Stamp Duty Exemptions For Financial Restructuring Agreements
Introduction
Provisional Article 32 was added to Banking Law numbered 5411 (“BL”) through Article 17 of the Law No. 7186 on Amendments to the Income Tax Law and Certain Laws ("Law No. 7186") in the Official Gazette on 19.07.2019. This law enables companies that are experiencing financial difficulties, but which are able to continue their operations through restructuring their debts to the financial sector, to do so by creating agreements with creditor institutions. These agreements must be created in accordance with framework agreements to be determined and published by the Banks Association of Turkey.
As per Presidential Decision numbered 4299, which entered into force through publication in the Official Gazette dated 15.07.2021 and numbered 31542, the validity period of the restructuring of financial debts summarized above has been extended by two years under the authorization granted to the President by the relevant article.
Furthermore, various tax exemptions have been granted to these financial restructuring transactions. In this article, firstly the basic stamp tax regulations and then the stamp tax exemption for certain papers in financial restructuring transactions will be covered.
Justification for Tax Exemptions in Financial Restructuring
Provisional Article 32 was added to BL on the Amendment of Income Tax Law and Certain Laws (“Law numbered 7186”) in order to grant an opportunity to companies that are in financial difficulty, but are able to continue their operations through the restructuring of their debts to the financial system, so that they may fulfill their repayment obligations and continue to contribute to employment.
Pursuant to Provisional Article 32 of BL, debtors will be identified in the framework agreements created under the Regulation on Restructuring of Debts to the Financial Sector issued by the Banking Regulation and Supervision Agency (“Agency”) which was first published in the Official Gazette dated 15.08.2018 and numbered 30510. The loans of these debtors may be subject to restructuring with the other debtors in the risk group to which they belong regarding the loans extended by the financial institutions specified in the article, together with other debtors or personally. The procedures and principles regarding the financial restructurings to be made under the article must be determined by the framework agreements created within the framework of the provisions of the regulation issued by the Agency.
In order for this financial restructuring instrument to fulfill its objective, various tax exemptions, primarily corporate tax, banking and insurance transactions tax (“BITT”), resource utilization support fund (“RUSF”) and stamp tax exemptions, are granted for the transactions carried out and for certain papers signed during financial restructuring.
Main Regulations Regarding Stamp Tax
Pursuant to Article 1 of Stamp Tax Code No. 488 (“STC”), documents indicated in Table (1) attached to STC are subject to stamp tax. The term “documents” used in this code defines (i) the documents created by adding a signature, or another mark in lieu of a signature, that may be produced in order to prove or designate anything; and, (ii) documents produced as magnetic and electronic data to use as an electronic signature. Table (2) attached to STC lists documents exempted from stamp tax.
Stamp tax is collected in the form of ad valorem or fixed stamp tax. In ad valorem stamp tax, the calculation is made on a certain amount indicated in the document, according to the kind and nature of the documents. In fixed stamp tax, stamp tax liability arises over the fixed amount in Table (1) attached to STC, depending on the nature of the documents.
Legislative Provisions Regarding Stamp Duty Exemption in Financial Restructuring Agreements
The transactions to be carried out in accordance with the principles set out in the framework agreements signed in accordance with Provisional Article 32 of the Law and the agreements made within the scope of these agreements shall be exempt from (i) the fees (including judicial fees) levied in accordance with the Law on Fees and (ii) the stamp tax levied in accordance with the Stamp Duty Law on the papers to be issued (including framework agreements and agreements).
It is stated that the exceptions in the regulation shall not apply in cases where the creditor institutions dispose of the assets and collaterals acquired directly or indirectly by the creditor institutions due to the transactions within the scope of the framework agreements and the contracts made within the scope of these agreements, except for the transfer of the assets and collaterals between the creditor institutions or to the debtor.
Administrative Letter and The Rulings of the Turkish Revenue Administration Regarding Stamp Duty Exemption in Financial Restructuring Agreements
In the letter dated 27.12.2019 and numbered 23294678-010.07.02-E.4900229 published by the Ministry of Environment and Urbanization, General Directorate of Land Registry and Cadastre, Department of Land Registry, [1] the ministry states that in the transactions to be made under a contract signed within the scope of the framework agreement, (i) the assets or collaterals acquired directly or indirectly by the creditor institutions from the debtor and (ii) the transfer of these acquisitions among the creditor institutions or to the debtor are within the scope of the exception provision. On the other hand, the letter states that other refinancing transactions carried out by means of extension, installments, collateralization, additional credit extension and other methods shall not be considered within the scope of the exception under Art. 32 Provisional Article of BL.
The letter explained the ministry’s opinion on the matter to the Land Registry Directorates as follows:
In the event that it is notified in writing by the creditor institutions (those listed in the Provisional Article 32 of the Law No. 5411), which are parties to the agreement signed within the scope of the framework agreement and submitted to the directorate of land registry, that the requested title deed transaction is within the scope of the Provisional Article 32 of the Banking Law No. 5411 and the Regulation on Restructuring of Debts to the Financial Sector and that it should be exempted from fees/taxes, it should be exempted from title deed fees and stamp tax by being evaluated by the directorate within the scope of the Law and Regulation provisions explained above.
In a ruling dated 03.02.2021 and numbered 90792880-155.15[1627]-43650, the Ankara Tax Office[2] stated that if the paper entitled "transfer agreement" is made within the scope of the Financial Restructuring Agreement between the creditor banks and the loan borrowers, it is possible to exempt this paper from the stamp tax. If the commercial enterprise pledge taken as loan collateral constitutes the collateral of the receivables assigned with the transfer agreement for the transfer of the commercial enterprise pledge to the bank, stamp tax will not be sought from the papers issued regarding the transfer of the commercial enterprise pledge to the bank.
In a ruling dated 20.02.2012 and numbered B.07.1.GİB.4.99.16.02-HARÇ-123-57, Büyük Mükellefler Tax Office,[3] summarized its opinion as follows:
- Pursuant to Article 3 of Law No. 4743, an amendment agreement of a commercial enterprise pledge agreement in the form of an arrangement should not be subject to stamp tax and fees if it is one of the financial restructuring framework agreement and agreements made for financial restructuring and the transactions to be made and papers issued pursuant to them, which are issued within the conditions specified in Law No. 4743.
- A contract which is only related to the purchase, collection, restructuring and sale of the receivables and other assets of banks and other financial institutions, including funds, does not cover the receivables of real persons and legal entities other than banks and other financial institutions, including funds, and issued within the calendar year of the establishment of the asset management company and the following five years should not be subject to stamp tax and fees pursuant to Article 143 of Law No. 5411.
Conclusion
Financial restructuring agreements made as specified in the legislation, the agreements to be made within the scope of these agreements, and the transactions to be carried out in accordance with the provisions specified in these agreements, are exempt from stamp tax and fees to be collected in accordance with the Law on Fees.
As a matter of fact, in many rulings of the administration, it is stated that not only financial restructuring agreements, but also the agreements made with these agreements are exempt from stamp tax and fees to be collected in accordance with the Law on Duties, if they constitute the collateral of the receivables received.
Therefore, this exemption should not be interpreted narrowly in line with its purpose; however, the relevant paper should be evaluated in terms of stamp tax liability.
- https://www.tkgm.gov.tr/sites/default/files/202011/5411_sayili_kanunun_gecici_32_nci_maddesi_kapsaminda_harc_mufiyeti.pdf, 5411 sayılı kanunun geçici 32nci maddesi kapsamında harç muafiyeti konulu, s. 23294678-010.07.02-E.4900229, t. 27.12.2019
- https://www.gib.gov.tr/7186-sayili-kanun-ile-bankacilik-kanununa-eklenen-gecici-32nci-maddesi-kapsamindaki-istisna, 7186 sayılı kanun ile bankacılık kanununa eklenen geçici 32’nci maddesi kapsamındaki istisna, s. 90792880-155.15[1627]-43650, t. 03.02.2021
- https://www.gib.gov.tr/node/96449, 4743 sayılı Kanun kapsamında borçlu şirket ile alacaklı bankalar arasında düzenlenen ticari işletme rehni tadili sözleşmesi ve bu sözleşmeye atıf yapan alacaklı bankalar arasındaki temlik sözleşmesinin damga vergisi ve harçtan istisna olup olmadığı konulu, s. B.07.1.GİB.4.99.16.02-HARÇ-123-57, t. 20.02.2012
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