REIT Survey 2007 Questionnaire

Kuzey Yeminli Mali Muşavirlik A.Ş. Tel 0212 315 3000
Büyükdere Cd. Beytem Plaza Kat: 2Fax
0212 248 5032
Şişli 80220 İstanbul - TURKEY
REAL ESTATE INVESTMENT TRUST (REIT)
SURVEY - TURKEY
QUESTIONNAIRE & REPLIES
I
Does a REIT-regime form part of the legal system of your
country or is it expected to be introduced in the near future?
a.
If no REIT regime is existing or is close to be implemented please describe
the regime that is most similar to a REIT regime, if any.
N/A
b.
If a REIT regime is existing or is close to be implemented please answer the
questions set out below in regard of your country’s REIT regime.
Please find our explanations regarding the inquiries hereinbelow.
c.
If a REIT regime is existing how is the REIT legally be dealt with? Is there
a specific REIT law or is the REIT dealt with in different laws?
A REIT (so called as Real Estate Investment Company – hereinafter referred as
REIC or REIT) regime exists in Turkey primarily under the administrative
supervision of the Capital Markets Board (CMB – is a regulatory and supervision
agency). Currently there are 13 REIT’s registered at the Capital Markets Board
1
with shares quoted at the Istanbul Stock Exchange which are as follows*;
Ticaret Ünvanı
Şehir
Web Adresi
Akmerkez Gayrimenkul Yatırım Ortaklığı A.Ş.
İSTANBUL
http://www.akmerkez.com.tr/bilgilendirme_formu.asp
Alarko Gayrimenkul Yatırım Ortaklığı A.Ş.
İSTANBUL
http://www.alarkoyatirim.com.tr/portfoy/form.asp
Atakule Gayrimenkul Yatırım Ortaklığı A.Ş.
ANKARA
http://www.atakulegyo.com.tr/ksbf.htm
Doğuş-Ge Gayrimenkul Yatırım Ortaklığı A.Ş.
İSTANBUL
http://www.dogusgegyo.com/?page_id=177&cat_id=24
EGS Gayrimenkul Yatırım Ortaklığı A.Ş.
İSTANBUL
http://www.imkb.gov.tr/sirket/kabf/egyo.zip
İş Gayrimenkul Yatırım Ortaklığı A.Ş.
İSTANBUL
http://www.isgyo.com.tr
Nurol Gayrimenkul Yatırım Ortaklığı A.Ş.
İSTANBUL
http://www.nurolgyo.com
Pera Gayrimenkul Yatırım Ortaklığı A.Ş.
İSTANBUL
http://www.peragyo.com/spk_%20bilgi_formu.asp
Sağlam Gayrimenkul Yatırım Ortaklığı A.Ş.
İSTANBUL
http://www.saglamgyo.com
SİNPAŞ GYO A.Ş.
İSTANBUL
http://www.sinpasgyo.com/TR-tr/index.html
Vakıf Gayrimenkul Yatırım Ortaklığı A.Ş.
ANKARA
http://www.vakifgyo.com.tr/vgyo.html
Y ve Y Gayrimenkul Yatırım Ortaklığı A.Ş.
İSTANBUL
http://www.ihlasgyo.com.tr
Yapı Kredi Koray GYO A.Ş.
İSTANBUL
http://www.yapikredikoray.com/spk.htm
REIT in Turkey is first introduced with the Capital Markets Law and regulated in
details with the Communiqué of the Capital Markets Board (CMB). The
Communiqué on Principles Regarding Real Estate Investment Companies, Serial
VI No.11 is the basic legislation dealing with REIT.
REIT in Turkey, like other investment trusts, should be established in forms of
joint stock company. They must deal primarily with portfolio management. REIT
must invest at least 50% of its portfolio value in real estate, rights relating to real
estate and real estate projects.
* The chart is extracted from http://www.spk.gov.tr/kyd/yo/yo_index.html?tur=gyo as of 14.08.2007
2
At least 49% of the capital of the REIT should be offered to the public within
different periods between 1 and 3 years depending on the amount of its paid-in
capital. These shares must be quoted on the Stock Exchange. The assets or rights
on assets of REIT should be registered in the name of the REIT.
The independent expertise should appraise the value of the assets, and rights, and
market value of the rental value of assets. The market value of the assets and the
rights in the REIT portfolio should be determined by the expertise in question as
of the end of the each year. REIT should prepare portfolio tables displaying the
cost of the assets and rights along with their market values and, additionally, a
board of directors’ report for each three month period. Then, all should be
submitted to the Capital Markets Board. REIT’s are exempted from the
Corporation Tax, which is an important incentive for their development.
II
Questions concerning the REIT regime and the conditions for
application
-
General/history
1
At what time did the introduction of the REIT regime take place? Please
describe how successful the REIT market in your county is. What is the market
capitalization?
The REIT practices in Turkey started in 1995 and the trade thereof on the Istanbul
Stock Exchange commenced since 1997. The rapid increase in the population and
the internal migration have the housing demand expand in direct proportion with
the real estate investment. Along with the new Regulations regarding the
Mortgage Loans introduced in 2007, it is expected that the demand for the real
estate will increase and consequently this improvement will effect the REIT
positevely. Please find general information of the REIT hereinbelow†;
† The chart is extracted from the Monthly Bulletin of the CMB January 2007
3
Title of Company
AKMERKEZ GYO
ALARKO GYO
ATAKULE GYO
EGS GYO
GARANTİ GYO
İHLAS GYO
İŞ GYO
NUROL GYO
PERA GYO
VAKIF GYO
YAPI KREDİ KORAY GYO
Registered
Capital
(TRY)
27.400.000
20.000.000
100.000.000
75.000.000
500.000.000
35.000.000
2.000.000.000
50.000.000
50.000.000
100.000.000
100.000.000
Paid in
Capital
(TRY)
13.700.000
5.490.100
63.000.000
50.000.000
73.800.000
33.162.530
329.966.000
10.000.000
32.000.000
16.800.000
40.000.000
Portfolio Value
(TRY)
688.662.369
214.285.941
141.192.165
47.680.132
160.614.030
23.477.767
1.103.620.187
41.464.710
25.899
65.704.776
246.251.544
Net Asset Value
(TRY)
686.927.805
198.940.030
141.004.566
10.869.754
128.090.161
27.786.909
1.057.165.639
41.945.651
32.713
65.437.242
122.656.228
-
Formalities /procedures
2
Are there any specific formalities or procedures that must be complied with
in order to become eligible for the REIT regime?
As described hereinabove REIT’s are regulated within the Communiqués of the
CMB and the establishment as well as the operations thereof is closely
overviewed by the CMB. In accordance with the Communiqué the Companies
could be established;
- for a limited time to undertake a certain project
- for a limited or unlimited time to invest in certain areas
- for a limited or unlimited time without any limitation or purpose.
REIT can be established by immediate establishment, furthermore existing
companies can convert into REIT by amending their Statute in accordance with
the procedures of the Communiqué and the Law. The followings are the preconditions required for REIT to obtain permission for establishment and operation
from the CMB;
a) Should be established in the forms of a joint stock company under the
registered capital system in which the Board of Directors may increase the share
capital of company by issuing new shares up to the amount of registered capital
stated in the Statute without complying with the provisions of the Turkish
Commercial Code concerning capital increases.
4
b) The initial capital should not be less than an amount, which shall be
determined by the Board (currently it is 7.200.000 TRY),
c) 100 percent of the share capital should be fully paid,
d) The commercial Title should include the phrase “Real Estate Investment
Company”
e) The Statute thereof should be in compliance with the provisions of the Law
and the regulations of the CMB
f) The Founders should be certified as never having been subject to legal
prosecution due to bankruptcy or other infamous offence
The types of investment companies according to the assets types that they can
hold, principles of valuation, portfolio restrictions, principles of management, the
principles with regard to distribution of profits, depository procedures and
principles and their obligations in the event of their liquidation shall be
determined by the CMB.
3
Which legal forms are permitted to be used for a REIT vehicle?
In accordance with the Communiqué either as immediate establishment or
transformation the REIT should be in form of joint stock company. The general
concept of joint stock companies are regulated with the Turkish Commercial
Code, the specifics of REIT shall be accomplished with the Capital Markets Law
and the Communiqué.
4
Does your law provide for a pre-REIT structure? If so, what are the
requirements? What benefits can be achieved? For example, under the proposed
German REIT system capital gains from the transfer of real estate to the REIT
shall already be tax privileged even if the transfer takes place at a point of time
where the REIT has not yet received its full REIT status (but with a recapture
provision if the REIT status is finally not obtained.).
N/A
5
5
What is the required minimum share capital for a REIT? Is there a
distinction between one or more class of shares, voting or non-voting rights?
The required minimum share capital for a REIT is 7.200.000 TRY. The CMB has
the authority to redefine the minimum capital requirement on a yearly basis.
The REIT’s may issue shares in registered or bearer forms. However, the shares
representing the capital in kind should be in registered form. If the share capital
will be in kind, an appraisal report should be drawn from the Commercial Code
and the capital amount will be in accordance with the report. Although Turkish
Commercial Code restricts the transfer of capital in kind shares for 2 years, the
shares of REIT in connection with capital in kind can be freely transferred without
any time limitation.
Companies shall not issue any privileged securities or real estate certificates other
than shares permitting nomination of candidates in election of members of the
Board of Directors. After the public offering, no privileges can be created,
including nominations for membership to the Board of Directors.
6
Is there a difference between domestic and foreign legal forms? What are
the statutory seat/management seat requirements?
There is no specific difference between domestic and foreign investor. The REIT
to be established in accordance with the Communiqué will be a Turkish
Company. Please also note that in accordance with the Constitution and the
Foreign Direct Investment Law, there is a non-discrimination principle which is
also applicable for the foreign investors. Directly investing into Turkey.
The members of Board of Directors and Auditing Board (are elected and serve in
accordance with the related articles of the Turkish Commercial Code. However, at
least 1/3 of the members to be appointed to the Board must be independent from;
a) Other shareholders having 10% or more shares or shareholders with voting
right of 10% or more,
6
b) The shareholders entitled to nomination preference for the board of directors,
c) The companies providing consultancy,
d) The operating companies,
e) The companies in which the individuals mentioned in paragraphs (a) and (b)
have 10% or more shares or voting right,
f) The subsidiaries of the company.
In accordance with Article 347 of the Turkish Commercial Code, the statutory
auditor of the company should be a Turkish citizen and if there is an Auditing
Board one more than the half of the auditing board members should be Turkish
citizen.
-
Shareholder/listing requirements
7
Is listing on a stock exchange required to obtain the REIT status? Is a
private REIT allowed?
It is obligatory that companies, which are established by immediate establishment
process or transformed into real estate investment companies by amending the
Articles of Association, provide the necessary office, hardware and personnel,
establish the organization, form an asset portfolio with the resources left after the
necessary expenses have been deducted and apply to the Board for the registration
of their shares equal to at least 49% of their issued capital to be offered to the
public by completing the public offering application form, the format and
procedures of which are going to be determined by the Board and the documents
mentioned in the form;
a) in one year following the registration of Articles of Association in
establishment or the changes in the Articles of Association in transformation with
the trade registry if their paid in capital is less than 50 million YTL,
b) in three years following the registration of Articles of Association in
establishment or the changes in the Articles of Association in transformation with
7
the trade registry if their paid in capital is equal to or more than 50 million YTL
but less than 100 million YTL,
c) in five years following the registration of Articles of Association in
establishment or the changes in the Articles of Association in transformation with
the trade registry if their paid in capital is equal to or more than 100 million YTL.
The CMB has the authority to reassess these amounts in accordance with the
Communiqué. It is possible for companies to offer their shares equal to at least
49% of their issued capital by performing one or more public offering in the time
periods specified hereinabove. The companies that do not apply to the Board by
completing the public offering application form and the documents mentioned in
this form within the time periods specified in first paragraph or whose
applications were found inappropriate due to failure to fulfill the necessary
conditions shall lose the right to operate as real estate investment companies. Such
companies are obliged to amend the provisions of their Articles of Association so
as not to cover real estate investment activities and apply to the Board to get out
from the registered system in at most three months following the notification of
the negative opinion or by the end of the relevant period. If the company does not
fulfill these changes, they shall be regarded as dissolved according to provisions
of the Turkish Commercial Code.
8
Is there a difference between a domestic and a foreign listing?
The main objective of the CMB is to establish a consistent and deepened Turkish
Capital Market, thus the listing requirement would be met with a domestic listing.
Although the wording of the Communiqué as well as the Law does not provide a
clear expression on the matter, the intention of the Legislation strengthens the
view.
9
Are there any specific shareholder conditions that have to be fulfilled to
become eligible for the REIT status?
8
The Capital Market Law and relating Communiqué state certain conditions only
for the Founders of the Company which are as follows;
-
The founder shareholders shall not have any payable tax and insurance
premium debt
-
There should not be any bankruptcy decision or any composition of debts
announcement against the natural person shareholders or the institutions of
which they are an unlimited partner,
-
The founder shareholders should not be sentenced for infamous offence such
as theft, fraudulent act, forgery
-
Natural and legal person founders should have the sufficient financial
capacity, good repute and experience as required by their status.
10
Is there a difference between resident and non-resident shareholders in
regard of ownership (status, shareholding percentage, etc.) If so, please describe.
No difference please refer to our explanations in Q6.
-
Activity test / asset requirements
11
Does you country’s REIT regime impose restrictions on the permitted
activities of the REIT? For instance, is a REIT permitted to develop real estate for
its own account, to trade with real estate or to own residential and/or commercial
real estate?
According to the Communiqué, REIT’s;
§ can not engage in deposit business, conduct business and operations resulting
in deposit collection defined in Turkish Banking Law
§ can not engage in commercial, industrial or agricultural activities other than
the transactions permitted by Communiqué,
§ can not engage in capital market activities other than portfolio management for
its own portfolio limited to the investment areas permitted by Communiqué,
9
§ can not in any way be involved in construction of real estates and can not
recruit personnel and equipment with this purpose.
§ can not commercially operate any hotel, hospital, shopping center, business
center, commercial parks, commercial warehouses, residential sites, supermarkets,
and similar type of real estates and employ any personnel for this purpose.
§ can not provide services by its personnel to individuals and institutions in
project development, project control, financial feasibility and follow-up of legal
permission except for the projects related to the portfolio or will be related to the
portfolio.
12
Is a REIT allowed to hold shares and/or interests in a subsidiary corporation
and/or in a partnership structure? If so, what are the requirements/restrictions
(minimum or maximum shareholdings, etc.)?
REIT can only participate into operator companies, other real estate investment
companies, companies established within the context of Build-Operate-Transfer
model, companies established abroad, the operational field of which is only the
real estates, for the purpose of including certain real estates or rights backed by
real estates to their portfolio and companies established in Turkey, provided that
the expertise value of the real estate planned to be included in the portfolio value
at the acquisition date is at least equal to 75% of the balance sheet assets of
companies established in Turkey. However REIT shall not participate in the
operating companies more than 10% of their portfolio value specified in their
most recent quarterly portfolio table drew up and disclosed to the public at the end
of the accounting period.
13
What limits are set out concerning the amount of the real estate assets of the
REIT? Is there a description of the qualifying assets? If so, please give details
including the legislative source.
10
In accordance with the Communiqué, the portfolio of general purpose REIT is
required to be diversified based on the industry, region and real estates and to be
managed with a long term investment purpose.
75% of the portfolio of the companies established with the purpose of operating in
certain areas or investing in certain projects must consist of assets mentioned in
their titles and/or Articles of Association.
Furthermore, the companies are required to invest in real estates, rights supported
by real estates and real estate projects in the ratio of at least 50 % of their portfolio
value.
14
Is there a difference between domestic and foreign real estate holding and/or
any other allowed activities?
REIT can invest in foreign real estate and capital market instruments backed by
real estate, at a maximum rate of 49% of the portfolio value.
15
Please describe any tax or other penalties if the required asset level is not
met.
If companies can not meet requirement of investing in real estates, rights
supported by real estates and real estate projects in the ratio of at least 50 % of
their portfolio value, they should apply to the CMB. After making an evaluation,
the Board may provide an extension period of one year for once. However, if
companies still fail to achieve this minimum 50% ratio at the end of this extension
period, they are required to apply to the Board in order to modify their Articles of
Association so as not to cover real estate investment trust operations. If companies
do not fulfill these changes, they shall be regarded as dissolved in accordance with
the Turkish Commercial Code. The exemptions specific for REIT will not be
applicable. For the exemptions applied until the loss of the REIT status should be
determined in accordance with the specifics of each case.
11
-
Leverage
16
Please describe the gearing limits. For instance under Dutch tax law the loan
capital is limited to 60% of the fiscal book values of real property and 20% of
fiscal book values of all other investment.
In order to meet short term fund demands or costs related to their portfolio, REIT
can obtain credits at a rate of three times as much as their net asset values
included in their most recent quarterly portfolio table prepared and disclosed to
the public at the end of the accounting period. In order to calculate the uppermost
limit of such credits, obligations of the company arising out of financial leasing
transactions and non-cash credits shall also be taken into account.
REIT can issue debt instruments within the restrictions in the capital market
legislation. However, for the issued debt securities, the credits mentioned in the
above paragraph shall be deducted from the issue limit calculated according to the
capital market legislation.
Companies can issue asset-backed securities backed by contracts on sales or
promises to sell the real estates in their portfolio, or backed
17
Is there a difference between domestic and cross-border situations?
Principally there is no specific determination within the REIT Legislation,
however this issue should be analyzed in details according to the Foreign
Currency Control Legislation on specific case basis.
-
Profit distribution obligation
18
The REIT regimes in general require that all or most of the profits of the
REIT are distributed to the shareholders. Does your country’s REIT regime
require such a profit distribution and if so, under what timing rules? Are advanced
profit distributions allowed?
12
According to Communiqué related to the distribution of dividends by publicly
held joint stock corporations, it is required to show first dividend ratio by
corporations in the articles of association.
The first dividend ratio can not be less than 20% of distributable profit remains
after deduction of the reserves required to be set aside according to law and taxes,
funds, financial payments and the losses of previous year, if any.
Distribution of dividends shall be completed by companies until the end of the
fifth month following the end of their accounting periods.
Interim (advance) dividend distribution is a procedure, which is only applicable
for the companies, subject to Capital Markets Law. In normal conditions, the
yearly income of a company can be distributed as dividend to its shareholders by
the decision of the General Assembly. However, the Capital Markets Law, has a
specific provision for the listed companies which enables them to distribute
dividend prior to the year end, but under some certain conditions. Provided that
its articles of association so permit and there has been a decision of the general
assembly giving such authority to the board of directors limited to the current
year, publicly held joint stock corporations may distribute an interim dividend
from profits shown on their quarterly financial statements prepared in
conformance with the capital market legislation and independently audited,
provided that the dividend does not exceed half of the amount remaining after
subtracting the reserves required to set aside according to law and the articles of
association plus funds designated for taxes.
19 Please describe the consequences in case the profit distribution obligation is
not complied with.
In case REIT distribute dividends incomplete according to legal procedure, the
CMB can oblige that the amount of incompletely distributed dividends shall be
distributed in cash together with the amount of interest calculated using the
Turkish Central Bank’s short term advance interest rate. If legal conditions are
met, the right of applying legal procedures against members of the Board of
13
Directors of the REIT for incomplete distribution of the dividends of those
suffered from this is reserved.
20
Is there a difference between a domestic and a cross-border profit
distribution? Will foreign source profits (e.g. from foreign located property
or foreign subsidiary) require a special/different treatment?
From a REIT Legislation point of view the domestic and foreign sourced profit
does not require different treatment.
III Questions concerning the tax and balance sheet treatment at the level of
the REIT
21
Please describe the tax regime in terms of rate, income recognition (cash
versus accrual), etc, and more in particular the tax treatment of the
following sources of income:
The corporate tax rate is 20%. There is a corporate tax exemption for the income
of REIT’s established in Turkey. REIT’s may also have income subject to
withholding tax to be taxed at source. Principally the income recognition is on
accrual basis.
-
Rental income;
The rental income is deemed as the commercial income of the REIT, thus should
be regarded within the corporate tax exempted at REIT level.
-
Capital gains;
No differentiation, thus capital gains is principally deemed as the commercial
income of REIT to be regarded within the corporate tax exemption. There may
also be income subject to withholding tax.
-
Other types of business income if allowed to be generated.
14
The general principle is that the commercial income of REIT should be regarded
within the corporate tax exemption. However there may also be income subject to
withholding tax in accordance with the type of income.
22
Please describe for which kind of taxes a special tax treatment is applicable.
For example, if in your country a local income tax will be levied in addition to
the corporate income tax is
the tax
exemption applicable for both kinds of
taxes?
It is principally possible that an income tax is levied on a tax issue in addition to
the
corporate income tax. However, there is an exception for REIT in Turkish
Corporate Tax
Code that if the gains of corporation are subject to withholding
tax according to Turkish
Income Tax Code’s related articles, they will not be
subject to a double taxation in accordance with the Corporate Tax Code.
23
Please describe any tax or other penalties if certain income thresholds are
not met.
There is no income thresholds in Turkish Tax System. However please note that
there are some certain tax penalties such as irregularity penalties, tax loss
penalties and tax smuggling penalties.
24
Please describe the levying mechanism of withholding tax, if any, in case of
a dividend distribution by the REIT to its shareholders (rate, timing,
execution, treaty rules).
There is an uncertainty with regards to the withholding tax rate for dividends
distributed by REITs. In accordance with the opinion of the Ministry of Finance
dividend distributions to be made by REIT’s should be subject to 15%
withholding tax. However the wording of the Code may provide another
interpretation that the withholding tax rate should be 0%.
15
25
Is there a difference between a dividend distribution to a domestic or foreign
shareholder?
Dividends distributed to resident companies are exempt from the dividend
withholding tax. Dividends distributed to resident real persons, non resident
corporations and real persons are subject to withholding tax.
26
Please describe the rules regarding the loss of the REIT status.
This issue should be analyzed furtherly with regards to the specifics of each case.
There are no specific provisions within the Legislation. As an initial comment it
may be considered that the exemptions provided to REIT’s will be lost by the loss
of the REIT status.
27
Does your country levy some sort of transfer tax or registration duty (real
estate transfer tax, stamp duty, land register fee, notary fee, etc.) in case of the
acquisition of real estate? If so, please describe this particular treatment.
Delivery of goods and services is subject to the Value Added Tax. The general tax
rate for VAT is 18% whereas the VAT Code provides several reduced tax rates
such as 1% and 8% for specific deliveries. To this extent, delivery of housings
smaller than 150 square meters is subject to 1% VAT. In addition to this, there are
several exemptions provided by the VAT Code which would be applicable for real
estate deliveries under special circumstances.
Disposing a real estate is subject to the Title Deed Fee of 3% which both the seller
and the buyer are obliged to pay equally (50% - 50%) before the disposal. This fee
is calculated over actual consideration to be paid for such real estate; however the
consideration shall not be less than the tax value of such real estate. In addition to
that, specific sales agreement (if any) will be subject to 0,75% stamp duty if an
amount is stated on the agreement.
16
28
Please describe the transition regulations that apply upon conversion into a
REIT, or visa versa.
This issue should be analyzed furtherly with regards to the specifics of each case.
There is no general transition regulations that apply upon every conversion into a
REIT.
29
Does your country grant a privileged exit taxation rule for capital gains
realized on real estate if sold to a REIT? If yes, are there any timing/holding
period/type of qualifying real estate requirements to be observed on either the side
of the seller or the purchasing REIT?
There is no privileged exit taxation rule for capital gains realized on real estate if
sold to a REIT. However, there is a specific limited exemption rule which is
stipulated in the Corporate Income Tax Code and applicable for only resident
companies. According to this rule, under some certain conditions the 75% of the
gains derived from the alienation of real estate may be exempted from Corporate
Tax.
30
Is the REIT in your country regarded as a tax resident person for Double
Taxation Treaty purposes?
Yes.
31
Is the REIT entitled to a refund of a tax credit for foreign withholding levied
on its foreign source income? For instance in case certain provisions are met,
Dutch tax law allows such a payment.
This issue should be furtherly analyzed based on the specifics of each case.
32 How is a foreign REIT taxed in your country with its local rental income (or
with any other income, if allowed)?
17
N/A. As a general rule, non-resident corporation deriving rental income in Turkey
will be subject to 20% withholding tax and reverse charge VAT at 18% rate may
be charged.
33 What accounting rules are to be observed by the REIT (local GAAP, USGAAP, IFRS)? Is there a difference between single and group financial
statements?
Since REITs should be listed in the Turkish Stock Exchange, the accounting rules
designated by the Capital Markets Board and the Turkish Board of Accounting
Standarts should be applicable for REITs.
IV
Questions concerning the tax treatment at the level of the shareholders
34
Please describe the fiscal treatment of a corporate domestic shareholder
concerning the following benefits:
-
A dividend paid by the REIT. Is there a difference between current income
dividend and a capital gains dividend?
No.
-
A return of capital distribution;
The capital distribution to be named as a capital decrease (repayment of the
capital through an amendment of the Statute of the Company) is not subject to
withholding tax. If a return of capital distribution will be in forms of increasing
the capital of the company and providing the shareholders with gratis shares, then
this will not be regarded as a dividend distribution to be subject to taxation.
-
Capital gains realized on the sale of the REIT shares.
For the shares acquired after 01.01.2006, the capital gains taxation derived from
the alienation of the shares of REIT by a full taxpayer company is as follows;
18
1) The gains derived from the disposal of the share certificates quoted in Istanbul
Stock Exchange and held for more than 1 year are;
- not subject to withholding,
- subject to corporate tax (20%).
- 75% of the income is exempted from corporate tax in case the conditions in
paragraph 5/1-e of the Corporate Tax Code are met.
2) Those quoted in Istanbul Stock Exchange and disposed in one year or less;
- are subject to 10% withholding.
- are subject to corporate tax (20%).
- The withholding paid is deducted from the corporate tax calculated in the tax
return.
35
Please describe the fiscal treatment of an individual domestic shareholder
concerning the following benefits:
-
A dividend paid by the REIT. Is there a difference between current income
dividend and a
capital gains dividend?
No.
-
A return of capital distribution;
The capital distribution to be named as a capital decrease (repayment of the
capital through an amendment of the Statute of the Company) is not subject to
withholding tax. If a return of capital distribution will be in forms of increasing
the capital of the company and providing the shareholders with gratis shares, then
this will not be regarded as a dividend distribution to be subject to taxation.
-
Capital gains realized on the sale of the REIT shares.
For the shares acquired after 01.01.2006, the capital gains taxation derived from
the alienation of the shares of REIT by a full taxpayer individual is as follows;
1) The share certificates of individual domestic shareholder which quoted in
Istanbul Stock Exchange;
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- those held for more than one year are not subject to withholding, and not
declared.
- they are subject to 10% withholding if held 1 year or less.
- withholding is the final tax. Not declared.
2) Capital gains not derived through the intermediary of banks or intermediary
institutions (for example unquoted share certificates), will be declared pursuant to
the general provisions of the Income Tax Code.
The gains derived from share certificates of full liable corporations held for more
than 2 years are exempted.
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Please describe the fiscal treatment of a corporate foreign shareholder
concerning the following benefits:
-
A dividend paid by the REIT. Is there a difference between current income
dividend and a capital gains dividend?
No.
-
A return of capital distribution;
The capital distribution to be named as a capital decrease (repayment of the
capital through an amendment of the Statute of the Company) is not subject to
withholding tax. If a return of capital distribution will be in forms of increasing
the capital of the company and providing the shareholders with gratis shares, then
this will not be regarded as a dividend distribution to be subject to taxation.
-
Capital gains realized on the sale of the REIT shares.
For the shares acquired after 01.01.2006, the capital gains taxation derived from
the alienation of the shares of REIT by a corporate foreign shareholder is as
follows;
1) Those derived from the disposal of the REIT share certificates quoted in ISE
and held for more than 1 year;
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- are not subject to withholding,
- are not declared.
2) The rate of withholding is 0% for those quoted in ISE and disposed in 1 year or
less.
- Not declared.
3) Capital gains derived without the intermediary of banks or intermediary
institutions;
- are not subject to withholding.
- are subject to corporate tax (20%).
- The amount remaining after the corporate tax is subject to 15% income tax
withholding.
In the above mentioned ratios of withholding tax is not concerned the Double
Taxation Treaties. If in a Double Taxation Treaty determine a lower ratio of
withholding tax, then the Treaty ratio will prevail.
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Please describe the fiscal treatment of an individual foreign shareholder
concerning the following benefits:
-
A dividend paid by the REIT. Is there a difference between current income
dividend and a capital gains dividend?
No.
-
A return of capital distribution;
The capital distribution to be named as a capital decrease (repayment of the
capital through an amendment of the Statute of the Company) is not subject to
withholding tax. If a return of capital distribution will be in forms of increasing
the capital of the company and providing the shareholders with gratis shares, then
this will not be regarded as a dividend distribution to be subject to taxation.
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-
Capital gains realized on the sale of the REIT shares.
For the shares acquired after 01.01.2006, the capital gains taxation derived from
the alienation of the shares of REIT by a limited (non-resident) taxpayer
individual is as follows;
1) Of the share certificates quoted in Istanbul Stock Exchange;
- those held for more than one year are not subject to withholding, and not
declared.
- the withholding rate is 0% if they are held for 1 year or less.
2) Capital gains not derived through the intermediary of banks or intermediary
institutions (for example unquoted share certificates), will be declared pursuant to
the general provisions of the Income Tax Code.
The gains derived from share certificates of full liable corporations held for more
than 2 years are exempted.
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Are there any limitations regarding the holding of shares in a REIT? If so,
what are the tax or civil/corporate law consequences if such limitations are
disregarded?
N/A
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Is a non-resident shareholder entitled to a withholding tax reduction under
the Double Taxation Treaty between the REIT country and his country of
residence?
For the application of the reduced rates of the DTT, non-resident taxpayer should
provide a certificate of residency (apostilled) from the home-country.
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40
Is it possible for domestic and foreign shareholders (corporate and
individual as well as tax-exempt entities) to credit withholding tax?
This issue should be furtherly analyzed in accordance with the specifics of each
case and the DTT.
***
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guidance only. It is not expected to be a substitute for detailed research or the exercise of
professional judgment. Neither Kuzey YMM A.Ş. nor any other member of the global Ernst &
Young organization can accept any responsibility for loss occasioned to any person acting or
refraining from action as a result of any material in this publication. On any specific matter,
reference should be made to the appropriate advisor.
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