1. BDO Member Firm Name Member Firm Name TAX LEGISLATION AND INCENTIVES IN TURKEY PRESENTED BY : HALUK KAPTANOĞLU BDO DENET DENET Yönetim Danışmanlığı Y.M.M. A.Ş.

2. BDO Member Firm Name Member Firm Name TURKISH TAX SYSTEM DENET Yönetim Danışmanlığı Y.M.M. A.Ş.

3. BDO Member Firm Name Member Firm Name Basic Classification Taxes on Income Taxes on Expenditure Taxes on Wealth TURKISH TAX SYSTEM DENET Yönetim Danışmanlığı Y.M.M. A.Ş.

4. BDO Member Firm Name Member Firm Name Taxes on Income Corporate Income Tax (CIT) Individual Income Tax (IIT) DENET Yönetim Danışmanlığı Y.M.M. A.Ş. TURKISH TAX SYSTEM

5. BDO Member Firm Name Member Firm Name Taxes on Income (cont.) Lower rates at present as compared to years prior to 2006 CIT from 33% to 20% IIT from 45% to 35% (highest rates) DENET Yönetim Danışmanlığı Y.M.M. A.Ş. TURKISH TAX SYSTEM

6. BDO Member Firm Name Member Firm Name Taxes on Expenditure Value Added Tax (VAT) Special Consumption Tax Banking and Insurance Transaction Tax Stamp Duty Special Communication Tax Customs Duty DENET Yönetim Danışmanlığı Y.M.M. A.Ş. TURKISH TAX SYSTEM

7. BDO Member Firm Name Member Firm Name Taxes on Wealth Inheritance and Gift Taxes Real Estate Tax Motor Vehicles Tax DENET Yönetim Danışmanlığı Y.M.M. A.Ş. TURKISH TAX SYSTEM

8. BDO Member Firm Name Member Firm Name Corporate Income Tax Earnings and profits of companies Limited company Joint stock company, and Branch of foreign companies Are taxed at 20% CIT rate as of each quarter and finally the year end. DENET Yönetim Danışmanlığı Y.M.M. A.Ş. TURKISH TAX SYSTEM

9. BDO Member Firm Name Member Firm Name Corporate Income Tax (cont.) Filing of CIT return: Between the 1st and the 25th day of the fourth month following the fiscal year end which is the calendar year. DENET Yönetim Danışmanlığı Y.M.M. A.Ş. TURKISH TAX SYSTEM

10. BDO Member Firm Name Member Firm Name Corporate Income Tax (cont.) Withholding tax on: Dividend of companies profits of branches paid abroad Rate: 15% Lower rates are available under Double Tax Treaties DENET Yönetim Danışmanlığı Y.M.M. A.Ş. TURKISH TAX SYSTEM

11. BDO Member Firm Name Member Firm Name Individual Income Tax Income on commercial activities Income on agriculture Income from professional services Wages and salaries Income from capital investment (interest and dividend) Income from immovable assets and rights Other income and earnings Capital gains Incidental income DENET Yönetim Danışmanlığı Y.M.M. A.Ş. TURKISH TAX SYSTEM

12. BDO Member Firm Name Member Firm Name Individual Income Tax (cont.) Capital Gains Exemptions on The sale of shares The sale of real estate DENET Yönetim Danışmanlığı Y.M.M. A.Ş. TURKISH TAX SYSTEM

13. BDO Member Firm Name Member Firm Name Individual Income Tax (cont.) On progressive basis (15% - 35%) Employer withholds income tax on salaries DENET Yönetim Danışmanlığı Y.M.M. A.Ş. TURKISH TAX SYSTEM

14. BDO Member Firm Name Member Firm Name Individual Income Tax (cont.) Filing of annual tax return: March 15 Employees are not required to file income tax return if salary is the only income. DENET Yönetim Danışmanlığı Y.M.M. A.Ş. TURKISH TAX SYSTEM

15. BDO Member Firm Name Member Firm Name Social Security Not a tax. But a payroll cost to the employer. Employer and the employee contributes for social security which comprises of items like sickness, work related accidents pension, etc. DENET Yönetim Danışmanlığı Y.M.M. A.Ş. TURKISH TAX SYSTEM

16. BDO Member Firm Name Member Firm Name Social Security Base is the salary with a cap which is TRY 3650 currently Employer’s contribution: 19,5 % Employee’s contribution: 14 % DENET Yönetim Danışmanlığı Y.M.M. A.Ş. TURKISH TAX SYSTEM

17. BDO Member Firm Name Member Firm Name Value Added Tax (VAT) On the supply and importation of goods and services at the rate of 18% Reduced rates are available 1% and 8% DENET Yönetim Danışmanlığı Y.M.M. A.Ş. TURKISH TAX SYSTEM

18. BDO Member Firm Name Member Firm Name Value Added Tax (VAT) (cont.) Input VAT is carried forward until offset against output VAT. Recovery of input VAT is also possible. VAT return is filed on monthly basis. DENET Yönetim Danışmanlığı Y.M.M. A.Ş. TURKISH TAX SYSTEM

19. BDO Member Firm Name Member Firm Name Special Consumption Tax (SCT) Applicable on luxury items, vehicles of all sorts, oil products, tobacco products, alcoholic beverages and some soft drinks DENET Yönetim Danışmanlığı Y.M.M. A.Ş. TURKISH TAX SYSTEM

20. BDO Member Firm Name Member Firm Name Special Consumption Tax (SCT) (cont.) Charged only once upon importation ex-factory sales DENET Yönetim Danışmanlığı Y.M.M. A.Ş. TURKISH TAX SYSTEM

21. BDO Member Firm Name Member Firm Name Banking and Insurance Transaction Tax Applied on the above transactions where VAT is not applicable. Rates vary between 1% - 5%. DENET Yönetim Danışmanlığı Y.M.M. A.Ş. TURKISH TAX SYSTEM

22. BDO Member Firm Name Member Firm Name Stamp Tax Applicable on a wide range of documents including contracts, receipts, …etc. On varying lump sum amounts, or Varying rates DENET Yönetim Danışmanlığı Y.M.M. A.Ş. TURKISH TAX SYSTEM

23. BDO Member Firm Name Member Firm Name Customs Duty Upon importation of goods at varying rates. Not applicable on imports from EU. DENET Yönetim Danışmanlığı Y.M.M. A.Ş. TURKISH TAX SYSTEM

24. BDO Member Firm Name Member Firm Name Inheritance and Gift Tax Transition of goods possessed by Turkish nationals or the goods located in Turkey to others. Taxpayer is the acquirer. Rates vary in accordance with Inheritance or gift Values Relation DENET Yönetim Danışmanlığı Y.M.M. A.Ş. TURKISH TAX SYSTEM

25. BDO Member Firm Name Member Firm Name Real Estate Tax Charged on land and buildings at rates varying between 0.1% - 0.3% The rate is applied twice if the property is in greater metropolitan area DENET Yönetim Danışmanlığı Y.M.M. A.Ş. TURKISH TAX SYSTEM

26. BDO Member Firm Name Member Firm Name Motor Vehicles Tax Applied on all motor vehicles including yachts, helicopters, airplanes, etc. Taxes on lump sum amounts varying in accordance with engine, age capacity, etc. DENET Yönetim Danışmanlığı Y.M.M. A.Ş. TURKISH TAX SYSTEM

27. BDO Member Firm Name Member Firm Name Double Tax Treaties (DTT) As of today Turkey has DTTs with 64 countries. The aim of the DTT is the avoidance of double taxation. They also allow and require exchange of information between the countries. DENET Yönetim Danışmanlığı Y.M.M. A.Ş. TURKISH TAX SYSTEM

28. BDO Member Firm Name Member Firm Name INCENTIVES DENET Yönetim Danışmanlığı Y.M.M. A.Ş.

29. BDO Member Firm Name Member Firm Name PAST 1980’S AND 1990’S Heaven of incentives Tourism Exports Free Zones before 2004 DENET Yönetim Danışmanlığı Y.M.M. A.Ş. INCENTIVES

30. BDO Member Firm Name Member Firm Name PURPOSE To create a stronger and competitive economy with special emphasis on certain industries Examples: Tourism Textiles / Ready made garments DENET Yönetim Danışmanlığı Y.M.M. A.Ş. INCENTIVES

31. BDO Member Firm Name Member Firm Name PRESENT Initial purposes were achieved to an extent End results of the economic crisis in 2001 helped: Businesses:Increase in efficiency Governments:Better governance in economy INCENTIVES DENET Yönetim Danışmanlığı Y.M.M. A.Ş.

32. BDO Member Firm Name Member Firm Name PRESENT Inner and outer forces shaped incentives again : Governments: Why should we give more? Turkey’s bid for EU as examples Created a new era INCENTIVES DENET Yönetim Danışmanlığı Y.M.M. A.Ş.

33. BDO Member Firm Name Member Firm Name PRESENT Incentives focused on Technological advancements / R&D / Education Employment in less developed provinces Whereas tourism, investment incentives in general and export incentives still continue but in a more rational, realistic and reasonable manner. INCENTIVES DENET Yönetim Danışmanlığı Y.M.M. A.Ş.

34. BDO Member Firm Name Member Firm Name R&D Technology Development Zones Industrial Zones Free Zones Private Education Establishments Investment Incentives Tourism Incentives Export Incentives, and Shipping Incentives INCENTIVES Current Incentives DENET Yönetim Danışmanlığı Y.M.M. A.Ş.

35. BDO Member Firm Name Member Firm Name In the form of - Supports/ grants / aids - Tax benefits / cuts INCENTIVES DENET Yönetim Danışmanlığı Y.M.M. A.Ş. Current Incentives (cont.)

36. BDO Member Firm Name Member Firm Name A tax incentive 40% of the expenditures made for Software developments Technological improvements Cost saving technologies are deducted from tax base. INCENTIVES DENET Yönetim Danışmanlığı Y.M.M. A.Ş. R&D

37. BDO Member Firm Name Member Firm Name Tax incentive available in a number of designated areas until 2013 R&D sourced income is fully exempt from income tax and CIT Salaries of employees are tax exempt INCENTIVES DENET Yönetim Danışmanlığı Y.M.M. A.Ş. Technology Development Zones

38. BDO Member Firm Name Member Firm Name R&D Development Centers and R&D Development Companies Tax Incentives -On Income -On Salaries Grants INCENTIVES DENET Yönetim Danışmanlığı Y.M.M. A.Ş. The New Draft Bill

39. BDO Member Firm Name Member Firm Name Currently in 49 relatively less developed provinces Available incentives: Tax and grants Tax cuts on employment (up to 80%) Social security grants (up to 80% on employers share Allocation of land free of charge Energy support INCENTIVES DENET Yönetim Danışmanlığı Y.M.M. A.Ş. Industrial Zones

40. BDO Member Firm Name Member Firm Name Free Zones Free of all taxes and duties for those established prior to February 2004 – Available for trading and industrial activities No CIT No income tax on salaries No VAT, etc. DENET Yönetim Danışmanlığı Y.M.M. A.Ş.

41. BDO Member Firm Name Member Firm Name Free Zones (cont.) For those established after February 2004 Tax exempt (income tax & CIT) earnings on manufacturing income only. DENET Yönetim Danışmanlığı Y.M.M. A.Ş.

42. BDO Member Firm Name Member Firm Name Private Education Establishments Five year tax exemption (income tax and CIT) on earnings Pre-school education Primary and secondary schools DENET Yönetim Danışmanlığı Y.M.M. A.Ş.

43. BDO Member Firm Name Member Firm Name Investment Incentives in General Import duty exemption VAT exemption on capital goods (local and imports) Interest grants in less developed regions Subsidized energy for qualifying touristic establishments DENET Yönetim Danışmanlığı Y.M.M. A.Ş.

44. BDO Member Firm Name Member Firm Name Export Incentives Tax incentives and grants Customs duty exemption on importation of raw materials Exemptions on stamp duty, Banking and Insurance Transaction Tax DENET Yönetim Danışmanlığı Y.M.M. A.Ş.

45. BDO Member Firm Name Member Firm Name Export Incentives (cont.) Grants Environment related costs Market research Setting up of offices sales points abroad Branding Participation in fairs Employment R&D Training DENET Yönetim Danışmanlığı Y.M.M. A.Ş.

46. BDO Member Firm Name Member Firm Name Shipping Incentives Tax incentives Exemption on shipping income and capital gains (income tax and CIT) Income tax exemption on the salaries of crew DENET Yönetim Danışmanlığı Y.M.M. A.Ş.

47. BDO Member Firm Name Member Firm Name Shipping Incentives (cont.) Condition Registration with International Ship Registry in Turkey which is subject to fees. DENET Yönetim Danışmanlığı Y.M.M. A.Ş.

48. BDO Member Firm Name Member Firm Name THANK YOU DENET Yönetim Danışmanlığı Y.M.M. A.Ş.