The President is still approving laws that were passed prior to July’s failed coup d’état, and one by one they are being published, giving them effect. One significant piece of legislation that was passed by the Grand National Assembly on 15 July but which only recently went into effect is the Law in Respect of Making Changes in Various Laws to Improve Investment Conditions (Yatırım Ortamının İyileştirilmesi Amacıyla Bazı Kanunlarda Değişiklik Yapılmasına Dair Kanun), Law No. 6728, which was published on August 9, 2016 and went into effect that same day with certain exceptions (referred to here as the “Omnibus Investment Act” or the “Act”).

As the name implies, the Omnibus Investment Act makes changes in a number of laws with the intention of encouraging investment. These changes mostly consist of subtle changes to the tax code, together with other incentives aimed at easing the bureaucratic burden. These changes do not necessarily betray a coherent response to a single well-defined problem, but rather seemingly constitute a collection of unrelated measures, and as such this article will discuss these changes independently of one another and evaluate the potential effects of each change in turn.

Bankruptcy Postponement

The first notable change made in the Omnibus Investment Act is a revision to the bankruptcy postponement mechanism that is provided in the Bankruptcy Code, Law No. 2004 (İcra ve İflas Kanunu). With the changes made by the Omnibus Investment Act, the relevant sections of the Bankruptcy Code will prescribe in much greater detail exactly how bankruptcy postponement will run. This remedy is examined in greater detail in the Bankruptcy Protection article in this edition of the newsletter.

Passport Privileges

The Omnibus Investment Act has also made it possible for the first time for private-sector workers to obtain green, so-called special passports. The special passport is advantageous in that many countries, including the Schengen zone, exempt holders of the Turkish special passport from visa requirements. The green passport had previously been limited to active and retired high-ranking government officials and their families, but with the changes made by the Omnibus Investment Act, officials working with companies with export volumes greater than a threshold to be set by the Council of Ministers will be given green passports for two-year periods. There had been reports in the press that European nations already thought the visa-free travel privilege for green passport holders was being abused before this change was made, with the number of green passports issued not being commensurate with its restrictive nature. It will be interesting to see whether this further liberalization in the potential recipients will generate any backlash from those countries extending benefits to holders of green passports, in terms of revocations of privileges or otherwise.

Tax-Related Improvements

The first of the tax-related changes brought by the Omnibus Investment Act relates to the enforcement of tax fines. The Omnibus Investment Act has added a new section to the Tax Procedure Code, Law No. 213 (Vergi Usul Kanunu), and introduced a discretionary new procedure that can be followed before a tax audit is launched in cases where there is a suspicion of tax evasion. This process will entitle the government to invite suspected tax evaders to explain observed discrepancies in the tax record. If the solicited explanation resolves whatever doubts were raised about perceived improprieties, then no tax audit is launched, and the enforcement process can end; the suspected tax evader can also agree to submit any missing tax returns, correct any mistakes, or pay any outstanding back taxes and obtain a 20% discount on any further potential tax fines to be assessed.

The procedure described in the Omnibus Investment Act is short of major details, such as which governmental agency is entitled to issue this invitation and evaluate the explanations that are given, or what kind of a preliminary examination can result in such an invitation. The Act rather authorizes the Ministry of Finance to determine these factors. It is likely that this procedure will ease the burden of tax enforcement to some degree, with some tax audits being obviated by presentation of evidence of past misunderstandings, and some actual offenders choosing to come clean about past tax evasions to take advantage of reductions in tax fines. What is interesting is that the legislature chose in the Omnibus Investment Act to apply this provision even to small-scale acts of tax fraud, the procedure being available even in instances of falsification or destruction of records where the sum concerned is less than TL 50,000 and constitutes less than 5% of the total annual purchases of the accused for the year in question.

Exemptions from Stamp Taxes and Notarial Fees

The changes that make up perhaps the most significant portion of the Omnibus Investment Act are reductions in certain bureaucratic charges and fees. These changes are not necessarily interesting from a theoretical perspective, given that they constitute nothing more than a lowering of arbitrarily-set burdens. They may also not have as great an impact in practice as can be expected at first blush, because many workarounds have long existed in practice that allowed firms to bypass such levies. For instance, the Omnibus Investment Act relieves any duplicate copies of an agreement from the stamp tax and notarial fees when more than a single copy of an agreement is executed. This is a sensible move that should be applauded; however, it may not have much effect in practice because prior to this change firms executed only a single copy of agreements, with attorney-certified true copies being distributed to an agreement’s parties in place of signed originals. A change that will perhaps have more of a practical impact is that references to deposits, penalty clauses, etc. will no longer be taken as the basis for the stamp tax unless they themselves are the objective sought by the agreement in question.

The Omnibus Investment Act also includes a significant number of stamp-tax exemptions for import and export related documents. This exemption is not to be applied loosely though; any waived taxes may be assessed, with late interest, if the import or export related activity that forms the basis of the exemption is not carried out in reality. The changes impose a requirement to report failures to realize the requisite activities to earn a waiver on any institution that may discover such a failure, presumably affecting independent auditors and other entities that may have access to a benefiting entities’ financial records, on pain of joint liability with the original tax debtor for any late fees and accrued interest on unpaid amounts.

The Omnibus Investment Act also provides stamp tax exemption for contracts for the supply of goods subject to financial leasing and documents issued as security.

Exemption for Share Acquisition Agreements

A very small addition that will have a disproportionate but welcome effect in the M&A sector is that share purchase agreements in joint stock and limited companies have been exempted from the stamp tax and notary fee requirements. In effect, this change can be said to amount to a discount of more than 1% on shares in Turkish concerns.

Added Benefits for Holders of Investment Incentive Certificates

One common thread that runs through the Omnibus Investment Act is that a number of discrete laws have been revised to increase the impact of the Investment Incentives Plan (Yatırım Teşvik Sistemi), which provides regulatory and financial incentives to encourage investments in less-developed regions and particularly targeted industries. Even though the scheme of investments that is currently in place is fairly detailed and well-developed, the Omnibus Investment Act has provided even further incentives, by way of such measures as exempting agreements in relation to incentivized investments from stamp taxes, as well as authorizing temporary exemptions from levies such as construction taxes for the first five years after construction is completed, land taxes for as long as there is a valid investment incentive certificate, and construction and other related fees for buildings built within the scope of an investment incentive certificate.

Waiver of Enforcement Fees for Arbitral Awards

A notable addition to the Omnibus Investment Act is a provision to encourage arbitration. The Act has exempted arbitral awards from enforcement fees, which are assessed at a rate of 6.831% of the amount at stake with respect to court decisions, and which was previously assessed on arbitral awards at half that rate prior to ratification of the Act. This final adjustment can be expected to encourage would-be domestic litigants to select alternative dispute resolution methods instead of courts as the cheaper alternative, and also help Istanbul’s burgeoning dispute resolution platforms become more competitive in the international arena.

Administrative and Criminal Liability for the Bounced Checks

The Act states that a person who is responsible for causing a check to bounce will receive a judicial monetary fine of up to the equivalent wages of 1,500 days. The execution court may also prohibit the following checking account holders from issuing any checks and opening any checking accounts: (i) individuals (real persons), (ii) entities with legal personality (i.e. corporations), (iii) individuals who issue checks on behalf of legal entities, and (iv) individual managers and/or members of the board of directors in the event that a bounced check was issued on behalf of a corporation. Individuals who have been subjected to this prohibition by a court cannot be appointed to the managing bodies of corporations during their prohibition period.

If the abovementioned judicial monetary fine is not paid, the fine will be directly converted to imprisonment with no option for community service. Furthermore, prepayment, reconciliation, and deferment of the announcement of the verdict are not applicable for the offense of causing the check to bounce.

Rehabilitating Individuals who have Bounced Checks

If the full amount of a bounced check is paid along with any accrued commercial interest, or if the complaint is withdrawn, the execution court will dismiss the case at the trial stage, and if the conviction has already been finalized, then the execution court will cancel its decision including all penalties. Furthermore, individuals who have been convicted for bouncing a check may request the execution court to remove the prohibition from issuing a check and opening a check account three years after the full completion of the sentence, and in after ten years regardless of the circumstances. 

The Form of Checks

The Omnibus Investment Act introduced a new concept called “2d Code” (two dimensional barcode) which includes among other things, detailed information regarding the check account holder’s check history over the last five years.

Acceleration of Liquidation

Liquidation is a process by which the company’s assets are cashed out, its receivables are collected, its debts are paid, any balance of the proceeds are distributed to its shareholders pro rata to their shares, and the company is unregistered with the trade registry. The general assembly meeting’s resolution regarding the liquidation of a company must be registered with the relevant Trade Registry and announced in the Trade Registry Gazette three times in one-week intervals. Prior to the Omnibus Investment Act, companies then had to wait one year for completion of the liquidation process, with some exceptions for early liquidation. However, the Act reduces this one year period to six months with the intent of processing liquidations in a shorter period.


The Omnibus Investment Act does not introduce a distinct investment encouragement regime, but rather aims to buttress some existing plans while removing other, arbitrary burdens. As such, its effects may be difficult to observe in practice. However, there is little doubt that the changes that are introduced will have a positive impact on the economy, given that most of the changes in the Act have served to dispense with regulatory burdens that have drawn universal scorn from anyone doing business in the country.