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In this, our third and final post in our series on the newly adopted Provisional Article and the effect on financial restructuring in Turkey, we explore the considerations and recommendations of Esin Attorney Partnership on the tax front.

1) Financial Restructuring Considerations

The Provisional Article provides various tax reliefs and exemptions in relation to financial restructuring transactions.

The Omnibus Law’s general preamble states that the purposes of the amendments to the Banking Law are (i) resolving financial issues that have or may arise in the real sector due to the macroeconomic developments (ii) restoring solvency to debtors in financial trouble by facilitating the operation of reconciliation platforms that include financial restructuring programs; and (iii) establishing the legal infrastructure enabling debtors to comply with their obligations towards financial institutions.

With those broad purposes in mind, various tax exemptions were provided by the Provisional Article for financial restructuring transactions implemented under the Framework Agreements process.

  • These financial restructuring transactions are exempt from fees under the Law on Fees No. 492 (including judiciary fees), and the documents to be issued in connection with the restructuring (including framework agreements and financial restructuring agreements) are exempt from stamp tax under the Stamp Tax Law No: 488 (the “Stamp Tax Law“).
  • Amounts collected by creditor institutions are exempt from the banking and insurance transaction tax under the Expenditures Taxes Law No. 6802.
  • Loans granted and to be granted in connection with such restructurings are exempt from the resource utilization support fund deduction.

However, the tax exemptions would only apply to transfers between the transferor and the original creditor (and transfers between creditors) such that, for example, if the assets and collateral in question were restructured by a party that acquired it who then proceeded to transfer, that would result in above tax implications, which would only make restructurings more challenging.