdfunding. Pursuant to the Capital Markets Board’s Bulletin No. 2022/74, the minimum capital required for the establishment and listing of platforms in Article 5/1 of the Communiqué on Crowdfunding was increased from TRY 1,362,000 to TRY 5,000,000, the investment limits for real persons who are not qualified investors in Article 15/1 and 18/1 were increased from TRY 68,100 and TRY 272,400 to TRY 150,000 and TRY 600,000 respectively, the maximum investment amount that real persons who are not qualified investors can make with debt-based crowdfunding in Article 18/2 was increased from TRY 27,240 to TRY 60,000, the limit on fund collection target in share-based crowdfunding in Article 16/5 was increased from TRY 1,362,000 to TRY 3,000,000, the limits on the amount of funds collected in share-based and debt-based crowdfunding in Article 21/4 and 22/4 were increased from TRY 1,362,000 to TRY 3,000,000.

3. Companies Operating in Technopolises and R&D and Design Centers are Obliged to Invest in Venture Companies

Pursuant to the Law No. 4691 on Technology Development Zones (“Technopolis Law“), income and corporate taxpayers operating in technology development zones (“Technopolis“) were exempted from income and corporate tax until 31.12.2028 on their earnings derived exclusively from software, design and R&D activities in Technopolis (“Technopolis Exemption“). In addition, pursuant to the Law No. 5746 on Supporting Research, Development and Design Activities (“R&D and Design Law“), all R&D and innovation expenditures made in R&D and design centers (“R&D and Design Center“) shall be subject to a deduction in the determination of the income subject to income and corporate tax (“R&D Deduction“).

Through the amendments to the Technopolis Law and R&D and Design Law, companies benefiting from the Technopolis Exemption and R&D Deduction shall invest in venture companies. As of 01.01.2022, taxpayers whose exempted profit subject to Technopolis Exemption or deducted expenditures subject to R&D Deduction are TRY 1,000,000 or more shall, with 2% of the amount subject to deduction or exemption, acquire the venture capital investment fund shares that are established to invest in entrepreneurs resident in Turkey, or capitalize in venture capital investment partnerships or entrepreneurs operating in business incubators under the Technopolis Law until the end of the year in which it is transferred to the temporary account (“Investment Obligation”). In case of non-compliance with this obligation, 20% of the income subject to Technopolis Exemption or 20% of the expenditures subject to R&D Deduction shall be excluded from the scope of income and corporate tax exemption utilized in the relevant year and the tax not collected on time shall be levied without applying tax loss penalty.

4. Tax Deduction has been Introduced for Investments in Venture Capital Investment Funds, Venture Capital Partnerships, and Venture Companies

It should be additionally noted that the investment amount made in accordance with the abovementioned Investment Obligation can be deducted from the income tax or corporate tax base. Pursuant to the provisional Article 4 of the Technopolis Law, the capital support provided to the entrepreneurs operating in Technopolis can be deducted from the income tax or corporate tax base, provided that other conditions listed in the Technopolis Law are also met. Thus, in case the taxpayer subject to the Investment Obligation prefers investing capital in other entrepreneurs operating in incubation centers under the Technopolis Law, the taxpayer will be entitled to deduct the invested amount from its income tax or corporate tax base. Correspondingly, pursuant to the Article 89/1-12 of the ITL and Article 10/1-g of the Corporate Tax Law No. 5520 (“CTL”), venture capital funds allocated for the purpose of capitalizing venture capital investment partnerships or acquiring venture capital investment fund shares can be deducted from the income tax or corporate tax base, provided that other conditions listed in the CTL and ITL are also met. Thus, in case the taxpayer subject to the Investment Obligation prefers acquiring venture capital investment fund shares or capitalizing venture capital investment partnerships, the taxpayer will be entitled to deduct the invested amount from its income tax or corporate tax base. As a result, the taxpayer who invests pursuant to the Investment Obligation will also receive a deduction from the income tax or corporate tax base in the amount of the investment.

5. The Scope of Income Tax Withholding Incentive for Companies Operating in Technopolises and R&D and Design Centers Expanded

Pursuant to the Technopolis Law, all of the income tax calculated after applying the minimum living allowance on the wages of R&D, design and support personnel working in Technopolis arising from their relevant duties can be deducted from the tax accrued on the withholding tax return to be submitted. Pursuant to the R&D and Design Law, 95% of the income tax calculated after applying the minimum living allowance on the wages of R&D, design and support personnel working in Technopolis arising from their relevant duties for the employee which holds a doctorate degree or at least a master’s degree in one of the supported program areas, 90% for the employee holding a master’s degree or a bachelor’s degree in one of the supported program areas and 80% for the employee which does not hold either can be deducted from the tax accrued on the withholding tax return to be submitted. This incentive thus reduced the personnel costs of the venture companies.

In addition, it was regulated that the periods spent outside the Technopolis or R&D and Design Center shall also be considered within the scope of the income tax withholding incentive, provided that they do not exceed 50% of the total number of personnel working in the Technopolis or R&D and Design Center hours subject to the income tax withholding incentive or the total working hours subject to incentive. Pursuant to the Presidential Decision No. 5806 published in the Official Gazette dated 21.07.2022 and numbered 31889, the ratio of the working hours spent outside was increased from 50% to 75%. Accordingly, for example, in case 10 employees of an employer spend all of their monthly working time in their branch in Technopolis and 30 employees spend all of their monthly working time outside, while before the Presidential Decree No. 5806, this incentive could be applied for 10 employees in Technopolis and 10 employees outside (according to the 50% ratio), now this incentive can be utilized for all 30 employees working outside (corresponding to 75% of the total number of employees).

6. Opportunity to Establish Electronic Contracts was Provided to Portfolio Management Companies

The Communiqué on Remote Identification Methods to be Used by Intermediary Institutions and Portfolio Management Companies and Establishment of Contractual Relations in Electronic Environment (no. III-42.1) (“Communiqué on Remote Identification and Electronic Contracts”) has been published in the Official Gazette dated 08.02.2022 and numbered 31744 and entered into force on 08.03.2022. Communiqué on Remote Identification and Electronic Contracts provided institutions and portfolio management companies with the opportunity to gain customers remotely and regulated principles regarding the remote identification methods that can be implemented in this process. Thus, it has been made possible to establish a contractual relationship regarding the services to be provided following the identification of the customer through an information or electronic communication device, whether the contract is distance or not, as a substitute for the written form or to establish a distance contractual relationship, and the principles of establishing this contract are also stipulated by the aforementioned Communiqué.

7. Turnover Thresholds have been Removed for Technology Undertakings for Mergers and Acquisitions that Require Authorization of the Competition Board

The Communiqué on Amending the Communiqué Concerning the Mergers and Acquisitions Requiring the Authorization of the Competition Board No. 2010/4 (“Communiqué on Mergers and Acquisitions”) numbered 2022/2 (“Communiqué No. 2022/2”) has been published in the Official Gazette dated 04.03.2022 and numbered 31768 and entered into force on 04.05.2022. With the amendments introduced by the Communiqué No. 2022/2, technology undertakings were defined for the first time in the Communiqué on Mergers and Acquisitions. In addition, it is regulated that the turnover thresholds stipulated in the Communiqué on Mergers and Acquisitions shall not be applied for the technology undertakings that are the target company in transactions regarding the acquisition of technology undertakings of operating in the geographical market of Turkey or having R&D activities or providing services to users in Turkey. Through the amendments, the Turkish Competition Authority aims to supervise the acquisitions of technology undertakings with a turnover less than TRY 250,000,000 and prevent killer acquisitions of technology undertakings.

8. Developments in the Electronic Commerce Regulations

The Law Amending the Law on the Regulation of Electronic Commerce, published in the Official Gazette dated 07.07.2022 and numbered 31889, has introduced significant changes to the electronic commerce, and a substantial number of these have entered into force as of 01.01.2023. With the amendments, definitions of electronic commerce intermediary service provider (“ECISP”), electronic commerce service provider (“ECSP”), electronic commerce environment, electronic commerce marketplace, net transaction volume and economic integrity were added to the regulation, and businesses operating in the fields of travel agencies, private pensions, banking, insurance, financial leasing, capital markets, payment services, electronic communications and chance games shall not be considered as ECISPs and ECSPs.

Additionally, ECISPs are obliged not to sell or mediate the sale of products sold by persons with whom they are in the same economic integrity, not to provide access between these environments and not to promote each other in case these products are offered for sale in different electronic commerce environments, to enable the ECISPs to include the information in the documents required to be issued under the Tax Procedure Law in the electronic commerce marketplace where the sale is made. Furthermore, ECISPs are obliged to remove the content that is unlawful or infringes the intellectual and industrial property rights of a third party. Additional obligations were imposed on ECISPs and ECSPs in accordance with their higher net transaction volumes.

Lastly, unfair commercial practices in the electronic commerce were regulated. Accordingly, ECISPs’ practices that significantly disrupt ECSP’s commercial activities, impairs its ability to make reasonable decisions or force it to take a certain decision that will result in becoming a party to a commercial relationship to which it would not normally be a party, are considered as unfair. Additionally, situations which shall be considered as unfair commercial practices in all cases were listed.

9. Developments in the Payment Services Regulations

The Regulation on Payment Services and Electronic Money Issuance and Payment Service Providers (“Payment Services Regulation”) and Communiqué on Information Systems of Payment and Electronic Money Institutions and Data Sharing Services of Payment Service Providers in the Field of Payment Services have been entered into force through their publication in the Official Gazette dated 01.12.2021 and numbered 31676. Institutions operating as of this date were obliged to comply with the new regulations until 01.12.2022. Pursuant to the recent amendment, the compliance period with the new regulations has been extended until 28.02.2023.

In addition, pursuant to the Communiqué on the Re-determination of Minimum Equity Amounts of Payment and Electronic Money Institutions, minimum thresholds regarding the equity stipulated in the Payment Services Regulation has been increased for (i) payment institutions providing invoice payment intermediary services, (ii) payment institutions other than institutions exclusively providing account services and (iii) electronic money institutions.

10. Developments in the Digital Banking Regulations

The Regulation on the Operation Principles of Digital Banking and Service Model Banking (“Digital Banking Regulation”) has been published in the Official Gazette dated 29.12.2021 and numbered 31704 and entered into force on 01.01.2022. Pursuant to the Digital Banking Regulation, a digital bank, limited to a deposit or participation bank, has been defined as a credit institution that offers banking services through electronic banking distribution channels instead of physical branches. Restrictions on the activities and general conditions for establishment and operation licenses of digital banks have been regulated. In addition, Digital Banking Regulation stipulated the principles of service model banking such as prohibiting banks from becoming interface providers, provisions that shall be included in the service contract between the service bank and the interface provider, confidentiality of the data to be shared with the interface provider.

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