Doing Business 2020 Turkey Economy Profile Turkey Page 1 Doing Business 2020 Turkey Economy Profile of Turkey Doing Business 2020 Indicators (in order of appearance in the document) Starting a business Procedures, time, cost and paid-in minimum capital to start a limited liability company Dealing with construction permits Procedures, time and cost to complete all formalities to build a warehouse and the quality control and safety mechanisms in the construction permitting system Getting electricity Procedures, time and cost to get connected to the electrical grid, and the reliability of the electricity supply and the transparency of tariffs Registering property Procedures, time and cost to transfer a property and the quality of the land administration system Getting credit Movable collateral laws and credit information systems Protecting minority investors Minority shareholders’ rights in related-party transactions and in corporate governance Paying taxes Payments, time, total tax and contribution rate for a firm to comply with all tax regulations as well as postfiling processes Trading across borders Time and cost to export the product of comparative advantage and import auto parts Enforcing contracts Time and cost to resolve a commercial dispute and the quality of judicial processes Resolving insolvency Time, cost, outcome and recovery rate for a commercial insolvency and the strength of the legal framework for insolvency Employing workers Flexibility in employment regulation and redundancy cost Page 2 Doing Business 2020 Turkey About Doing Business The Doing Business project provides objective measures of business regulations and their enforcement across 190 economies and selected cities at the subnational and regional level. The Doing Business project, launched in 2002, looks at domestic small and medium-size companies and measures the regulations applying to them through their life cycle. Doing Business captures several important dimensions of the regulatory environment as it applies to local firms. It provides quantitative indicators on regulation for starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also measures features of employing workers. Although Doing Business does not present rankings of economies on the employing workers indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business, it does present the data for these indicators. By gathering and analyzing comprehensive quantitative data to compare business regulation environments across economies and over time, Doing Business encourages economies to compete towards more efficient regulation; offers measurable benchmarks for reform; and serves as a resource for academics, journalists, private sector researchers and others interested in the business climate of each economy. In addition, Doing Business offers detailed subnational studies, which exhaustively cover business regulation and reform in different cities and regions within a nation. These studies provide data on the ease of doing business, rank each location, and recommend reforms to improve performance in each of the indicator areas. Selected cities can compare their business regulations with other cities in the economy or region and with the 190 economies that Doing Business has ranked. The first Doing Business study, published in 2003, covered 5 indicator sets and 133 economies. This year’s study covers 11 indicator sets and 190 economies. Most indicator sets refer to a case scenario in the largest business city of each economy, except for 11 economies that have a population of more than 100 million as of 2013 (Bangladesh, Brazil, China, India, Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian Federation and the United States) where Doing Business also collected data for the second largest business city. The data for these 11 economies are a population-weighted average for the 2 largest business cities. The project has benefited from feedback from governments, academics, practitioners and reviewers. The initial goal remains: to provide an objective basis for understanding and improving the regulatory environment for business around the world. To learn more about Doing Business please visit doingbusiness.org Page 3 Doing Business 2020 Turkey Ease of Doing Business in DB RANK DB SCORE Region Europe & Central Asia Turkey Income Category Upper middle income 33 Population 82,319,724 76.8 City Covered Istanbul Rankings on Doing Business topics - Turkey 21 24 27 26 41 37 44 53 77 120 Starting Dealing Getting Registering Getting Protecting Paying Trading Enforcing Resolving a with Electricity Property Credit Minority Taxes across Contracts Insolvency Business Construction Investors Borders Permits Topic Scores 88.8 73.8 84.5 81.6 75.0 76.0 86.6 91.6 71.4 38.5 Starting a Business (rank) 77 Getting Credit (rank) 37 Trading across Borders (rank) 44 Score of starting a business (0-100) 88.8 Score of getting credit (0-100) 75.0 Score of trading across borders (0-100) 91.6 Procedures (number) 7 Strength of legal rights index (0-12) 7 Time to export Time (days) 7 Depth of credit information index (0-8) 8 Documentary compliance (hours) 4 Cost (number) 6 Credit registry coverage (% of adults) 80.2 Border compliance (hours) 10 Paid-in min. capital (% of income per capita) 0.0 Credit bureau coverage (% of adults) 0.0 Cost to export Documentary compliance (USD) 55 Dealing with Construction Permits (rank) 53 Protecting Minority Investors (rank) 21 Border compliance (USD) 338 Score of dealing with construction permits (0-100) 73.8 Score of protecting minority investors (0-100) 76.0 Time to export Procedures (number) 18 Extent of disclosure index (0-10) 9.0 Documentary compliance (hours) 2 Time (days) 100 Extent of director liability index (0-10) 5.0 Border compliance (hours) 7 Cost (% of warehouse value) 3.6 Ease of shareholder suits index (0-10) 6.0 Cost to export Building quality control index (0-15) 13.0 Extent of shareholder rights index (0-6) 6.0 Documentary compliance (USD) 55 Extent of ownership and control index (0-7) 6.0 Border compliance (USD) 46 Getting Electricity (rank) 41 Extent of corporate transparency index (0-7) 6.0 Score of getting electricity (0-100) 84.5 Enforcing Contracts (rank) 24 Procedures (number) 4 Paying Taxes (rank) 26 Score of enforcing contracts (0-100) 71.4 Time (days) 34 Score of paying taxes (0-100) 86.6 Time (days) 623 Cost (% of income per capita) 62.3 Payments (number per year) 10 Cost (% of claim value) 24.9 Reliability of supply and transparency of tariff index (0-8) 5 Time (hours per year) 170 Quality of judicial processes index (0-18) 15.0 Total tax and contribution rate (% of profit) 42.3 Registering Property (rank) 27 Postfiling index (0-100) 100 Resolving Insolvency (rank) 120 Score of registering property (0-100) 81.6 Score of resolving insolvency (0-100) 38.5 Procedures (number) 6 Recovery rate (cents on the dollar) 10.5 Time (days) 4.5 Time (years) 5.0 Cost (% of property value) 3.0 Cost (% of estate) 14.5 Quality of the land administration index (0-30) 27.0 Outcome (0 as piecemeal sale and 1 as going 0 concern) Strength of insolvency framework index (0-16) 10.5 Page 4 Doing Business 2020 Turkey Starting a Business This topic measures the number of procedures, time, cost and paid-in minimum capital requirement for a small- to medium-sized limited liability company to start up and formally operate in each economy’s largest business city. To make the data comparable across 190 economies, Doing Business uses a standardized business that is 100% domestically owned, has start-up capital equivalent to 10 times the income per capita, engages in general industrial or commercial activities and employs between 10 and 50 people one month after the commencement of operations, all of whom are domestic nationals. Starting a Business considers two types of local limited liability companies that are identical in all aspects, except that one company is owned by 5 married women and the other by 5 married men. The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally start and formally operate a company To make the data comparable across economies, several assumptions about the business and the (number) procedures are used. It is assumed that any required information is readily available and that the entrepreneur will pay no bribes. • Preregistration (for example, name verification or reservation, notarization) The business: • Registration in the economy’s largest business city -Is a limited liability company (or its legal equivalent). If there is more than one type of limited • Postregistration (for example, social security registration, liability company in the economy, the limited liability form most common among domestic firms is company seal) chosen. Information on the most common form is obtained from incorporation lawyers or the statistical office. • Obtaining approval from spouse to start a business or to leave -Operates in the economy’s largest business city. For 11 economies the data are also collected for the home to register the company the second largest business city. • Obtaining any gender specific document for company -Performs general industrial or commercial activities such as the production or sale to the public of registration and operation or national identification card goods or services. The business does not perform foreign trade activities and does not handle products subject to a special tax regime, for example, liquor or tobacco. It is not using heavily Time required to complete each procedure (calendar days) polluting production processes. • Does not include time spent gathering information -Does not qualify for investment incentives or any special benefits. -Is 100% domestically owned. • Each procedure starts on a separate day (2 procedures cannot -Has five business owners, none of whom is a legal entity. One business owner holds 30% of the start on the same day) company shares, two owners have 20% of shares each, and two owners have 15% of shares • Procedures fully completed online are recorded as ½ day each. -Is managed by one local director. • Procedure is considered completed once final document is -Has between 10 and 50 employees one month after the commencement of operations, all of them received domestic nationals. • No prior contact with officials -Has start-up capital of 10 times income per capita. -Has an estimated turnover of at least 100 times income per capita. Cost required to complete each procedure (% of income per -Leases the commercial plant or offices and is not a proprietor of real estate. capita) -Has an annual lease for the office space equivalent to one income per capita. • Official costs only, no bribes -Is in an office space of approximately 929 square meters (10,000 square feet). -Has a company deed that is 10 pages long. • No professional fees unless services required by law or commonly used in practice The owners: Paid-in minimum capital (% of income per capita) -Have reached the legal age of majority and are capable of making decisions as an adult. If there • Funds deposited in a bank or with third party before registration is no legal age of majority, they are assumed to be 30 years old. or up to 3 months after incorporation -Are in good health and have no criminal record. -Are married, the marriage is monogamous and registered with the authorities. -Where the answer differs according to the legal system applicable to the woman or man in question (as may be the case in economies where there is legal plurality), the answer used will be the one that applies to the majority of the population. Page 5 Doing Business 2020 Turkey Starting a Business - Turkey Standardized Company Legal form Limited Sirket (LS) Paid-in minimum capital requirement No minimum City Covered Istanbul Indicator Turkey Europe & Central OECD high Best Regulatory Asia income Performance Procedure – Men (number) 7 5.2 4.9 1 (2 Economies) Time – Men (days) 7 11.9 9.2 0.5 (New Zealand) Cost – Men (% of income per capita) 6.0 4.0 3.0 0.0 (2 Economies) Procedure – Women (number) 7 5.2 4.9 1 (2 Economies) Time – Women (days) 7 11.9 9.2 0.5 (New Zealand) Cost – Women (% of income per capita) 6.0 4.0 3.0 0.0 (2 Economies) Paid-in min. capital (% of income per capita) 0.0 0.7 7.6 0.0 (120 Economies) Figure – Starting a Business in Turkey – Score 64.7 93.5 97.0 100.0 Procedures Time Cost Paid-in min. capital Figure – Starting a Business in Turkey and comparator economies – Ranking and Score DB 2020 Starting a Business Score 0 100 96.0: Greece (Rank: 11) 94.6: Tunisia (Rank: 19) 90.5: Regional Average (Europe & Central Asia) 88.8: Turkey (Rank: 77) 87.7: Romania (Rank: 91) 85.4: Bulgaria (Rank: 113) Note: The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. Page 6 Doing Business 2020 Turkey Figure – Starting a Business in Turkey – Procedure, Time and Cost Time (days) Cost (% of income per capita) 7 4 6 3.5 Cost (% of income per capita) 3 5 Time (days) 2.5 4 2 3 1.5 2 1 1 0.5 0 0 1 2 3 *4 5 6 *7 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 7 Doing Business 2020 Turkey Details – Starting a Business in Turkey – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Submit the memorandum and articles of association online and obtain a temporary tax Less than one day no charge identification number (TIN) (online procedure) Agency : Central Trade Registry System (MERSIS) Company registrations shall be carried out through MERSİS, the Central Trade Registry System. The business founders must submit their memorandum and articles of incorporation online through the MERSİS system, which will generate a temporary tax identification number (TIN) for the company. 2 Apply for registration at the Trade Registry Office 2 days see procedure details Agency : Trade Registry Office (Ticaret Sicil Müdürlüğü) Registration must be applied for at the Trade Registry Office. The following documents are required to apply for company registration: - Petition requesting registration. - 3 copies of an incorporation notification form (kurulus bildirim formu). - 2 copies of the articles of association plus 1 original version. - Proof of the payment made to the Competition Authority (0.04% of the company's share capital). - An undertaking (taahhutname) signed by the authorized company representatives. Signature declaration of the directors. - For each person authorized to represent the founders of the limited liability company, 2 copies of the signature declarations. - Chamber of Commerce registration form. - 1 passport-sized photo of each founder. - Acceptance declaration of the managers who are not shareholders (1 notarized copy). At the moment of incorporation, the business founders will obtain the certification of the legal books at the Trade Registry Office. Following the registration, the Trade Registry Office will notify the relevant Tax Office and the Social Security Institution ex-officio regarding the incorporation of the company. The Trade Registry Office will also arrange for an announcement in the Trade Registry Gazette within approximately 10 days as of the date of company registration. A tax registration certificate must then be obtained from the local Tax Office. According to the official fees of 2019 published in the Official Gazette No. 30642 on December 31, 2018, the fees applicable upon the incorporation of a limited liability company are set as of January 1, 2019 as follows: - Book certifying fee + Institution attestation fee: 190 TL - Publication of articles of association: TL 0.35 per word (for 750 words usually) - Start-up notice: TL 80 - Trade Registry Gazette fee: TL 3.5 - Registration fee for manager’s signature: TL 520.40 In addition, the Competition Authority fee of 0.04% of the company’s capital must be paid. For annual membership with the Istanbul Chamber of Commerce, the fees apply based on the company's capital, as follows: - TL 1 -1.000 : TL 260 - TL 1.001 - 25.000 : TL 265 - TL 25.001 - 250.000 : TL 285 - TL 250.001 - 1.000.000 : TL 390 - TL 1.000.001 - more : TL 460 3 Pay the registration fees 1 day no charge Agency : Trade Registry Office (Ticaret Sicil Müdürlüğü) Registration fees must be paid at a cashier located at the Trade Registry Office. 4 Obtain an authorized signatory list of managers 1 day (simultaneous with TL 120 Agency : Notary previous procedure) After incorporation, the company's managers or their representatives must visit a notary to obtain an “Authorized Signatory List of Managers" (imza sirküleri). This document is needed when a firm engages in business with third parties such as firms or banks. It is also required to obtain a Working Place and Operations Permit from the Municipality. The authorization of signature declarations can be obtained at Trade Registry Office. This authorization says that “this person will be using his below inscribed signature in representing the relevant company”. That is not the case for the “Authorized Signatory List of Managers", which sets out the monetary limits, if any, as well as a description of the relevant persons’ authorities to bind and represent the company, along with their signature samples. Page 8 Doing Business 2020 Turkey 5 Complete the company's tax registration 1 day no charge Agency : Tax Office The Trade Registry Office notifies the Tax Office and the Social Security Administration of the company’s incorporation. In practice, to expedite the registration process, company representatives follow up on whether the notification has been received and request the Tax Certificate (Vergi Levhasi), which is required to carry out business transactions and issue invoices. Through the visit to the Tax Office, the company's temporary tax ID will be made permanent. The following documents must be presented to the authorities: - Authorized signatory list of managers (previously obtained from a notary); - Company registration form; - Managers' IDs; - Rental contract of the company's office. Following this visit, the Tax Officers will come to the office to verify the location, the type of activities being conducted by the business, the company's documents, and other matters. A report will be prepared by the Tax Officers and the Tax Certificate is usually provided on the same day or on the following day. 6 Obtain a Workplace Opening and Operations Permit 1 day TL 1 per square meter Agency : Municipality A Workplace Opening and Operations Permit (İşyeri Açma ve Çalışma Ruhsatı). An application shall be made to the relevant Municipality by filing an application form and having it signed by the authorized signatories of the company. The following documents are required: - Copy of the tax registration certificate. - Authorized signatory list of managers. - Trade registry gazettes showing the incorporation. - Company registration certificate. - Lease agreement / title deed. - Application form. - Fire department's affirmative approval. - Workplace permit application fee payment receipt and environmental tax payment receipt. To apply for this permit, a fee of TL1 per square meter must be paid. 7 Register employees with Social Security Less than a day (online no charge Agency : Social Security Institution (Sosyal Güvenlik Kurumu) procedure) Companies can be registered with social security through the Trade Registry Office. Additionally, according to Law No. 5,510 on Social Security and General Health Insurance, employers are obliged to notify the Social Security Institution of the hiring of employees by submitting a statement of employment prior to their first day of work. This notification can be made online at https://uyg.sgk.gov.tr/SigortaliTescil/amp/loginldap. Takes place simultaneously with previous procedure. Page 9 Doing Business 2020 Turkey Dealing with Construction Permits This topic tracks the procedures, time and cost to build a warehouse—including obtaining necessary the licenses and permits, submitting all required notifications, requesting and receiving all necessary inspections and obtaining utility connections. In addition, the Dealing with Construction Permits indicator measures the building quality control index, evaluating the quality of building regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and professional certification requirements. The most recent round of data collection was completed in May 2019. See the methodology for more information What the indicators measure Case study assumptions Procedures to legally build a warehouse (number) To make the data comparable across economies, several assumptions about the construction company, the warehouse project and the utility connections are used. • Submitting all relevant documents and obtaining all necessary clearances, licenses, permits and certificates The construction company (BuildCo): • Submitting all required notifications and receiving all necessary - Is a limited liability company (or its legal equivalent) and operates in the economy’s largest inspections business city. For 11 economies the data are also collected for the second largest business city. • Obtaining utility connections for water and sewerage - Is 100% domestically and privately owned; has five owners, none of whom is a legal entity. Has a licensed architect and a licensed engineer, both registered with the local association of architects • Registering and selling the warehouse after its completion or engineers. BuildCo is not assumed to have any other employees who are technical or licensed Time required to complete each procedure (calendar days) experts, such as geological or topographical experts. - Owns the land on which the warehouse will be built and will sell the warehouse upon its • Does not include time spent gathering information completion. • Each procedure starts on a separate day—though procedures The warehouse: that can be fully completed online are an exception to this rule - Will be used for general storage activities, such as storage of books or stationery. • Procedure is considered completed once final document is received - Will have two stories, both above ground, with a total constructed area of approximately 1,300.6 square meters (14,000 square feet). Each floor will be 3 meters (9 feet, 10 inches) high and will be • No prior contact with officials located on a land plot of approximately 929 square meters (10,000 square feet) that is 100% owned by BuildCo, and the warehouse is valued at 50 times income per capita. Cost required to complete each procedure (% of income per - Will have complete architectural and technical plans prepared by a licensed architect. If capita) preparation of the plans requires such steps as obtaining further documentation or getting prior • Official costs only, no bribes approvals from external agencies, these are counted as procedures. - Will take 30 weeks to construct (excluding all delays due to administrative and regulatory Building quality control index (0-15) requirements). • Quality of building regulations (0-2) The water and sewerage connections: • Quality control before construction (0-1) - Will be 150 meters (492 feet) from the existing water source and sewer tap. If there is no water • Quality control during construction (0-3) delivery infrastructure in the economy, a borehole will be dug. If there is no sewerage infrastructure, a septic tank in the smallest size available will be installed or built. • Quality control after construction (0-3) - Will have an average water use of 662 liters (175 gallons) a day and an average wastewater flow • Liability and insurance regimes (0-2) of 568 liters (150 gallons) a day. Will have a peak water use of 1,325 liters (350 gallons) a day and • Professional certifications (0-4) a peak wastewater flow of 1,136 liters (300 gallons) a day. - Will have a constant level of water demand and wastewater flow throughout the year; will be 1 inch in diameter for the water connection and 4 inches in diameter for the sewerage connection. Page 10 Doing Business 2020 Turkey Dealing with Construction Permits - Turkey Standardized Warehouse Estimated value of warehouse TRY 2,214,060.30 City Covered Istanbul Indicator Turkey Europe & Central OECD high Best Regulatory Asia income Performance Procedures (number) 18 16.2 12.7 None in 2018/19 Time (days) 100 170.1 152.3 None in 2018/19 Cost (% of warehouse value) 3.6 4.0 1.5 None in 2018/19 Building quality control index (0-15) 13.0 12.1 11.6 15.0 (6 Economies) Figure – Dealing with Construction Permits in Turkey – Score 48.0 78.7 82.0 86.7 Procedures Time Cost Building quality control index Figure – Dealing with Construction Permits in Turkey and comparator economies – Ranking and Score DB 2020 Dealing with Construction Permits Score 0 100 77.4: Tunisia (Rank: 32) 75.9: Bulgaria (Rank: 43) 73.8: Turkey (Rank: 53) 69.5: Greece (Rank: 86) 69.0: Regional Average (Europe & Central Asia) 58.4: Romania (Rank: 147) Note: The ranking of economies on the ease of dealing with construction permits is determined by sorting their scores for dealing with construction permits. These scores are the simple average of the scores for each of the component indicators. Page 11 Doing Business 2020 Turkey Figure – Dealing with Construction Permits in Turkey – Procedure, Time and Cost Time (days) Cost (% of warehouse value) 100 1.8 1.6 Cost (% of warehouse value) 80 1.4 1.2 Time (days) 60 1 0.8 40 0.6 0.4 20 0.2 0 0 1 2 3 *4 *5 *6 *7 8 9 10 11 12 13 14 * 15 * 16 * 17 18 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 12 Doing Business 2020 Turkey Figure – Dealing with Construction Permits in Turkey and comparator economies – Measure of Quality 14.5 14.0 14.0 14 Index score 13.5 13.0 13.0 13 12.5 12.1 12.0 12 11.5 11 Turkey Bulgaria Greece Romania Tunisia Europe & Central Asia Details – Dealing with Construction Permits in Turkey – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Obtain zoning plan (Imar Durumu) 4 days TRY 250 Agency : Zoning and Planning Department BuildCo applies to the District Municipality - Planning Department for a 1:1000 scaled zoning plan which is already prepared and approved by the greater municipality. The plan shows the construction conditions of land such as the gross floor area ratio, footprint area ratio, and the function (e.g. commercial, residential, office, etc.) The fee is provided in the fee schedule of Arnavutköy Municipality 2 Obtain cadastral plan (Aplikasyon Krokisi) 3 days TRY 478 Agency : Authorized offices (“LİKHAB”) BuildCo submits an application to the Cadastral Plan Branch of the relevant municipality, along with the lot plan, and obtains the Cadastral Plan Document. The cadastral plan states the corner coordinations of the plot, the status of adjacent plots, and the surface area of the plot. 3 Obtain approval of architectural drawings from the municipality 30 days TRY 1,301 Agency : District Municipality The company must submit the documents listed below along with the architectural drawings to the project branch of the municipality: • The authorization document of the architect • The plan for the application • The cadastral plan document • The road datum document • The title deed registration document • The plot share distribution table, if there is more than one independent section on the land (for instance, an apartment building) • Built-up area breakdown table in square meters • Ratified geological study • Three sets of the elevator preliminary report (not applicable in the warehouse case) The municipality must approve the project’s proposed designs. The fire safety project should also be submitted to the municipality for approval and can be included in this procedure. If the municipality asks for changes to be made to the architectural designs during the approval process, these changes should be reflected in the engineering and landscaping projects as well. For final approval, these project plans are submitted to the municipal project branch, for static, sanitation facility, heating and heat insulation, and landscaping project plans to the Turkish Electricity Distribution Corporation (TEDAS), for the electricity project plans; and to the telephone company, for the telecommunication project plans. Fire-electricity and fire-mechanical project plans must be approved by the Fire Department. The fee of TRY 1/sq. meters is provided in the fee schedule of Arnavutköy Municipality 4 Obtain proof of payment and clearance of water and sewerage infrastructure 7 days TRY 5,973 Agency : Water and Sewerage Department (Istanbul Municipality) BuildCo will contact the Istanbul Water Supply and Sewerage General Directorate (ISKI) to obtain permission to discharge sewage and rainwater. At the same time, BuildCo must pay all outstanding debts to ISKI arising from the existing utility subscriptions and obtain a clearance letter stating that all existing connections/subscriptions are terminated. There is also a participation share in the cost the cost of the water and sewerage infrastructure. A clearance document is obtained, that shows that complete payment was made. Once this clearance is obtained, then BuildCo can move forward in laying out all pipes and excavation for sewage. All this work is done directly by the plumber of BuildCo; therefore there is no need for ISKI to be involved a second time. However, ISKI will inspect the work after it has been completed. Page 13 Doing Business 2020 Turkey 5 Obtain construction direction plan (Insaat Istikamet Rolevesi) and elevation of cross 5 days TRY 1,020 section (Kot Kesit Belgesi) Agency : The planning and zoning department of district municipality BuildCo must apply for a construction direction plan and elevation of cross section at the planning and zoning department of district municipality which is in charge to provide the construction direction plan, as well as the elevation of cross section plans. The documents obtained in the previous procedures must be submitted at this time. The technicians set all the necessary levels -- road, entrance, plot, building corners, etc. -- to be the basis for the design process of the works that will follow, and issue a construction direction plan and elevation of cross section. The construction direction plan includes stated directions on the land, distances from neighboring plots, and the building corners. The elevation of cross section identifies stated elevations of the corners of the plot, the necessary levels and elevations of the current land and elevations of the road. 6 Hire an independent building inspector 4 days TRY 34,318 Agency : Private Building Inspection Agency The company must select an independent building inspector and sign a service contract with this inspector. The inspector must check and approve all the project’s plans before they are submitted to the municipality. The list of project plans is extensive and includes the architectural design of the building done by design consultants; the reinforced concrete and insulation project plans prepared by a civil engineer; the fire safety project plans prepared jointly by an architect and the mechanical engineer for utilities; the project plans and documents for hot water, and those of central heating facilities prepared by a mechanical engineer; the electrical wiring project plans prepared by an electrical engineer; the telecommunications system project plans prepared by an electrical engineer; and the landscape project plans prepared by a landscape engineer. Selecting an independent building consultant takes only a day. However, practitioners agree that it takes at least 3 days for the building inspector to review and approve all the documents before they are submitted to the municipality. Hence, for the case considered here, it is assumed that 4 days are needed to complete this procedure. The building inspector charges a fee representing a percentage of the total cost of construction, according to the amendment of Article 5 of the Law on Building Inspection No. 4708 of August 17, 2011. This fee is paid in six installments. The inspector receives the following payments at the following stages: • 20% when the building permit is obtained • 40% when the foundation is completed • 20% when the shell & core structure is initiated • 15% when the installation is initiated • 5% when the construction is completed 7 Register with Social Security Institute before the commencement of construction works 1 day no charge Agency : Social Security Institution The company must register the staff that will be working at the construction site with the Social Security Institution. Under Turkish law, the construction site is considered as a “separate and independent workplace” where construction workers are employed to perform the permanent and temporary works forming the project/building. Consequently, this “separate workplace” must be registered with SSI and a workplace opening and operating permit must be obtained from the Ministry of Labour and Social Security. 8 Obtain building permit 30 days TRY 22,631 Agency : District Municipality, Licensing Branch The company requests a building permit from the licensing branch of the municipality. The approved design, engineering drawings, and other necessary documents (described in the previous procedures) must be attached to this request. The company must pay the fees before receiving the building permit and starting foundation work. Building permits are usually issued 1-2 months after submission of the application. Following the building permit issuance, the municipal building control authority will randomly conduct inspections during the construction on site, in addition to private inspection. 9 Obtain excavation (Harfiyat) permit from the Department of Environment of the Municipality 1 day TRY 2,817 Agency : Department of Environment of the Municipality After applying for the construction permit, BuildCo must obtain an excavation permit and inform the Department of Environment about how it will dispose of the extra soil from the area of excavation for the foundation, water, electricity etc. and get an approval from the department. The fee is listed on the web page of the municipality. Page 14 Doing Business 2020 Turkey 10 Obtain proof of "no outstanding taxes" clearance certificate from the Tax Authority 1 day no charge Agency : Tax Department The company must pay all taxes owed, and obtain a tax clearance document from the appropriate tax departments. This document states that all taxes owed have been paid. 11 Request and obtain a “no outstanding social security premium” clearance upon 1 day no charge completion of construction works Agency : Social Security Institute As far as construction works are concerned, once they are completed, the site (i.e., the workplace) will be closed. Upon completion date, there must not be any outstanding social security premium debt arising from the employment of the construction workers on site. Therefore, the contractor must obtain a document from the Social Security Institute evidencing that there is no outstanding social security debt. The local Municipality also requires this certificate before issuing the occupancy permit. 12 Receive final inspection from the Fire Department 1 day TRY 4,162 Agency : Fire Department, Istanbul Municipality According to the 2014 Fire Service Fees Schedule, BuildCo's warehouse would now fall into group 5 (factory buildings, hospitals, hotels, warehouses). 13 Submit final inspection report and receive final inspection from the municipality 5 days no charge Agency : District Municipality Upon completion of construction, the private inspector must submit his final inspection report to the municipality before the municipality conducts its final inspection. The municipality will come to inspect the building after 5 days on average. 14 Obtain occupancy permit 15 days TRY 2,294 Agency : District Municipality Land Development Law No. 3194 requires an occupancy permit for all new constructions. The company applies for the occupancy permit by submitting the following documents: • The invoice for the building • The building permit • The built-up area breakdown table in square meters • The original copy of the plot title deed • The real estate tax declaration • The real estate tax receipt An authorized commission from the municipality inspects the building and verifies that it complies with the project. This commission then issues the occupancy permit. The law specifies a statutory time limit of 30 days for the municipality to issue an occupancy permit. Practitioners observe that this statutory time limit is not frequently observed, and so, this process can take on average 2 months. Obtain operation permit from the Municipality 15 days TRY 3,887 15 Agency : District Municipality By law (Article 2 of the Operation Permit Regulation), BuildCo must obtain an operating permit from the Municipality before using this warehouse as a storage facility. Change the title deed from a land title deed to a building title deed 10 days TRY 395 16 Agency : Title Deed Department The company must submit the following documents to the title deed department in order to register the building: • The title deed • The plot share distribution table • The occupancy permit • The cadastral survey pages Registering the warehouse takes some time due to backlogs and long waiting times at the Land Registry. However, with connections at the Land Registry, the process may take as little as 3 days. Receive inspection from the water and sewerage department 1 day no charge 17 Agency : Istanbul Water Supply and Sewerage General Directorate (ISKI) Upon request of permission from the water and sewage department to discharge sewage and rainwater, the technicians from this department perform their inspections at the site and grant permission for connection of wastewater and rainwater to the system. The technicians from the same department also check that the canal connections comply with the approved design, upon request for a water connection. The technicians then issue a letter of approval for connection. Page 15 Doing Business 2020 Turkey 18 Obtain water and sewage connection 8 days TRY 250 Agency : Istanbul Water Supply and Sewerage General Directorate (ISKI) BuildCo. obtains the connection to water and sewage services The fee is provided on the website: www.iski.istanbul/web/tr-TR/musteri-hizmetleri/abonelik- islemleri Takes place simultaneously with previous procedure. Page 16 Doing Business 2020 Turkey Details – Dealing with Construction Permits in Turkey – Measure of Quality Answer Score Building quality control index (0-15) 13.0 Quality of building regulations index (0-2) 2.0 How accessible are building laws and regulations in your economy? (0-1) Available online; Free 1.0 of charge. Which requirements for obtaining a building permit are clearly specified in the building regulations or on any List of required 1.0 accessible website, brochure or pamphlet? (0-1) documents; Fees to be paid; Required preapprovals. Quality control before construction index (0-1) 1.0 Which third-party entities are required by law to verify that the building plans are in compliance with existing Licensed architect; 1.0 building regulations? (0-1) Licensed engineer. Quality control during construction index (0-3) 2.0 What types of inspections (if any) are required by law to be carried out during construction? (0-2) Inspections by 1.0 external engineer or firm; Inspections at various phases. Do legally mandated inspections occur in practice during construction? (0-1) Mandatory 1.0 inspections are always done in practice. Quality control after construction index (0-3) 3.0 Is there a final inspection required by law to verify that the building was built in accordance with the approved Yes, final inspection 2.0 plans and regulations? (0-2) is done by government agency; Yes, external engineer submits report for final inspection. Do legally mandated final inspections occur in practice? (0-1) Final inspection 1.0 always occurs in practice. Liability and insurance regimes index (0-2) 1.0 Which parties (if any) are held liable by law for structural flaws or problems in the building once it is in use Professional in 1.0 (Latent Defect Liability or Decennial Liability)? (0-1) charge of the supervision; Construction company. Which parties (if any) are required by law to obtain an insurance policy to cover possible structural flaws or No party is required 0.0 problems in the building once it is in use (Latent Defect Liability Insurance or Decennial Insurance)? (0-1) by law to obtain insurance . Professional certifications index (0-4) 4.0 What are the qualification requirements for the professional responsible for verifying that the architectural plans Minimum number of 2.0 or drawings are in compliance with existing building regulations? (0-2) years of experience; University degree in architecture or engineering; Being a registered architect or engineer. What are the qualification requirements for the professional who supervises the construction on the ground? (0- Minimum number of 2.0 2) years of experience; University degree in engineering, construction or construction management; Being a registered architect or engineer. Page 17 Doing Business 2020 Turkey Getting Electricity This topic measures the procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse. Additionally, the reliability of supply and transparency of tariffs index measures reliability of supply, transparency of tariffs and the price of electricity. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to obtain an electricity connection (number) To make the data comparable across economies, several assumptions about the warehouse, the electricity connection and the monthly consumption are used. • Submitting all relevant documents and obtaining all necessary clearances and permits The warehouse: • Completing all required notifications and receiving all necessary - Is owned by a local entrepreneur and is used for storage of goods. inspections - Is located in the economy’s largest business city. For 11 economies the data are also collected for • Obtaining external installation works and possibly purchasing the second largest business city. material for these works - Is located in an area where similar warehouses are typically located and is in an area with no physical constraints. For example, the property is not near a railway. • Concluding any necessary supply contract and obtaining final - Is a new construction and is being connected to electricity for the first time. supply - Has two stories with a total surface area of approximately 1,300.6 square meters (14,000 square Time required to complete each procedure (calendar days) feet). The plot of land on which it is built is 929 square meters (10,000 square feet). • Is at least 1 calendar day The electricity connection: • Each procedure starts on a separate day - Is a permanent one with a three-phase, four-wire Y connection with a subscribed capacity of 140- • Does not include time spent gathering information kilo-volt-ampere (kVA) with a power factor of 1, when 1 kVA = 1 kilowatt (kW). - Has a length of 150 meters. The connection is to either the low- or medium-voltage distribution • Reflects the time spent in practice, with little follow-up and no network and is either overhead or underground, whichever is more common in the area where the prior contact with officials warehouse is located and requires works that involve the crossing of a 10-meter road (such as by excavation or overhead lines) but are all carried out on public land. There is no crossing of other Cost required to complete each procedure (% of income per owners’ private property because the warehouse has access to a road. capita) - Does not require work to install the internal wiring of the warehouse. This has already been • Official costs only, no bribes completed up to and including the customer’s service panel or switchboard and the meter base. • Value added tax excluded The monthly consumption: The reliability of supply and transparency of tariffs index (0-8) - It is assumed that the warehouse operates 30 days a month from 9:00 a.m. to 5:00 p.m. (8 hours • Duration and frequency of power outages (0–3) a day), with equipment utilized at 80% of capacity on average and that there are no electricity cuts (assumed for simplicity reasons) and the monthly energy consumption is 26,880 kilowatt-hours • Tools to monitor power outages (0–1) (kWh); hourly consumption is 112 kWh. • Tools to restore power supply (0–1) - If multiple electricity suppliers exist, the warehouse is served by the cheapest supplier. - Tariffs effective in January of the current year are used for calculation of the price of electricity for • Regulatory monitoring of utilities’ performance (0–1) the warehouse. Although January has 31 days, for calculation purposes only 30 days are used. • Financial deterrents limiting outages (0–1) • Transparency and accessibility of tariffs (0–1) Price of electricity (cents per kilowatt-hour)* • Price based on monthly bill for commercial warehouse in case study *Note: Doing Business measures the price of electricity, but it is not included in the ease of doing business score nor in the ranking on the ease of getting electricity. Page 18 Doing Business 2020 Turkey Getting Electricity - Turkey Standardized Connection Name of utility İstanbul Anatolian Side Electricity Distribution Co. (AYEDAŞ) Price of electricity (US cents per kWh) 8.9 City Covered Istanbul Indicator Turkey Europe & Central OECD high Best Regulatory Asia income Performance Procedures (number) 4 5.1 4.4 3 (28 Economies) Time (days) 34 99.6 74.8 18 (3 Economies) Cost (% of income per capita) 62.3 271.9 61.0 0.0 (3 Economies) Reliability of supply and transparency of tariff index (0-8) 5 6.2 7.4 8 (26 Economies) Figure – Getting Electricity in Turkey – Score 83.3 93.0 99.2 62.5 Reliability of supply and transparency of Procedures Time Cost tariff index Figure – Getting Electricity in Turkey and comparator economies – Ranking and Score DB 2020 Getting Electricity Score 0 100 84.7: Greece (Rank: 40) 84.5: Turkey (Rank: 41) 82.3: Tunisia (Rank: 63) 75.6: Regional Average (Europe & Central Asia) 55.1: Bulgaria (Rank: 151) 53.7: Romania (Rank: 157) Note: The ranking of economies on the ease of getting electricity is determined by sorting their scores for getting electricity. These scores are the simple average of the scores for all the component indicators except the price of electricity. Figure – Getting Electricity in Turkey – Procedure, Time and Cost Time (days) Cost (% of income per capita) 35 30 30 Cost (% of income per capita) 25 25 Time (days) 20 20 15 15 10 10 5 5 0 0 1 2 *3 4 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures Page 19 Doing Business 2020 Turkey reflected here, see the summary below. Figure – Getting Electricity in Turkey and comparator economies – Measure of Quality 8 7 7 7 6.2 6 6 Index score 6 5 5 4 3 2 1 0 Turkey Bulgaria Greece Romania Tunisia Europe & Central Asia Page 20 Doing Business 2020 Turkey Details – Getting Electricity in Turkey – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Hire electrical engineer, apply for connection, await estimate and sign connection 13 calendar days TRY 3,000 agreement Agency : İstanbul Anatolian Side Electricity Distribution Co. (AYEDAŞ) The owner makes an agreement with an electrical engineer registered with the Chamber of Electrical Engineers. Electrical Engineer applies to the distribution company with the following documents. 1) Title deed registration, 2) Approved electrical project, 3) Building permit or building permit, 4) Contract between the owner and the electricity company authorized by him The application is evaluated by the distribution company and connection opinion is formed. Connection agreement is made with the authorized electrical engineer in accordance with the user preference regarding who will make the connection line. 2 Obtain external works from private firm or registered electrical engineer 18 calendar days TRY 12,750 Agency : Private firm/Electrical engineer(s) In the assumed area connections are generally made underground to the low voltage network. Physical implementation of both internal and external wiring is outsourced to the same Engineer or any other similar Engineers. 3 Obtain excavation permit from municipality 8 calendar days TRY 4,000 Agency : Istanbul Municipality The customer needs to obtain an excavation permit from Istanbul Municipality in order to carry out the works. The permit can be applied for after the electricity project has been approved. The customer needs to submit the approved electricity project, the occupancy permit, and state their address (no official document is needed). 4 Submit Electricity Structural Project and await meter installation and final connection 3 calendar days TRY 7,815.29 Agency : İstanbul Anatolian Side Electricity Distribution Co. (AYEDAŞ) Following the wiring and completion of implementation, the client is required to submit a post- implementation electricity project called “Electricity Structural Project.” This is followed by inspection of the internal wiring. Connection is made by the utility following its checking of the wiring (no inspection of entire internal wiring is done during the process, just of the interface). The compatibility of the metering devices and the circuits of the client are tested, and the relevant parts of the meters and measurement circuits are sealed and first index read on the meter. Connection to the system is then recorded by the distribution licensee. Takes place simultaneously with previous procedure. Page 21 Doing Business 2020 Turkey Details – Getting Electricity in Turkey – Measure of Quality Answer Reliability of supply and transparency of tariff index (0-8) 5 Total duration and frequency of outages per customer a year (0-3) 0 System average interruption duration index (SAIDI) 44.7 System average interruption frequency index (SAIFI) 19.5 What is the minimum outage time (in minutes) that the utility considers for the calculation of SAIDI/SAIFI 5.0 Mechanisms for monitoring outages (0-1) 1 Does the distribution utility use automated tools to monitor outages? Yes Mechanisms for restoring service (0-1) 1 Does the distribution utility use automated tools to restore service? Yes Regulatory monitoring (0-1) 1 Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on reliability of supply? Yes Financial deterrents aimed at limiting outages (0-1) 1 Does the utility either pay compensation to customers or face fines by the regulator (or both) if outages exceed a certain cap? Yes Communication of tariffs and tariff changes (0-1) 1 Are effective tariffs available online? Yes Link to the website, if available online http://www.epdk.org.tr/Det ay/Icerik/3-1327/elektrik- faturalarina-esas-tarife- tablolari Are customers notified of a change in tariff ahead of the billing cycle? Yes Note: If the duration and frequency of outages is 100 or less, the economy is eligible to score on the Reliability of supply and transparency of tariff index. If the duration and frequency of outages is not available, or is over 100, the economy is not eligible to score on the index. If the minimum outage time considered for SAIDI/SAIFI is over 5 minutes, the economy is not eligible to score on the index. Page 22 Doing Business 2020 Turkey Registering Property This topic examines the steps, time and cost involved in registering property, assuming a standardized case of an entrepreneur who wants to purchase land and a building that is already registered and free of title dispute. In addition, the topic also measures the quality of the land administration system in each economy. The quality of land administration index has five dimensions: reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution, and equal access to property rights. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally transfer title on immovable property To make the data comparable across economies, several assumptions about the parties to the (number) transaction, the property and the procedures are used. • Preregistration procedures (for example, checking for liens, The parties (buyer and seller): notarizing sales agreement, paying property transfer taxes) - Are limited liability companies (or the legal equivalent). • Registration procedures in the economy's largest business city. - Are located in the periurban (that is, on the outskirts of the city but still within its official limits) • Postregistration procedures (for example, filling title with area of the economy’s largest business city. For 11 economies the data are also collected for the municipality) second largest business city. - Are 100% domestically and privately owned. Time required to complete each procedure (calendar days) - Perform general commercial activities. • Does not include time spent gathering information The property (fully owned by the seller): • Each procedure starts on a separate day - though procedures - Has a value of 50 times income per capita, which equals the sale price. that can be fully completed online are an exception to this rule - Is fully owned by the seller. • Procedure is considered completed once final document is - Has no mortgages attached and has been under the same ownership for the past 10 years. received - Is registered in the land registry or cadastre, or both, and is free of title disputes. • No prior contact with officials - Is located in a periurban commercial zone (that is, on the outskirts of the city but still within its official limits), and no rezoning is required. Cost required to complete each procedure (% of property - Consists of land and a building. The land area is 557.4 square meters (6,000 square feet). A two- value) story warehouse of 929 square meters (10,000 square feet) is located on the land. The warehouse is 10 years old, is in good condition, has no heating system and complies with all safety standards, • Official costs only (such as administrative fees, duties and building codes and legal requirements. The property, consisting of land and building, will be taxes). transferred in its entirety. • Value Added Tax, Capital Gains Tax and illicit payments are - Will not be subject to renovations or additional construction following the purchase. excluded - Has no trees, natural water sources, natural reserves or historical monuments of any kind. - Will not be used for special purposes, and no special permits, such as for residential use, Quality of land administration index (0-30) industrial plants, waste storage or certain types of agricultural activities, are required. - Has no occupants, and no other party holds a legal interest in it. • Reliability of infrastructure index (0-8) • Transparency of information index (0–6) • Geographic coverage index (0–8) • Land dispute resolution index (0–8) • Equal access to property rights index (-2–0) Page 23 Doing Business 2020 Turkey Registering Property - Turkey Indicator Turkey Europe & Central OECD high Best Regulatory Asia income Performance Procedures (number) 6 5.5 4.7 1 (5 Economies) Time (days) 4.5 20.8 23.6 1 (2 Economies) Cost (% of property value) 3.0 2.7 4.2 0.0 (Saudi Arabia) Quality of the land administration index (0-30) 27.0 20.4 23.2 None in 2018/19 Figure – Registering Property in Turkey – Score 58.3 98.3 79.9 90.0 Procedures Time Cost Quality of the land administration index Figure – Registering Property in Turkey and comparator economies – Ranking and Score DB 2020 Registering Property Score 0 100 81.6: Turkey (Rank: 27) 75.8: Regional Average (Europe & Central Asia) 75.0: Romania (Rank: 46) 69.8: Bulgaria (Rank: 66) 63.7: Tunisia (Rank: 94) 46.9: Greece (Rank: 156) Note: The ranking of economies on the ease of registering property is determined by sorting their scores for registering property. These scores are the simple average of the scores for each of the component indicators. Page 24 Doing Business 2020 Turkey Figure – Registering Property in Turkey – Procedure, Time and Cost Time (days) Cost (% of property value) 4.5 3.5 4 3 Cost (% of property value) 3.5 2.5 3 Time (days) 2.5 2 2 1.5 1.5 1 1 0.5 0.5 0 0 1 2 3 4 5 6 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 25 Doing Business 2020 Turkey Figure – Registering Property in Turkey and comparator economies – Measure of Quality 30 27.0 25 20.4 Index score 19.5 20 17.0 15 13.5 10 4.5 5 0 Turkey Bulgaria Greece Romania Tunisia Europe & Central Asia Details – Registering Property in Turkey – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 The buyer conducts a non-encumbrance check on the property Less than one day, TRY 37.5 Agency : Land Registry Office online Although not mandated by law, non-encumbrance checks are essential procedures. Without them, buyers do not proceed with the transfer process. The buyer almost always checks whether or not the property is free of liens and encumbrances. For this, the seller would need to obtain the document showing that the property is free of disputes. By law, title deeds are open to anyone who legitimizes their interest. However, in practice the records are not accessible to the public: the buyer can obtain this document only with a power attorney of the seller. Therefore, this document is typically obtained by the seller who is often accompanied by the buyer. For transactions that are undertaken by lawyers, this procedure is conducted by lawyers (who have the power of attorney from the seller and have a legal right to search titles). The seller or the interested party takes an appointment on the general IT (TAKBIS) system to be present at the Land Registry office at the given time. The information at the Land Registry is computerized; so the search takes minutes. Conducting a non-encumbrance check is free of charge for the real person owner or for those who hold a right on the relevant property (or their representatives). In September 2017, the Land Registry introduced a new online system (WebTapu) which allows individuals to look into the details of their property electronically via e- government without visiting land title offices. One of the advantages of web-deed system is that the property owner (individual) may authorize his/her real estate agent to look into the details of his/her property electronically and this is free of charge. If the buyer or seller wish to obtain a copy of the records displaying the status of the property, a fee applies (TL 9.30 per page + a fixed fee of TL 21 that only applies if it is not the owner of the property who is requesting a copy of the records). If the application is made in a land registry office other than the land registry office which the property is registered at, then the applicant is required to pay an additional fixed fee of TL 42. 2 Managers obtain an authorization certificate of their authority to conduct transactions on 1 day TRY 54.4 companies’ behalf Agency : Company Registrar If the sale transaction will be made in person by the company signatories, the managers should obtain a separate document from the trade registry, showing that they have the authority to conduct transactions before the land registry office on their companies’ behalf. According to the General Communiqué of Act of Fees No. 80, the cost for obtaining an authorization certificate for company managers is TL 44. However, the registration and announcement of the authorization of a company's manager in the Trade Registry Gazette costs TL 420.60. If the sale transaction will be conduct by a proxy issued by the company signatories, the representatives should be provided with special proxies, which will be drawn by the notary and bear the photograph and the statement of the authorized manager. The notary would require the manager to provide it with the above mentioned authorization document which should be obtained from the trade registry and the signature circular of the company setting out the authorized signatories of the company and the way in which they are authorized to represent the company. The notary will charge a fee of approximately TL 200 for issuing the power of attorney. The validity period of this authorization certificate is one year as of its date of receipt. Page 26 Doing Business 2020 Turkey 3 Obtain a property tax clearance letter and a real estate value statement from the 1 day no charge Municipality Agency : Municipality The parties need to obtain a document showing (i) the current value of the property; and (ii) that there are no outstanding debts related to the property tax from the local municipality. This letter is required by Turkish Real Estate Tax Law No. 1319, and Land Registry Law No. 2,644. The document states (i) whether there is any unpaid property tax liability as of the date of issuance of the document; and (ii) the current minimum benchmark market value of the property (for the year in which the document is requested). This value statement is used by the land registry officer to determine the mortar dues. The parties could obtain this document either from offices of the relevant municipality or online. The online service can be accessed through www.turkiye.gov.tr, this service is free of charge. However, obtaining this document online is still not a common practice in Istanbul. Therefore, the seller obtains the value statement in person from the municipality where the real estate is situated. The municipalities update these value statements every year by categorizing properties according to their location and features. 4 Parties apply for registration and obtain tax payment assessment Less than one day, no charge Agency : Land Registry office online The owner of the real property has now opportunity to make an online application for the sale of the property through online through web tapu. So, the parties don’t have to be present before the land registry office to make the application. With the new system, the owner of the property can upload the necessary documentation and information while making the application. After that, the documents will be examined by the officers and will send and SMS to the owner regarding the registration fee and mortar dues calculated as per the declared purchase price (or value of the property determined by the municipality, whichever is higher). After payment of the relevant fees, the parties should be present for the signature before the land registry office on the date and time appointed by the land registry. The parties should also submit original copies of the documentation uploaded through the web tapu website while making the application. The documentation shall include; The documentation will include: (i) Copies of the tax registration certificates of the buyer and seller companies; (ii) The notarized proxies of the representatives (if they will perform the transaction); (iii) The identity cards of signatories (passport for foreigners); (iv) One photograph of the seller (or his representative) and two photographs of the buyer (or his representative); (v) Signature circular of the buyer company and seller company; (vi) Title deed copy or information regarding the title deed of the property; (vii) A document showing the current value of the property, issued by the relevant municipality; (viii) An earthquake insurance policy (it is not required if the property does not fall within the scope of the Law of Natural Disaster Insurance numbered 6305 published in the Official Gazette dated 18 May 2012 numbered 28296); and (ix) Signatories shall keep the seal of the company available during the procedure. (x) Loan documentation (if the property is bought by taking out a loan) 5 Registration fee is paid at a commercial bank Less than one day, TRY 66,759.31; Agency : Commercial Bank online (Registration fee of TL 128 Mortar dues are paid to the bank account of the land registry, and the bank will give a receipt of multiplied by Istanbul's the payment. The mortar due is equal to 4% of the declared amount in Turkish Lira, collected 2% local coefficient of 2.5 + each from the parties, but in practice usually the purchaser pays all. On September 30, 2017, 3% of declared transaction mortar increased back to 4% of the sale price of the property as by decree of the Council of Ministers is numbered 2017/9973. The parties also pay a registration fee (Döner Sermaye Hizmet price (mortar dues) or 3% Bedeli) to cover overall expenses of Land Registries in Turkey. This is usually paid by the of the taxable value of the purchaser to the bank account of the Land Registry. Registration fee is calculated by multiplying real estate (whichever is TL 103.50 fixed charge with local coefficients subject to the Law regarding Service Charges to Be higher) + TL 17.5 as fixed Collected by Land Registry Offices numbered 6544. Local coefficient for all districts of Istanbul is fees) set out as 2.5 in the tariff published by the Directorate General of Land Registry and Cadastre. Therefore, the total amount of the service charge of a property transfer transaction carried out at a land registry office in Istanbul for a two-story building will be TL 258.75. General IT system informs the concerned parties with a text message when the service charge and land registry fee should be paid at the commercial bank. Land registry fees and service charges can also be paid online via IT system of the General Directorate of Land Registry and Cadastre. This message is being sent to the parties after the evaluation process is completed by the land registry officers. The commercial bank to which the service charge and land registry fee are deposited is a bank designated by the land registry office. In other words, the parties have to deposit the concerned amounts to the bank account of land registry office at a bank determined by the land registry itself. Most of the payments are made in electronic environment according to the electronic collection number given by the electronic system. Moreover, online payment can be made from the web- tapu system established by TKGM. Page 27 Doing Business 2020 Turkey 6 Transaction is completed at the registry office 1 day paid in Procedure 5 Agency : Land Registry office Once all the above Procedures are fulfilled, a text message sent from general IT office of Land Registry that the parties should be present at the land registry office at the appointment hour decided previously by the Land Registry for the finalization of the transaction. The parties meet at registry office before the registry manager or his deputy at the appointment hour decided previously. The purchaser pays the consideration at that time. If it has already been paid, the seller would declare that it has already been fully paid. Then the parties both sign the land record sheet and the photographs of each of the parties are attached to the document. Each person witnesses that he/she had made the transaction mutually with the person in the picture, the transfer of the title is then completed. The documentation shall include: payment receipts and ID cards. Takes place simultaneously with previous procedure. Page 28 Doing Business 2020 Turkey Details – Registering Property in Turkey – Measure of Quality Answer Score Quality of the land administration index (0-30) 27.0 Reliability of infrastructure index (0-8) 8.0 Type of land registration system in the economy: Title Registration System What is the institution in charge of immovable property registration? Land Registry Office (Tapu) In what format are past and newly issued land records kept at the immovable property registry of the largest Computer/Fully digital 2.0 business city of the economy —in a paper format or in a computerized format (scanned or fully digital)? Is there a comprehensive and functional electronic database for checking for encumbrances (liens, mortgages, Yes 1.0 restrictions and the like)? Institution in charge of the plans showing legal boundaries in the largest business city: Cadastral Directorate of Istanbul In what format are past and newly issued cadastral plans kept at the mapping agency of the largest business Computer/Fully digital 2.0 city of the economy—in a paper format or in a computerized format (scanned or fully digital)? Is there an electronic database for recording boundaries, checking plans and providing cadastral information Yes 1.0 (geographic information system)? Is the information recorded by the immovable property registration agency and the cadastral or mapping agency Single database 1.0 kept in a single database, in different but linked databases or in separate databases? Do the immovable property registration agency and cadastral or mapping agency use the same identification Yes 1.0 number for properties? Transparency of information index (0–6) 4.0 Who is able to obtain information on land ownership at the agency in charge of immovable property registration Only intermediaries 0.0 in the largest business city? and interested parties Is the list of documents that are required to complete any type of property transaction made publicly available– Yes, online 0.5 and if so, how? Link for online access: https://randevu.tkgm. gov.tr/en/Appointment /AppointmentDocume nts Is the applicable fee schedule for any type of property transaction at the agency in charge of immovable Yes, online 0.5 property registration in the largest business city made publicly available–and if so, how? Link for online access: https://www.tkgm.gov. tr/sites/default/files/ic erik/ekleri/2019_yili_t arife_cetveli.pdf Does the agency in charge of immovable property registration agency formally commit to deliver a legally No 0.0 binding document that proves property ownership within a specific timeframe –and if so, how does it communicate the service standard? Link for online access: Is there a specific and independent mechanism for filing complaints about a problem that occurred at the agency Yes 1.0 in charge of immovable property registration? Contact information: BIMER: https://www.bimer.gov .tr/ CIMER: https://bilgiedinme.tcc b.gov.tr/Forms/pgDef ault.aspx Are there publicly available official statistics tracking the number of transactions at the immovable property Yes 0.5 registration agency? Number of property transfers in the largest business city in 2018: 328915.0 Who is able to consult maps of land plots in the largest business city? Freely accessible by 0.5 anyone Page 29 Doing Business 2020 Turkey Is the applicable fee schedule for accessing maps of land plots made publicly available—and if so, how? Yes, online 0.5 Link for online access: https://www.tkgm.gov. tr/sites/default/files/ic erik/ekleri/2018_fiyat_ listesi.pdf Does the cadastral/mapping agency formally specifies the timeframe to deliver an updated cadastral plan—and No 0.0 if so, how does it communicate the service standard? Link for online access: Is there a specific and independent mechanism for filing complaints about a problem that occurred at the Yes 0.5 cadastral or mapping agency? Contact information: BIMER: https://www.bimer.gov .tr/ CIMER: https://bilgiedinme.tcc b.gov.tr/Forms/pgDef ault.aspx Geographic coverage index (0–8) 8.0 Are all privately held land plots in the largest business city formally registered at the immovable property Yes 2.0 registry? Are all privately held land plots in the economy formally registered at the immovable property registry? Yes 2.0 Are all privately held land plots in the largest business city mapped? Yes 2.0 Are all privately held land plots in the economy mapped? Yes 2.0 Land dispute resolution index (0–8) 7.0 Does the law require that all property sale transactions be registered at the immovable property registry to make Yes 1.5 them opposable to third parties? Legal basis: Land Register Code numbered 2644 - 1934 - Turkish Civil Code numbered 4721 - 2001 Is the system of immovable property registration subject to a state or private guarantee? Yes 0.5 Type of guarantee: State guarantee Legal basis: Land Register Code numbered 2644 - 1934 - Turkish Civil Code numbered 4721 - 2001, Articles 1007 and 1023 Is there a is a specific, out-of-court compensation mechanism to cover for losses incurred by parties who Yes 0.5 engaged in good faith in a property transaction based on erroneous information certified by the immovable property registry? Legal basis: Land Register Code numbered 2644 - 1934 - Turkish Civil Code numbered 4721 - 2001, Articles 1007/1 and 1023 Does the legal system require a control of legality of the documents necessary for a property transaction (e.g., Yes 0.5 checking the compliance of contracts with requirements of the law)? If yes, who is responsible for checking the legality of the documents? Registrar; Does the legal system require verification of the identity of the parties to a property transaction? Yes 0.5 If yes, who is responsible for verifying the identity of the parties? Registrar; Is there a national database to verify the accuracy of government issued identity documents? Yes 1.0 Page 30 Doing Business 2020 Turkey What is the Court of first instance in charge of a case involving a standard land dispute between two local The Civil Court of businesses over tenure rights for a property worth 50 times gross national income (GNI) per capita and located First Instance of in the largest business city? Istanbul How long does it take on average to obtain a decision from the first-instance court for such a case (without Between 1 and 2 2.0 appeal)? years Are there publicly available statistics on the number of land disputes at the economy level in the first instance Yes 0.5 court? Number of land disputes in the economy in 2018: Equal access to property rights index (-2–0) 0.0 Do unmarried men and unmarried women have equal ownership rights to property? Yes Do married men and married women have equal ownership rights to property? Yes 0.0 Page 31 Doing Business 2020 Turkey Getting Credit This topic explores two sets of issues—the strength of credit reporting systems and the effectiveness of collateral and bankruptcy laws in facilitating lending. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Strength of legal rights index (0–12) Doing Business assesses the sharing of credit information and the legal rights of borrowers and lenders with respect to secured transactions through 2 sets of indicators. The depth of credit • Rights of borrowers and lenders through collateral laws (0-10) information index measures rules and practices affecting the coverage, scope and accessibility of • Protection of secured creditors’ rights through bankruptcy laws credit information available through a credit registry or a credit bureau. The strength of legal rights (0-2) index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. For each economy it is first determined whether a unitary Depth of credit information index (0–8) secured transactions system exists. Then two case scenarios, case A and case B, are used to • Scope and accessibility of credit information distributed by determine how a nonpossessory security interest is created, publicized and enforced according to credit bureaus and credit registries (0-8) the law. Special emphasis is given to how the collateral registry operates (if registration of security interests is possible). The case scenarios involve a secured borrower, company ABC, and a Credit bureau coverage (% of adults) secured lender, BizBank. • Number of individuals and firms listed in largest credit bureau In some economies the legal framework for secured transactions will allow only case A or case B as a percentage of adult population (not both) to apply. Both cases examine the same set of legal provisions relating to the use of movable collateral. Credit registry coverage (% of adults) • Number of individuals and firms listed in credit registry as a Several assumptions about the secured borrower (ABC) and lender (BizBank) are used: percentage of adult population - ABC is a domestic limited liability company (or its legal equivalent). - ABC has up to 50 employees. - ABC has its headquarters and only base of operations in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city. - Both ABC and BizBank are 100% domestically owned. The case scenarios also involve assumptions. In case A, as collateral for the loan, ABC grants BizBank a nonpossessory security interest in one category of movable assets, for example, its machinery or its inventory. ABC wants to keep both possession and ownership of the collateral. In economies where the law does not allow nonpossessory security interests in movable property, ABC and BizBank use a fiduciary transfer-of-title arrangement (or a similar substitute for nonpossessory security interests). In case B, ABC grants BizBank a business charge, enterprise charge, floating charge or any charge that gives BizBank a security interest over ABC’s combined movable assets (or as much of ABC’s movable assets as possible). ABC keeps ownership and possession of the assets. Page 32 Doing Business 2020 Turkey Getting Credit - Turkey Indicator Turkey Europe & Central OECD high Best Regulatory Asia income Performance Strength of legal rights index (0-12) 7 7.8 6.1 12 (5 Economies) Depth of credit information index (0-8) 8 6.7 6.8 8 (53 Economies) Credit registry coverage (% of adults) 80.2 24.0 24.4 100.0 (2 Economies) Credit bureau coverage (% of adults) 0.0 41.7 66.7 100.0 (14 Economies) Figure – Getting Credit in Turkey – Score 75.0 Score - Getting Credit Figure – Getting Credit in Turkey and comparator economies – Ranking and Score DB 2020 Getting Credit Score 0 100 80.0: Romania (Rank: 25) 75.0: Turkey (Rank: 37) 72.2: Regional Average (Europe & Central Asia) 65.0: Bulgaria (Rank: 67) 50.0: Tunisia (Rank: 104) 45.0: Greece (Rank: 119) Note: The ranking of economies on the ease of getting credit is determined by sorting their scores for getting credit. These scores are the sum of the scores for the strength of legal rights index and the depth of credit information index. Page 33 Doing Business 2020 Turkey Figure – Legal Rights in Turkey and comparator economies 10 9 9 8 7.8 8 7 Index Score 7 6 5 4 3 3 2 2 1 0 Turkey Bulgaria Greece Romania Tunisia Europe & Central Asia Page 34 Doing Business 2020 Turkey Details – Legal Rights in Turkey Strength of legal rights index (0-12) 7 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional equivalents No to security interests in movable assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without requiring a specific description No of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring a specific description of Yes collateral? May a security right extend to future or after-acquired assets, and does it extend automatically to the products, proceeds and replacements of the Yes original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between parties; Yes and can the collateral agreement include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non-incorporated entities, that is unified geographically and by asset type, with an Yes electronic database indexed by debtor's name? Does a notice-based collateral registry exist in which all functional equivalents can be registered? No Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be performed online by any interested third No party? Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor defaults outside an insolvency procedure? Yes Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is liquidated? Yes Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure? Does the law No protect secured creditors’ rights by providing clear grounds for relief from the stay and sets a time limit for it? Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow the secured creditor to sell Yes the collateral through public auction or private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Figure – Credit Information in Turkey and comparator economies 9 8 8 7 7 7 7 6.7 Index Score 6 5 5 4 3 2 1 0 Turkey Bulgaria Greece Romania Tunisia Europe & Central Asia Page 35 Doing Business 2020 Turkey Details – Credit Information in Turkey Depth of credit information index (0-8) Credit bureau Credit registry Score Are data on both firms and individuals distributed? No Yes 1 Are both positive and negative credit data distributed? No Yes 1 Are data from retailers or utility companies - in addition to data from banks and No Yes 1 financial institutions - distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries No Yes 1 that distribute more than 10 years of negative data or erase data on defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per capita distributed? No Yes 1 By law, do borrowers have the right to access their data in the credit bureau or No Yes 1 credit registry? Can banks and financial institutions access borrowers’ credit information online No Yes 1 (for example, through an online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value-added service to help No Yes 1 banks and financial institutions assess the creditworthiness of borrowers? Note: An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Coverage Credit bureau Credit registry Number of individuals 0 37,458,090 Number of firms 0 6,794,275 Total 0 44,252,365 Percentage of adult population 0.0 80.2 Page 36 Doing Business 2020 Turkey Protecting Minority Investors This topic measures the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain as well as shareholder rights, governance safeguards and corporate transparency requirements that reduce the risk of abuse. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions • Extent of disclosure index (0–10): Disclosure, review, and To make the data comparable across economies, a case study uses several assumptions about approval requirements for related-party transactions the business and the transaction. • Extent of director liability index (0–10): Ability of minority shareholders to sue and hold interested directors liable for The business (Buyer): prejudicial related-party transactions; Available legal - Is a publicly traded corporation listed on the economy’s most important stock exchange. remedies (damages, disgorgement of profits, disqualification - Has a board of directors and a chief executive officer (CEO) who may legally act on behalf of from managerial position(s) for one year or more, rescission of Buyer where permitted, even if this is not specifically required by law. the transaction) - Has a supervisory board in economies with a two-tier board system on which Mr. James appointed 60% of the shareholder-elected members. • Ease of shareholder suits index (0–10): Access to internal - Has not adopted bylaws or articles of association that go beyond the minimum requirements. corporate documents; Evidence obtainable during trial and allocation of legal expenses Does not follow codes, principles, recommendations or guidelines that are not mandatory. - Is a manufacturing company with its own distribution network. • Extent of conflict of interest regulation index (0-30): Sum of the extent of disclosure, extent of director liability and ease of The transaction involves the following details: shareholder suits indices - Mr. James owns 60% of Buyer, sits on Buyer’s board of directors and elected two directors to • Extent of shareholder rights index (0-6): Shareholders’ rights Buyer’s five-member board. and role in major corporate decisions - Mr. James also owns 90% of Seller, a company that operates a chain of retail hardware stores. Seller recently closed a large number of its stores. • Extent of ownership and control index (0-7): Governance - Mr. James proposes that Buyer purchase Seller’s unused fleet of trucks to expand Buyer’s safeguards protecting shareholders from undue board control distribution of its food products, a proposal to which Buyer agrees. The price is equal to 10% of and entrenchment Buyer’s assets and is higher than the market value. • Extent of corporate transparency index (0-7): Corporate - The proposed transaction is part of the company’s principal activity and is not outside the transparency on ownership stakes, compensation, audits and authority of the company. financial prospects - Buyer enters into the transaction. All required approvals are obtained, and all required disclosures made—that is, the transaction was not entered into fraudulently. • Extent of shareholder governance index (0–20): Sum of the - The transaction causes damages to Buyer. Shareholders sue Mr. James and the executives and extent of shareholders rights, extent of ownership and control directors that approved the transaction. and extent of corporate transparency indices • Strength of minority investor protection index (0–50): Sum of the extent of conflict of interest regulation and extent of shareholder governance indices Page 37 Doing Business 2020 Turkey Protecting Minority Investors - Turkey Stock exchange information Stock exchange Borsa İstanbul Stock exchange URL https://www.borsaistanbul.com Listed firms with equity securities 144 City Covered Istanbul Indicator Turkey Europe & Central OECD high Best Regulatory Asia income Performance Extent of disclosure index (0-10) 9.0 7.5 6.5 10 (13 Economies) Extent of director liability index (0-10) 5.0 5.0 5.3 10 (3 Economies) Ease of shareholder suits index (0-10) 6.0 6.8 7.3 10 (Djibouti) Extent of shareholder rights index (0-6) 6.0 3.4 4.7 6 (19 Economies) Extent of ownership and control index (0-7) 6.0 3.7 4.5 7 (9 Economies) Extent of corporate transparency index (0-7) 6.0 4.1 5.7 7 (13 Economies) Figure – Protecting Minority in Turkey – Score 76.0 Score - Protecting Minority Investors Figure – Protecting Minority Investors in Turkey and comparator economies – Ranking and Score DB 2020 Protecting Minority Investors Score 0 100 76.0: Turkey (Rank: 21) 74.0: Bulgaria (Rank: 25) 70.0: Greece (Rank: 37) 62.0: Romania (Rank: 61) 62.0: Tunisia (Rank: 61) 61.0: Regional Average (Europe & Central Asia) Note: The ranking of economies on the strength of minority investor protections is determined by sorting their scores for protecting minority investors. These scores are the simple average of the scores for the extent of conflict of interest regulation index and the extent of shareholder governance index. Page 38 Doing Business 2020 Turkey Figure – Protecting Minority Investors in Turkey and comparator economies – Measure of Quality Turkey 6 5 9 6 6 6 Bulgaria 7 2 10 4 6 8 Greece 6 4 9 6 5 5 Romania 5 4 9 3 5 5 Tunisia 5 7 6 4 4 5 OECD high income 5.6 5.6 6.6 4.3 4.5 7.4 Europe & Central Asia 4.1 4.8 7.2 3.6 3.4 6.8 0 5 10 15 20 25 30 35 40 Sub-Indicator Score Extent of corporate transparency index (0-7) Extent of director liability index (0-10) Extent of disclosure index (0-10) Extent of ownership and control index (0-7) Extent of shareholder rights index (0-6) Ease of shareholder suits index (0-10) Page 39 Doing Business 2020 Turkey Details – Protecting Minority Investors in Turkey – Measure of Quality Answer Score Extent of conflict of interest regulation index (0-30) Extent of disclosure index (0-10) 9.0 Whose decision is sufficient to approve the Buyer-Seller transaction? (0-3) Board of directors 2.0 excluding interested members Must an external body review the terms of the transaction before it takes place? (0-1) Yes 1.0 Must Mr. James disclose his conflict of interest to the board of directors? (0-2) Full disclosure of all 2.0 material facts Must Buyer disclose the transaction in periodic filings (e.g. annual reports)? (0-2) Disclosure on the 2.0 transaction and on the conflict of interest Must Buyer immediately disclose the transaction to the public? (0-2) Disclosure on the 2.0 transaction and on the conflict of interest Extent of director liability index (0-10) 5.0 Can shareholders representing 10% of Buyer's share capital sue for the damage the transaction caused to Yes 1.0 Buyer? (0-1) Can shareholders hold Mr. James liable for the damage the transaction caused to Buyer? (0-2) Liable if negligent 1.0 Can shareholders hold the other directors liable for the damage the transaction caused to Buyer? (0-2) Liable if negligent 1.0 Must Mr. James pay damages for the harm caused to Buyer upon a successful claim by shareholders? (0-1) Yes 1.0 Must Mr. James repay profits made from the transaction upon a successful claim by shareholders? (0-1) Yes 1.0 Is Mr. James disqualified upon a successful claim by shareholders? (0-1) No 0.0 Can a court void the transaction upon a successful claim by shareholders? (0-2) Only in case of fraud 0.0 or bad faith Ease of shareholder suits index (0-10) 6.0 Before suing, can shareholders representing 10% of Buyer's share capital inspect the transaction documents? Yes 1.0 (0-1) Can the plaintiff obtain any documents from the defendant and witnesses at trial? (0-3) Any relevant 3.0 document Can the plaintiff request categories of documents from the defendant without identifying specific ones? (0-1) No 0.0 Can the plaintiff directly question the defendant and witnesses at trial? (0-2) Preapproved 1.0 questions only Is the level of proof required for civil suits lower than that of criminal cases? (0-1) No 0.0 Can shareholder plaintiffs recover their legal expenses from the company? (0-2) Yes if successful 1.0 Extent of shareholder governance index (0-20) Extent of shareholder rights index (0-6) 6.0 Does the sale of 51% of Buyer's assets require shareholder approval? Yes 1.0 Can shareholders representing 10% of Buyer's share capital call for a meeting of shareholders? Yes 1.0 Must Buyer obtain its shareholders’ approval every time it issues new shares? Yes 1.0 Do shareholders automatically receive preemption rights every time Buyer issues new shares? Yes 1.0 Do shareholders elect and dismiss the external auditor? Yes 1.0 Are changes to the rights of a class of shares only possible if the holders of the affected shares approve? Yes 1.0 Extent of ownership and control index (0-7) 6.0 Page 40 Doing Business 2020 Turkey Is it forbidden to appoint the same individual as CEO and chairperson of the board of directors? No 0.0 Must the board of directors include independent and nonexecutive board members? Yes 1.0 Can shareholders remove members of the board of directors without cause before the end of their term? Yes 1.0 Must the board of directors include a separate audit committee exclusively comprising board members? Yes 1.0 Must a potential acquirer make a tender offer to all shareholders upon acquiring 50% of Buyer? Yes 1.0 Must Buyer pay declared dividends within a maximum period set by law? Yes 1.0 Is a subsidiary prohibited from acquiring shares issued by its parent company? Yes 1.0 Extent of corporate transparency index (0-7) 6.0 Must Buyer disclose direct and indirect beneficial ownership stakes representing 5%? Yes 1.0 Must Buyer disclose information about board members’ primary employment and directorships in other Yes 1.0 companies? Must Buyer disclose the compensation of individual managers? No 0.0 Must a detailed notice of general meeting be sent 21 days before the meeting? Yes 1.0 Can shareholders representing 5% of Buyer’s share capital put items on the general meeting agenda? Yes 1.0 Must Buyer's annual financial statements be audited by an external auditor? Yes 1.0 Must Buyer disclose its audit reports to the public? Yes 1.0 Page 41 Doing Business 2020 Turkey Paying Taxes This topic records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as well as the administrative burden of paying taxes and contributions and complying with postfiling procedures (VAT refund and tax audit). The most recent round of data collection for the project was completed in May 2019 covering for the Paying Taxes indicator calendar year 2018 (January 1, 2018 – December 31, 2018). See the methodology for more information. What the indicators measure Case study assumptions Tax payments for a manufacturing company in 2018 (number Using a case scenario, Doing Business records taxes and mandatory contributions a medium size per year adjusted for electronic and joint filing and payment) company must pay in a year, and measures the administrative burden of paying taxes, contributions and dealing with postfiling processes. Information is also compiled on frequency of • Total number of taxes and contributions paid or withheld, filing and payments, time taken to comply with tax laws, time taken to comply with the including consumption taxes (value added tax, sales tax or requirements of postfiling processes and time waiting. goods and service tax) • Method and frequency of filing and payment To make data comparable across economies, several assumptions are used: - TaxpayerCo is a medium-size business that started operations on January 1, 2017. It produces Time required to comply with 3 major taxes (hours per year) ceramic flowerpots and sells them at retail. All taxes and contributions recorded are paid in the second year of operation (calendar year 2018). Taxes and mandatory contributions are measured • Collecting information, computing tax payable at all levels of government. • Preparing separate tax accounting books, if required • Completing tax return, filing with agencies The VAT refund process: - In June 2018, TaxpayerCo. makes a large capital purchase: the value of the machine is 65 times • Arranging payment or withholding income per capita of the economy. Sales are equally spread per month (1,050 times income per capita divided by 12) and cost of goods sold are equally expensed per month (875 times income Total tax and contribution rate (% of commercial profits) per capita divided by 12). The machinery seller is registered for VAT and excess input VAT incurred • Profit or corporate income tax in June will be fully recovered after four consecutive months if the VAT rate is the same for inputs, sales and the machine and the tax reporting period is every month. Input VAT will exceed Output • Social contributions, labor taxes paid by employer VAT in June 2018. • Property and property transfer taxes The corporate income tax audit process: • Dividend, capital gains, financial transactions taxes - An error in calculation of income tax liability (for example, use of incorrect tax depreciation rates, • Waste collection, vehicle, road and other taxes or incorrectly treating an expense as tax deductible) leads to an incorrect income tax return and a corporate income tax underpayment. TaxpayerCo. discovered the error and voluntarily notified the Postfiling Index tax authority. The value of the underpaid income tax liability is 5% of the corporate income tax • Time to comply with VAT refund (hours) liability due. TaxpayerCo. submits corrected information after the deadline for submitting the annual tax return, but within the tax assessment period. • Time to obtain VAT refund (weeks) • Time to comply with a corporate income tax correction (hours) • Time to complete a corporate income tax correction (weeks) Page 42 Doing Business 2020 Turkey Paying Taxes - Turkey Indicator Turkey Europe & Central OECD high Best Regulatory Asia income Performance Payments (number per year) 10 14.4 10.3 3 (2 Economies) Time (hours per year) 170 213.1 158.8 49 (3 Economies) Total tax and contribution rate (% of profit) 42.3 31.7 39.9 26.1 (33 Economies) Postfiling index (0-100) 100 68.2 86.7 None in 2018/19 Figure – Paying Taxes in Turkey – Score 88.3 81.3 76.9 100.0 Payments Time Total tax and contribution rate Postfiling index Figure – Paying Taxes in Turkey and comparator economies – Ranking and Score DB 2020 Paying Taxes Score 0 100 86.6: Turkey (Rank: 26) 85.2: Romania (Rank: 32) 77.9: Regional Average (Europe & Central Asia) 77.1: Greece (Rank: 72) 72.3: Bulgaria (Rank: 97) 69.4: Tunisia (Rank: 108) Note: The ranking of economies on the ease of paying taxes is determined by sorting their scores for paying taxes. These scores are the simple average of the scores for each of the component indicators, with a threshold and a nonlinear transformation applied to one of the component indicators, the total tax and contribution rate. The threshold is defined as the total tax and contribution rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax and contribution rate below this threshold receive the same score as the economy at the threshold. Page 43 Doing Business 2020 Turkey Figure – Paying Taxes in Turkey and comparator economies – Measure of Quality 120 100 100 Index score 76.7 76.8 80 71.2 68.2 60 52.5 40 20 0 Turkey Bulgaria Greece Romania Tunisia Europe & Central Asia Page 44 Doing Business 2020 Turkey Details – Paying Taxes in Turkey Tax or Payments Notes on Time (hours) Statutory tax Tax base Total tax and Notes on TTCR mandatory (number) Payments rate contribution contribution rate (% of profit) Corporate 1.0 online 24.0 22% taxable profit 20.01 income tax Employer paid - 1.0 online 71.0 15.5% gross salaries 17.48 Social security contributions Employer paid - 0.0 online and jointly 2% gross salaries 2.32 Unemployment insurance contributions Property transfer 1.0 2% sale price 1.21 fee Property tax 1.0 online 0.1% and 0.3% value of building 0.88 (doubled in and land Istanbul) (reevaluated each year) Tax on interest 0.0 withheld 10%-12%-13%-1 interest income 0.38 included in other 5%-18% taxes Vehicle tax 1.0 TRY 3229 fixed fee 0.29 Transaction tax 1.0 TRY 6.5 per number of 0.14 on checks check checks Environment tax 1.0 online varies between 0.02 TRY 3.625 to TRY 30 Fuel tax 1.0 included in fuel 0.00 small amount price Employee paid - 0.0 online and jointly 0.759% gross salaries 0.00 withheld Payroll tax Employee paid - 0.0 online and jointly 14% gross salaries 0.00 withheld Social security contributions Employee paid - 0.0 online and jointly 1% gross salaries 0.00 withheld Unemployment insurance contributions Value added tax 1.0 online 75.0 General rate is value added 0.00 not included (VAT) 18% but varies between 1%-18% Advertising tax 1.0 various rates advertising 0.00 small amount expense Totals 10 170 42.3 Page 45 Doing Business 2020 Turkey Details – Paying Taxes in Turkey – Tax by Type Taxes by type Answer Profit tax (% of profit) 20.0 Labor tax and contributions (% of profit) 19.7 Other taxes (% of profit) 2.5 Page 46 Doing Business 2020 Turkey Details – Paying Taxes in Turkey – Measure of Quality Answer Score Postfiling index (0-100) 100 VAT refunds Does VAT exist? Yes Does a VAT refund process exist per the case study? No, industrial machine is exempted from VAT Restrictions on VAT refund process none Percentage of cases exposed to a VAT audit (%) Not applicable Is there a mandatory carry forward period? No Time to comply with VAT refund (hours) No VAT No VAT Time to obtain VAT refund (weeks) No VAT No VAT Corporate income tax audits Does corporate income tax exist? Yes Percentage of cases exposed to a corporate income tax audit (%) 0% - 24% Time to comply with a corporate income tax correction (hours) 1.5 100 Time to complete a corporate income tax correction (weeks) No tax audit per case 100 study scenario Notes: Names of taxes have been standardized. For instance income tax, profit tax, tax on company's income are all named corporate income tax in this table. The hours for VAT include all the VAT and sales taxes applicable. The hours for Social Security include all the hours for labor taxes and mandatory contributions in general. The postfiling index is the average of the scores on time to comply with VAT refund, time to obtain a VAT refund, time to comply with a corporate income tax correction and time to complete a corporate income tax correction. N/A = Not applicable. Page 47 Doing Business 2020 Turkey Trading across Borders Doing Business records the time and cost associated with the logistical process of exporting and importing goods. Doing Business measures the time and cost (excluding tariffs) associated with three sets of procedures—documentary compliance, border compliance and domestic transport—within the overall process of exporting or importing a shipment of goods. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Documentary compliance To make the data comparable across economies, a few assumptions are made about the traded goods and the transactions: • Obtaining, preparing and submitting documents during transport, clearance, inspections and port or border handling in Time: Time is measured in hours, and 1 day is 24 hours (for example, 22 days are recorded as origin economy 22×24=528 hours). If customs clearance takes 7.5 hours, the data are recorded as is. Alternatively, • Obtaining, preparing and submitting documents required by suppose documents are submitted to a customs agency at 8:00a.m., are processed overnight and destination economy and any transit economies can be picked up at 8:00a.m. the next day. The time for customs clearance would be recorded as 24 hours because the actual procedure took 24 hours. • Covers all documents required by law and in practice, including electronic submissions of information Cost: Insurance cost and informal payments for which no receipt is issued are excluded from the Border compliance costs recorded. Costs are reported in U.S. dollars. Contributors are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. • Customs clearance and inspections Contributors are private sector experts in international trade logistics and are informed about exchange rates. • Inspections by other agencies (if applied to more than 20% of shipments) Assumptions of the case study: • Handling and inspections that take place at the economy’s port - For all 190 economies covered by Doing Business, it is assumed a shipment is in a warehouse in or border the largest business city of the exporting economy and travels to a warehouse in the largest business city of the importing economy. Domestic transport - It is assumed each economy imports 15 metric tons of containerized auto parts (HS 8708) from • Loading or unloading of the shipment at the warehouse or its natural import partner—the economy from which it imports the largest value (price times port/border quantity) of auto parts. It is assumed each economy exports the product of its comparative advantage (defined by the largest export value) to its natural export partner—the economy that is • Transport between warehouse and port/border the largest purchaser of this product. Shipment value is assumed to be $50,000. • Traffic delays and road police checks while shipment is en - The mode of transport is the one most widely used for the chosen export or import product and route the trading partner, as is the seaport or land border crossing. - All electronic information submissions requested by any government agency in connection with the shipment are considered to be documents obtained, prepared and submitted during the export or import process. - A port or border is a place (seaport or land border crossing) where merchandise can enter or leave an economy. - Relevant government agencies include customs, port authorities, road police, border guards, standardization agencies, ministries or departments of agriculture or industry, national security agencies and any other government authorities. Page 48 Doing Business 2020 Turkey Trading across Borders - Turkey Indicator Turkey Europe & Central OECD high Best Regulatory Asia income Performance Time to export: Border compliance (hours) 10 16.1 12.7 1 (19 Economies) Cost to export: Border compliance (USD) 338 150.0 136.8 0 (19 Economies) Time to export: Documentary compliance (hours) 4 25.1 2.3 1 (26 Economies) Cost to export: Documentary compliance (USD) 55 87.6 33.4 0 (20 Economies) Time to import: Border compliance (hours) 7 20.4 8.5 1 (25 Economies) Cost to import: Border compliance (USD) 46 158.8 98.1 0 (28 Economies) Time to import: Documentary compliance (hours) 2 23.4 3.4 1 (30 Economies) Cost to import: Documentary compliance (USD) 55 85.9 23.5 0 (30 Economies) Figure – Trading across Borders in Turkey – Score 94.5 68.1 98.2 86.3 98.0 96.2 99.6 92.1 Time Cost Time Cost Time Cost Time Cost to to to to to to to to export: export: export: export: import: import: import: import: Border Border Documentary Documentary Border Border Documentary Documentary compliance compliance compliance compliance compliance compliance compliance compliance Figure – Trading across Borders in Turkey and comparator economies – Ranking and Score DB 2020 Trading Across Borders Score 0 100 97.4: Bulgaria (Rank: 21) 93.7: Greece (Rank: 34) 91.6: Turkey (Rank: 44) 87.3: Regional Average (Europe & Central Asia) 74.6: Tunisia (Rank: 90) 100: Romania (Rank: 1) Note: The ranking of economies on the ease of trading across borders is determined by sorting their scores for trading across borders. These scores are the simple average of the scores for the time and cost for documentary compliance and border compliance to export and import. Page 49 Doing Business 2020 Turkey Figure – Trading across Borders in Turkey – Time and Cost Time (hours) Cost (USD) 12 400 10 338 350 10 Time (hours) 300 Cost (USD) 8 7 250 6 200 4 150 4 2 100 2 55 46 55 50 0 0 Export Export Import Import - - - - Border Documentary Border Documentary Compliance Compliance Compliance Compliance Page 50 Doing Business 2020 Turkey Details – Trading across Borders in Turkey Characteristics Export Import Product HS 87 : Vehicles other than railway or tramway HS 8708: Parts and accessories of motor vehicles rolling-stock, and parts and accessories thereof Trade partner France Germany Border Derince port Kapıkule border crossing Distance (km) 90 280 Domestic transport time (hours) 3 6 Domestic transport cost (USD) 350 450 Details – Trading across Borders in Turkey – Components of Border Compliance Time to Complete (hours) Associated Costs (USD) Export: Clearance and inspections required by 4.0 48.0 customs authorities Export: Clearance and inspections required by 0.0 0.0 agencies other than customs Export: Port or border handling 8.0 290.0 Import: Clearance and inspections required by 3.5 46.0 customs authorities Import: Clearance and inspections required by 0.0 0.0 agencies other than customs Import: Port or border handling 3.8 0.0 Page 51 Doing Business 2020 Turkey Details – Trading across Borders in Turkey – Trade Documents Export Import ATR Commercial Invoice Bill of lading Packing list Customs declaration ATR Invoice T-2 document Packing list Customs import declaration SOLAS certificate Page 52 Doing Business 2020 Turkey Enforcing Contracts The enforcing contracts indicator measures the time and cost for resolving a commercial dispute through a local first-instance court, and the quality of judicial processes index, evaluating whether each economy has adopted a series of good practices that promote quality and efficiency in the court system. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Time required to enforce a contract through the courts The dispute in the case study involves the breach of a sales contract between two domestic (calendar days) businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt enforcement. • Time to file and serve the case • Time for trial and to obtain the judgment To make the data on the time and comparable across economies, several assumptions about the case are used: • Time to enforce the judgment - The dispute concerns a lawful transaction between two businesses (Seller and Buyer), both Cost required to enforce a contract through the courts (% of located in the economy’s largest business city. For 11 economies the data are also collected for the claim value) second largest business city. - The Buyer orders custom-made furniture, then fails to pay alleging that the goods are not of • Average attorney fees adequate quality. • Court costs - The value of the dispute is 200% of the income per capita or the equivalent in local currency of USD 5,000, whichever is greater. • Enforcement costs - The Seller sues the Buyer before the court with jurisdiction over commercial cases worth 200% of income per capita or $5,000 whichever is greater. Quality of judicial processes index (0-18) - The Seller requests the pretrial attachment of the defendant’s movable assets to secure the • Court structure and proceedings (-1-5) claim. - The claim is disputed on the merits because of Buyer’s allegation that the quality of the goods • Case management (0-6) was not adequate. • Court automation (0-4) - The judge decides in favor of the seller; there is no appeal. - The Seller enforces the judgment through a public sale of the Buyer’s movable assets. • Alternative dispute resolution (0-3) Page 53 Doing Business 2020 Turkey Enforcing Contracts - Turkey Standardized Case Claim value TRY 75,877 Court name Istanbul Commercial Court of First Instance City Covered Istanbul Indicator Turkey Europe & Central OECD high Best Regulatory Asia income Performance Time (days) 623 496.4 589.6 120 (Singapore) Cost (% of claim value) 24.9 26.6 21.5 0.1 (Bhutan) Quality of judicial processes index (0-18) 15.0 10.3 11.7 None in 2018/19 Figure – Enforcing Contracts in Turkey – Score 58.8 72.1 83.3 Time Cost Quality of judicial processes index Figure – Enforcing Contracts in Turkey and comparator economies – Ranking and Score DB 2020 Enforcing Contracts Score 0 100 72.2: Romania (Rank: 19) 71.4: Turkey (Rank: 24) 67.0: Bulgaria (Rank: 42) 65.5: Regional Average (Europe & Central Asia) 58.4: Tunisia (Rank: 88) 48.1: Greece (Rank: 146) Note: The ranking of economies on the ease of enforcing contracts is determined by sorting their scores for enforcing contracts. These scores are the simple average of the scores for each of the component indicators. Page 54 Doing Business 2020 Turkey Figure – Enforcing Contracts in Turkey – Time and Cost Time (days) Cost (% of claim value) 1800 1711 30 Cost (% of claim value) 26.6 25.8 1600 24.9 22.4 25 1400 21.5 21.8 Time (days) 1200 18.6 20 1000 15 800 623 564 589.6 565 600 496.4 512 10 400 5 200 0 0 Bulgaria Europe Greece OECD Romania Tunisia Turkey & high Central income Asia Page 55 Doing Business 2020 Turkey Figure – Enforcing Contracts in Turkey and comparator economies – Measure of Quality Turkey 2.5 5 4 3.5 Bulgaria 2.5 2.5 2 3.5 Greece 2.5 5 2 3 Romania 3 4 2 5 Tunisia 2 0 4.5 OECD high income 2.5 3.2 2.4 3.6 Europe & Central Asia 2.3 2.8 1.3 3.6 0 2 4 6 8 10 12 14 16 Sub-Indicator Score Alternative dispute resolution (0-3) Case management (0-6) Court automation (0-4) Court structure and proceedings (-1-5) Details – Enforcing Contracts in Turkey Indicator Time (days) 623 Filing and service 44 Trial and judgment 450 Enforcement of judgment 129 Cost (% of claim value) 24.9 Attorney fees 12 Court fees 3 Enforcement fees 9.9 Quality of judicial processes index (0-18) 15.0 Court structure and proceedings (-1-5) 3.5 Case management (0-6) 5.0 Court automation (0-4) 4.0 Alternative dispute resolution (0-3) 2.5 Page 56 Doing Business 2020 Turkey Details – Enforcing Contracts in Turkey – Measure of Quality Answer Score Quality of judicial processes index (0-18) 15.0 Court structure and proceedings (-1-5) 3.5 1. Is there a court or division of a court dedicated solely to hearing commercial cases? Yes 1.5 2. Small claims court 0.0 2.a. Is there a small claims court or a fast-track procedure for small claims? No 2.b. If yes, is self-representation allowed? n.a. 3. Is pretrial attachment available? Yes 1.0 4. Are new cases assigned randomly to judges? Yes, automatic 1.0 5. Does a woman's testimony carry the same evidentiary weight in court as a man's? Yes 0.0 Case management (0-6) 5.0 1. Time standards 1.0 1.a. Are there laws setting overall time standards for key court events in a civil case? Yes 1.b. If yes, are the time standards set for at least three court events? Yes 1.c. Are these time standards respected in more than 50% of cases? Yes 2. Adjournments 0.0 2.a. Does the law regulate the maximum number of adjournments that can be granted? No 2.b. Are adjournments limited to unforeseen and exceptional circumstances? No 2.c. If rules on adjournments exist, are they respected in more than 50% of cases? n.a. 3. Can two of the following four reports be generated about the competent court: (i) time to disposition report; (ii) Yes 1.0 clearance rate report; (iii) age of pending cases report; and (iv) single case progress report? 4. Is a pretrial conference among the case management techniques used before the competent court? Yes 1.0 5. Are there any electronic case management tools in place within the competent court for use by judges? Yes 1.0 6. Are there any electronic case management tools in place within the competent court for use by lawyers? Yes 1.0 Court automation (0-4) 4.0 1. Can the initial complaint be filed electronically through a dedicated platform within the competent court? Yes 1.0 2. Is it possible to carry out service of process electronically for claims filed before the competent court? Yes 1.0 3. Can court fees be paid electronically within the competent court? Yes 1.0 4. Publication of judgments 1.0 4.a Are judgments rendered in commercial cases at all levels made available to the general public Yes through publication in official gazettes, in newspapers or on the internet or court website? 4.b. Are judgments rendered in commercial cases at the appellate and supreme court level made Yes available to the general public through publication in official gazettes, in newspapers or on the internet or court website? Alternative dispute resolution (0-3) 2.5 1. Arbitration 1.0 1.a. Is domestic commercial arbitration governed by a consolidated law or consolidated chapter or Yes section of the applicable code of civil procedure encompassing substantially all its aspects? 1.b. Are there any commercial disputes—aside from those that deal with public order or public policy— Yes that cannot be submitted to arbitration? 1.c. Are valid arbitration clauses or agreements usually enforced by the courts? Yes Page 57 Doing Business 2020 Turkey 2. Mediation/Conciliation 1.5 2.a. Is voluntary mediation or conciliation available? Yes 2.b. Are mediation, conciliation or both governed by a consolidated law or consolidated chapter or Yes section of the applicable code of civil procedure encompassing substantially all their aspects (for example, definition, aim and scope of application, desig 2.c. Are there financial incentives for parties to attempt mediation or conciliation (i.e., if mediation or Yes conciliation is successful, a refund of court filing fees, income tax credits or the like)? Page 58 Doing Business 2020 Turkey Resolving Insolvency Doing Business studies the time, cost and outcome of insolvency proceedings involving domestic legal entities. These variables are used to calculate the recovery rate, which is recorded as cents on the dollar recovered by secured creditors through reorganization, liquidation or debt enforcement (foreclosure or receivership) proceedings. To determine the present value of the amount recovered by creditors, Doing Business uses the lending rates from the International Monetary Fund, supplemented with data from central banks and the Economist Intelligence Unit. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Time required to recover debt (years) To make the data on the time, cost and outcome comparable across economies, several assumptions about the business and the case are used: • Measured in calendar years • Appeals and requests for extension are included - A hotel located in the largest city (or cities) has 201 employees and 50 suppliers. The hotel experiences financial difficulties. Cost required to recover debt (% of debtor’s estate) - The value of the hotel is 100% of the income per capita or the equivalent in local currency of USD 200,000, whichever is greater. • Measured as percentage of estate value - The hotel has a loan from a domestic bank, secured by a mortgage over the hotel’s real estate. • Court fees The hotel cannot pay back the loan, but makes enough money to operate otherwise. • Fees of insolvency administrators In addition, Doing Business evaluates the quality of legal framework applicable to judicial • Lawyers’ fees liquidation and reorganization proceedings and the extent to which best insolvency practices have • Assessors’ and auctioneers’ fees been implemented in each economy covered. • Other related fees Outcome • Whether business continues operating as a going concern or business assets are sold piecemeal Recovery rate for creditors • Measures the cents on the dollar recovered by secured creditors • Outcome for the business (survival or not) determines the maximum value that can be recovered • Official costs of the insolvency proceedings are deducted • Depreciation of furniture is taken into account • Present value of debt recovered Strength of insolvency framework index (0- 16) • Sum of the scores of four component indices: • Commencement of proceedings index (0-3) • Management of debtor’s assets index (0-6) • Reorganization proceedings index (0-3) • Creditor participation index (0-4) Page 59 Doing Business 2020 Turkey Resolving Insolvency - Turkey Indicator Turkey Europe & Central OECD high Best Regulatory Asia income Performance Recovery rate (cents on the dollar) 10.5 38.5 70.2 92.9 (Norway) Time (years) 5.0 2.3 1.7 0.4 (Ireland) Cost (% of estate) 14.5 13.3 9.3 1.0 (Norway) Outcome (0 as piecemeal sale and 1 as going concern) 0 .. .. .. Strength of insolvency framework index (0-16) 10.5 11.2 11.9 None in 2018/19 Figure – Resolving Insolvency in Turkey – Score 11.3 65.6 Recovery rate Strength of insolvency framework index Figure – Resolving Insolvency in Turkey and comparator economies – Ranking and Score DB 2020 Resolving Insolvency Score 0 100 59.1: Romania (Rank: 56) 57.8: Bulgaria (Rank: 61) 55.7: Regional Average (Europe & Central Asia) 54.2: Tunisia (Rank: 69) 53.1: Greece (Rank: 72) 38.5: Turkey (Rank: 120) Note: The ranking of economies on the ease of resolving insolvency is determined by sorting their scores for resolving insolvency. These scores are the simple average of the scores for the recovery rate and the strength of insolvency framework index. Page 60 Doing Business 2020 Turkey Figure – Resolving Insolvency in Turkey – Time and Cost Time (years) Cost (% of estate) 6 14.5 16 13.3 5.0 14 Cost (% of estate) 5 12 Time (years) 10.5 4 3.5 9.3 3.3 9.0 9.0 3.3 10 3 7.0 8 2.3 1.7 6 2 1.3 4 1 2 0 0 Bulgaria Europe Greece OECD Romania Tunisia Turkey & high Central income Asia Page 61 Doing Business 2020 Turkey Figure – Resolving Insolvency in Turkey and comparator economies – Measure of Quality Turkey 3 3 3 1.5 Bulgaria 3 2.5 4 2.5 Greece 5.5 2.5 1 2.5 Romania 6 2.5 2 2.5 Tunisia 5.5 2 1 0 OECD high income 5.3 2.8 2.1 1.9 Europe & Central Asia 4.5 2.5 2.3 1.7 0 2 4 6 8 10 12 14 Sub-Indicator Score Management of debtor's assets index (0-6) Commencement of proceedings index (0-3) Creditor participation index (0-4) Reorganization proceedings index (0-3) Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Figure – Resolving Insolvency in Turkey and comparator economies – Recovery Rate Recovery rate(cents on the dollar) 60 51.3 50 40 37.7 38.5 34.4 32.0 30 20 10.5 10 0 Turkey Bulgaria Greece Romania Tunisia Europe & Central Asia Page 62 Doing Business 2020 Turkey Details – Resolving Insolvency in Turkey Indicator Answer Score Proceeding liquidation (after an The most common and practical way for the hotel to proceed was the postponement of bankruptcy procedure. Article attempt at 377 of Turkish Commercial Code and Article 179 of the Turkish Enforcement and Bankruptcy Code regulate this reorganization) procedure. The debtor must propose a rehabilitation plan. The court may decide to grant up to one year for the debtor to attempt rehabilitation based on the proposed plan. This period can be extended up to 4 years in total. Upon the decision on postponement of bankruptcy, no legal proceeding (including the proceedings for the collection of the public receivables) can be initiated against the debtor and the pending proceedings will be deferred. If the court agrees to postpone the bankruptcy, it will also appoint an administrator in the same decision. The maximum postponement period is one year (it can be extended up to 4 years) during which time the administrator will supervise the business. In most cases, similar to the case study, the debtor does not achieve the projections of the rehabilitation plan and the court will commence liquidation proceedings. However, the postponement of bankruptcy procedures are temporarily suspended by the Statutory Decrees until the end of state of emergency. Outcome piecemeal sale If the debtor fails to achieve its goals shown in the rehabilitation report, then the court will rule for opening its bankruptcy. Therefore in that case it would not be possible for the debtor to continue operating as a going concern. Time (in years) 5.0 After several months of procedural matters and hearings, the court will grant a one-year postponement of bankruptcy period to Mirage. This period can be extended up to 5 years depending on the achievement of the rehabilitation plan. In the case of Mirage, the postponement period will last 3 years in total. After the third year, Mirage can request an extension of the postponement period (another year), however, the court will likely deny this this request, because Mirage is not likely to comply with the financial projections of the proposed rehabilitation plan. The court will declare Mirage bankrupt and notify the bankruptcy office. Bankruptcy administrators will be appointed and will carry out the liquidation procedure. Bankruptcy administrators will examine the inventory and financials of the company, review creditors' claims, prepare creditors' list, organize creditors' meetings and facilitate the sale of the hotel's assets. The bankruptcy procedure will last 18 months. Given the recent restructuring of its commercial courts, pending cases are experiencing significant delays while case files are being reassigned to new courts. It is however expected that this reform will speed up proceedings in the longer term. Cost (% of estate) 14.5 The largest part of the expenses is government levies (4.55% for bankruptcy) and other case-related costs (court fees, publication costs, stamp duty, etc.). Attorney fees comprise about 5% of the total expenses, as per the fee schedule for Monetary Claims and related proceedings before Execution and Bankruptcy Offices. Fees of administrators, auctioneers, accountants and other professionals involved in the insolvency proceedings make up the rest of the expenses. Recovery rate 10.5 (cents on the dollar) Page 63 Doing Business 2020 Turkey Details – Resolving Insolvency in Turkey – Measure of Quality Answer Score Strength of insolvency framework index (0-16) 10.5 Commencement of proceedings index (0-3) 3.0 What procedures are available to a DEBTOR when commencing insolvency proceedings? (a) Debtor may file for 1.0 both liquidation and reorganization Does the insolvency framework allow a CREDITOR to file for insolvency of the debtor? (a) Yes, a creditor 1.0 may file for both liquidation and reorganization What basis for commencement of the insolvency proceedings is allowed under the insolvency framework? (a) (c) Both (a) and (b) 1.0 Debtor is generally unable to pay its debts as they mature (b) The value of debtor's liabilities exceeds the value options are available, of its assets but only one of them needs to be complied with Management of debtor's assets index (0-6) 3.0 Does the insolvency framework allow the continuation of contracts supplying essential goods and services to the No 0.0 debtor? Does the insolvency framework allow the rejection by the debtor of overly burdensome contracts? No 0.0 Does the insolvency framework allow avoidance of preferential transactions? Yes 1.0 Does the insolvency framework allow avoidance of undervalued transactions? Yes 1.0 Does the insolvency framework provide for the possibility of the debtor obtaining credit after commencement of Yes 1.0 insolvency proceedings? Does the insolvency framework assign priority to post-commencement credit? (c) No priority is 0.0 assigned to post- commencement creditors Reorganization proceedings index (0-3) 1.5 Which creditors vote on the proposed reorganization plan? (a) All creditors 0.5 Does the insolvency framework require that dissenting creditors in reorganization receive at least as much as Yes 1.0 what they would obtain in a liquidation? Are the creditors divided into classes for the purposes of voting on the reorganization plan, does each class vote No 0.0 separately and are creditors in the same class treated equally? Creditor participation index (0-4) 3.0 Does the insolvency framework require approval by the creditors for selection or appointment of the insolvency Yes 1.0 representative? Does the insolvency framework require approval by the creditors for sale of substantial assets of the debtor? No 0.0 Does the insolvency framework provide that a creditor has the right to request information from the insolvency Yes 1.0 representative? Does the insolvency framework provide that a creditor has the right to object to decisions accepting or rejecting Yes 1.0 creditors' claims? Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Page 64 Doing Business 2020 Turkey Employing Workers Doing Business presents detailed data for the employing workers indicators on the Doing Business website (http://www.doingbusiness.org). The study does not present rankings of economies on these indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Hiring To make the data comparable across economies, several assumptions about the worker and the (i) whether fixed-term contracts are prohibited for permanent business are used. tasks; (ii) maximum cumulative duration of fixed-term contracts; (iii) length of the maximum probationary period; (iv) minimum The worker: wage;(v) ratio of minimum wage to the average value added per - Is a cashier in a supermarket or grocery store, age 19, with one year of work experience. worker. - Is a full-time employee. - Is not a member of the labor union, unless membership is mandatory. Working hours (i) maximum number of working days allowed per week; (ii) The business: premiums for work: at night, on a weekly rest day and overtime; - Is a limited liability company (or the equivalent in the economy). (iii) whether there are restrictions on work at night, work on a - Operates a supermarket or grocery store in the economy’s largest business city. For 11 weekly rest day and for overtime work; (iv) length of paid annual economies the data are also collected for the second largest business city. leave. - Has 60 employees. - Is subject to collective bargaining agreements if such agreements cover more than 50% of the Redundancy rules food retail sector and they apply even to firms that are not party to them. (i) whether redundancy can be basis for terminating workers; (ii) - Abides by every law and regulation but does not grant workers more benefits than those whether employer needs to notify and/or get approval from third mandated by law, regulation or (if applicable) collective bargaining agreements. party to terminate 1 redundant worker and a group of 9 redundant workers; (iii) whether the law requires employer to reassign or retrain a worker before making worker redundant; (iv) whether priority rules apply for redundancies and reemployment. Redundancy cost (i) notice period for redundancy dismissal; (ii) severance payments, and (iii) penalties due when terminating a redundant worker. Data on the availability of unemployment protection for a worker with one year of employment is also collected. Page 65 Doing Business 2020 Turkey Employing Workers - Turkey Details – Employing Workers in Turkey Answer Hiring Fixed-term contracts prohibited for permanent tasks? Yes Maximum length of a single fixed-term contract (months) No limit Maximum length of fixed-term contracts, including renewals (months) No limit Minimum wage applicable to the worker assumed in the case study (US$/month) 599.7 Ratio of minimum wage to value added per worker 0.5 Maximum length of probationary period (months) 2.0 Working hours Standard workday 7.5 Maximum number of working days per week 6.0 Premium for night work (% of hourly pay) 0.0 Premium for work on weekly rest day (% of hourly pay) 100.0 Premium for overtime work (% of hourly pay) 50.0 Restrictions on night work? Yes Restrictions on weekly holiday? No Restrictions on overtime work? No Paid annual leave for a worker with 1 year of tenure (working days) 14.0 Paid annual leave for a worker with 5 years of tenure (working days) 20.0 Paid annual leave for a worker with 10 years of tenure (working days) 20.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in working days) 18.0 Redundancy rules Dismissal due to redundancy allowed by law? Yes Third-party notification if one worker is dismissed? No Third-party approval if one worker is dismissed? No Third-party notification if nine workers are dismissed? No Third-party approval if nine workers are dismissed? No Retraining or reassignment obligation before redundancy? No Priority rules for redundancies? No Priority rules for reemployment? Yes Redundancy cost Notice period for redundancy dismissal for a worker with 1 year of tenure (weeks of salary) 4.0 Notice period for redundancy dismissal for a worker with 5 years of tenure (weeks of salary) 8.0 Notice period for redundancy dismissal for a worker with 10 years of tenure (weeks of salary) 8.0 Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in weeks of salary) 6.7 Severance pay for redundancy dismissal for a worker with 1 year of tenure (weeks of salary) 4.3 Severance pay for redundancy dismissal for a worker with 5 years of tenure (weeks of salary) 21.7 Page 66 Doing Business 2020 Turkey Severance pay for redundancy dismissal for a worker with 10 years of tenure (weeks of salary) 43.3 Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in weeks of salary) 23.1 Unemployment protection after one year of employment? Yes Page 67 Doing Business 2020 Turkey Business Reforms in Turkey From May 2, 2018 to May 1, 2019, 115 economies implemented 294 business regulatory reforms across the 10 areas measured by Doing Business. Reforms inspired by Doing Business have been implemented by economies in all regions. The following are reforms implemented since Doing Business 2008. =Doing Business reform making it easier to do business. = Change making it more difficult to do business. DB2020 Registering Property: Turkey made property registration less expensive by temporarily reducing mortar charges to transfer property, and faster by reducing the time to obtain a tax assessment. Paying Taxes: Turkey made paying taxes easier by amending the value added tax code to exempt certain capital investments from value added tax. DB2019 Starting a Business: Turkey made starting a business easier by removing the paid-in minimum capital requirement and by eliminating the notarization of company documents and legal books. Dealing with Construction Permits: Turkey increased the transparency of its building regulations by publishing online all pre-application requirements needed to obtain a construction permit. In addition, it strengthened construction quality control by imposing stricter qualification requirements for professionals in charge of approving architectural plans. Registering Property: Turkey made registering property more difficult by increasing the costs of transferring property. Getting Credit: Turkey strengthened access to credit by extending the security interest to products, proceeds and replacements of the original collateral; secured creditors are now given absolute priority over other claims, such as labor and tax, both outside and within bankruptcy proceedings. Turkey also improved access to credit information by reporting data on arrears from telecommunications companies. Paying Taxes: Turkey made paying taxes easier by improving the online portal for filing and payment of taxes. Trading across Borders: Turkey reduced the time and cost to export and import through various initiatives, including expanding the functionalities of the national trade single window, enhancing the risk management system and lowering customs brokers’ fees. Enforcing Contracts: Turkey made enforcing contracts easier by publishing judgments rendered at all levels in commercial cases, and by introducing financial incentives for mediation. Resolving Insolvency: Turkey made resolving insolvency easier by introducing the possibility to obtain post-commencement credit, improving voting arrangements in reorganization and granting creditors greater participation in the proceedings. DB2018 Registering Property: Turkey made registering property easier by lowering the costs of transferring property. Getting Credit: Turkey strengthened access to credit by adopting a new law on secured transactions that establishes a unified collateral registry and allows out-of- court enforcement of collateral. Turkey also improved its credit information system by adopting a new law on personal data protection. Enforcing Contracts: Turkey made enforcing contracts easier by publishing performance measurement reports on local commercial courts. Resolving Insolvency: Turkey made resolving insolvency more difficult by suspending applications for postponement of bankruptcy procedures introduced both before and during the state of emergency. DB2017 Starting a Business: Turkey simplified the process of starting a business by reducing the time needed to register a company. Paying Taxes: Turkey made paying taxes easier by introducing electronic invoicing and electronic bookkeeping. At the same time, however, Turkey also increased the rate of transaction tax applicable on checks. DB2016 Dealing with Construction Permits: Turkey made dealing with construction permits easier by streamlining the process to obtain the fire clearance. DB2015 Starting a Business: Turkey made starting a business more difficult by increasing the notary and company registration fees. Paying Taxes: Turkey made paying taxes more costly for companies by increasing employers’ social security contribution rate. Enforcing Contracts: Turkey made enforcing contracts easier by introducing an electronic filing system for court users. Page 68 Doing Business 2020 Turkey DB2014 Starting a Business: Turkey made starting a business more difficult by increasing the minimum capital requirement. Dealing with Construction Permits: Turkey reduced the time required for dealing with construction permits by setting strict time limits for granting a lot plan and by reducing the documentation requirements for an occupancy permit. Getting Electricity: Turkey made getting electricity easier by eliminating external inspections and reducing some administrative costs. Registering Property: Turkey made transferring property more costly by increasing the registration and several other fees. Protecting Minority Investors: Turkey strengthened investor protections through a new commercial code that requires directors found liable in abusive related-party transactions to disgorge their profits and that allows shareholders to request the appointment of an auditor to investigate alleged prejudicial conflicts of interest. DB2013 Dealing with Construction Permits: Turkey made dealing with construction permits easier by eliminating the requirement to build a shelter in nonresidential buildings with a total area of less than 1,500 square meters. Enforcing Contracts: Turkey made enforcing contracts easier by introducing a new civil procedure law. DB2012 Starting a Business: Turkey made starting a business less costly by eliminating notarization fees for the articles of association and other documents. Paying Taxes: Turkey lowered the social security contribution rate for companies by offering them a 5% rebate DB2010 Getting Credit: Turkey’s private credit bureau added firms to its database, improving access to credit information. DB2009 Protecting Minority Investors: Turkey strengthened investor protections by requiring that an independent auditor assess related-party transactions before approval. DB2008 Paying Taxes: Turkey made paying taxes less costly for companies by reducing the tax rates on corporate income and on interest. Trading across Borders: Turkey made trading across borders easier by introducing an electronic data interchange system, improving information technology infrastructure and training some 2,500 customs officers and 14,000 traders. Page 69 Doing Business 2020 Turkey Page 70