Evren Özmen
Serbest Muhasebeci Mali Müşavir
Bilirkişi
evrenozmen@ozmconsultancy.com
www.ozmconsultancy.com

Istanbul Finance Center Tax Advantages: A Guide for Financial Institutions and Entrepreneurs

Istanbul Finance Center: Tax Incentives and Advantages for Financial Institutions in Turkey’s Special Zone

The Istanbul Financial Center (IFC) is a transformative project intended to enhance Turkey’s economy and draw in global investors, providing lucrative tax opportunities. 

The IFC aspires to be a regional financial hub in the near future and a global financial center in the medium term.

Bringing together public and private sector banks, asset management companies, brokerage firms, insurance companies, and professional service companies, along with Turkish and international financial institutions, the IFC is designed to create an efficient financial services ecosystem.

Table of Contents

1. Introduction: An Overview of the Istanbul Finance Center
2. Tax Advantages: The Istanbul Finance Center’s Tax Benefits
3. Activities at the Istanbul Finance Center: From Asset Management to Tax Consulting
4. How to Apply: The Application Process for the Istanbul Finance Center

1-Introduction and Overview of the Istanbul Finance Center

The Istanbul Finance Center is set to become the new hub for financial activity in Turkey and the surrounding region. 

Located on the Asian side of Istanbul, this center aims to provide a range of financial services, including asset management, capital markets, fintech, and more. 

In this article, we will take a closer look at the Istanbul Finance Center and the various areas of activity that it encompasses and also tax advantages of Istanbul Finance Center.

2-Istanbul Finance Center Tax Advantages

Q: What benefit will companies operating in the Istanbul Finance Center (IFC) receive?

A: Companies that obtain a participant certificate to operate in the IFC will be able to deduct 75% of the profits they generate from financial service exportation from their corporate tax base.

Q: What will be the rate of tax deduction applied to companies generating profits from financial service exportation?

A: The rate of tax deduction applied to companies generating profits from financial service exportation will be 75% until 2022. 

From 2022 until 2031 (including these tax periods), this rate will be applied at 100%.

Q: What is financial service exportation?

A: Financial service exportation refers to the services provided by companies operating in the IFC to individuals located abroad, which are ultimately utilized outside the country.

Q: Which financial activities are covered by the law in the IFC?

A: The financial activities covered by the law in the IFC include primarily banking, insurance, financial leasing, factoring, finance and savings finance, capital market activities, payment and electronic money institutions, asset management, and individual retirement.

Q: How will taxes be levied on activities that are not related to financial service exportation for companies with headquarters or branches in the IFC?

A: For companies with headquarters or branches in the IFC, taxes will be levied according to general tax rules in Turkey for activities that are not related to financial service exportation.

Q: Are there any exemptions from fees and stamp duty related to financial activities conducted in the Istanbul Finance Center? 

A: Yes, all types of fees and stamp duties related to financial activities conducted in the Istanbul Finance Center are exempted. 

Additionally, there are no fees or stamp duties charged for renting immovable properties located in the Istanbul Finance Center, including office areas.

Q: Are there any tax advantages for employees working in the Istanbul Finance Center? 

A: Yes, conditional and graduated exemptions are provided for wages paid to employees working in the Istanbul Finance Center. 

If the person starting work in the IFC has at least five years of professional experience abroad, 60% of their salary is exempt from income tax. 

If they have at least ten years of professional experience, 80% of their salary is exempt. 

However, to apply for this exemption, the employee must not have worked in Turkey during the three years before starting work in the Istanbul Finance Center.

3-From Asset Management to Tax Consulting: Activities at the Istanbul Finance Center

a-Asset Management, Fund Management, and Portfolio Management

One of the primary areas of activity in the Istanbul Finance Center is asset management. This includes managing a range of assets, such as stocks, bonds, real estate, and more. 

Fund management is also an important part of the center, with a focus on managing investment funds and creating new investment opportunities. Portfolio management is another key area, with a focus on managing portfolios of assets and ensuring a diverse range of investments.

b-Capital Markets and Investment Banking

Capital markets are a critical component of any financial center, and the Istanbul Finance Center is no exception. This includes a range of services, such as equity and debt capital markets, mergers and acquisitions, and more. 

Investment banking is also a significant area of activity, with a focus on providing advisory services to clients looking to raise capital or make strategic investments.

c-Retail Banking, Digital Banking, and Open Banking

Retail banking is an essential part of any financial center, and the Istanbul Finance Center is well-equipped to provide a range of services in this area. This includes traditional banking services, such as deposit accounts and loans, as well as more modern services, such as mobile banking and online banking. 

Digital banking is another key area of activity, with a focus on providing innovative financial services to clients. Open banking is also gaining in popularity, with a focus on providing clients with greater control over their financial data.

d- Family Offices, Private Banking, and Private Equity

Family offices are a growing area of activity in the financial world, and the Istanbul Finance Center is well-positioned to serve this market. This includes providing a range of services, such as investment management and estate planning. 

Private banking is also an important area, with a focus on providing personalized financial services to high-net-worth individuals. Private equity is another key area of activity, with a focus on providing capital to private companies and helping them grow.

e- Insurance and Reinsurance

Insurance and reinsurance are critical components of any financial center, and the Istanbul Finance Center is no exception. This includes providing a range of insurance products, such as life insurance, property insurance, and more. 

Reinsurance is also an important part of the center, with a focus on providing coverage for other insurance companies.

f- Tax, Law, and Consulting Firms

Finally, tax, law, and consulting firms are essential components of any financial center, and the Istanbul Finance Center is well-equipped to provide a range of services in these areas. 

This includes tax planning, legal services, and consulting services to help clients navigate complex financial regulations and optimize their financial strategies.

4-How to Apply: The Application Process for the Istanbul Finance Center

To benefit from tax advantages and establish a presence in the Istanbul finance center, interested parties must first obtain a participant certificate by applying to the One-Stop Office (Tek Durak Büro) and register online via the IFM Portal. 

After obtaining the participant certificate, they can proceed with office rental arrangements. 

These steps are essential to take advantage of the non-tax incentives that make Istanbul stand out among global financial centers, as provided for by Law №7412 on the Istanbul Finance Center.

A-What is Participation Certificate?

Participation Certificate is a mandatory document required to participate in the financial ecosystem created within the Istanbul Finance Center, operate in the office area, and benefit from the exceptions, discounts, and other facilitative structures provided by the relevant legislation, especially the Law on Istanbul Finance Center №7412.

B-Can you explain the process of obtaining a Participation Certificate for the Istanbul Finance Center?

To operate in the office area and take advantage of exceptions, discounts, and facilitative structures provided by the relevant legislation, including the Law on Istanbul Finance Center №7412, it is mandatory to obtain a Participation Certificate for the financial ecosystem created within the Istanbul Finance Center.

C-How can one apply for the Participation Certificate?

Applications for the Participation Certificate can be completed electronically through the user-friendly digital platform designed for participants and potential participants called the Istanbul Finance Center Portal.

D-What happens after the application is submitted?

Once the application is submitted and all the requirements are met, if the application is evaluated positively, the Presidency of the Finance Office will issue the Participation Certificate.

E-What is the “Tek Durak Büro (one-stop-office)” in Istanbul Finance Center? 

The “Tek Durak Büro” is a one-stop service center created to speed up the basic bureaucratic procedures of participants in the Istanbul Finance Center and provide solutions from a single service point.

F-What government institutions are involved in the “Tek Durak Büro”?

The “Tek Durak Büro” includes representatives from the Ministry of Labor and Social Security, the Ministry of Environment, Urbanization and Climate Change, the Ministry of Treasury and Finance, the Ministry of Internal Affairs, the Ministry of Commerce, and the municipality of Ümraniye.

G-What services are provided through the “Tek Durak Büro”?

A wide range of services such as company registration and activity processes, establishment and license applications, tax procedures, work and residence permits, social security and employment processes are provided through the “Tek Durak Büro.”

H-What is the “IFM Portal”?

The “IFM Portal” is a user-friendly digital platform developed for participant certificate applications and “Tek Durak Büro” processes. It serves as an interface between the public institutions and participants, and it includes appointment systems and service tracking screens.

In conclusion, the Istanbul Finance Center offers many advantages and opportunities for businesses that want to operate in the finance sector. With its strategic location and advanced infrastructure, the Istanbul Finance Center is poised to become a leading financial hub in the region.

17.04.2023

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