Doing Business 2019 Turkey Economy Profile Turkey Page 1 Doing Business 2019 Turkey Economy Profile of Turkey Doing Business 2019 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 post-filing 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 Labor market regulation Flexibility in employment regulation and aspects of job quality Page 2 Doing Business 2019 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 labor market regulation. Although Doing Business does not present rankings of economies on the labor market regulation 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 reports, which exhaustively cover business regulation and reform in different cities and regions within a nation. These reports 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 report, published in 2003, covered 5 indicator sets and 133 economies. This year’s report 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. More about Doing Business (PDF, 5MB) Page 3 Doing Business 2019 Turkey Ease of Doing Business in DB 2019 Rank Region Europe & Central Asia 190 1 Turkey Income Category Upper middle income 43 DB 2019 Ease of doing business score Population 80,745,020 0 100 City Covered Istanbul 74.33 DB 2019 Ease of Doing Business Score 0 100 74.33: Turkey (Rank: 43) 72.34: Regional Average (Europe & Central Asia) 72.30: Romania (Rank: 52) 71.24: Bulgaria (Rank: 59) 67.23: India (Rank: 77) 66.11: Tunisia (Rank: 80) Note: The ease of doing business score captures the gap of each economy from the best regulatory performance observed on each of the indicators across all economies in the Doing Business sample since 2005. An economy’s ease of doing business score is reflected on a scale from 0 to 100, where 0 represents the lowest and 100 represents the best performance. The ease of doing business ranking ranges from 1 to 190. Rankings on Doing Business topics - Turkey 1 19 26 28 32 39 42 55 59 60 78 80 82 Rank 109 109 136 163 190 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 Ease of Doing Business Score on Doing Business topics - Turkey 100 88.21 90.27 81.23 80 76.58 75.00 74.65 73.19 71.67 71.78 Score 60 40.71 40 20 0 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 Page 4 Doing Business 2019 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 2018. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally start and formally operate To make the data comparable across economies, several assumptions about the a company (number) business and the 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 - Is a limited liability company (or its legal equivalent). If there is more than one type city of limited liability company in the economy, the most common among domestic firms • Postregistration (for example, social security is chosen. Information on the most common form is obtained from incorporation registration, company seal) lawyers or the statistical office. - Operates in the economy’s largest business city. For 11 economies the data are • Obtaining approval from spouse to start a business or to leave the home to register the also collected for the second largest business city. company - The entire office space is approximately 929 square meters (10,000 square feet). - Is 100% domestically owned and has five owners, none of whom is a legal entity; • Obtaining any gender specific document for has a start-up capital of 10 times income per capita and has a turnover of at least company registration and operation or national 100 times income per capita. identification card - Performs general industrial or commercial activities, such as the production or sale of goods or services to the public. The business does not perform foreign trade Time required to complete each procedure activities and does not handle products subject to a special tax regime, for example, (calendar days) liquor or tobacco. It does not use heavily polluting production processes. • Does not include time spent gathering - Leases the commercial plant or offices and is not a proprietor of real estate and the information amount of the annual lease for the office space is equivalent to the income per capita. • Each procedure starts on a separate day (2 procedures cannot start on the same day) - Does not qualify for investment incentives or any special benefits. - Has at least 10 and up to 50 employees one month after the commencement of • Procedures fully completed online are recorded operations, all of whom are domestic nationals. as ½ day - Has a company deed that is 10 pages long. • Procedure is considered completed once final document is received The owners: • No prior contact with officials - Have reached the legal age of majority. If there is no legal age of majority, they are assumed to be 30 years old. Cost required to complete each procedure (% of - Are sane, competent, in good health and have no criminal record. income per capita) - Are married and the marriage is monogamous and registered with the authorities. - Where the answer differs according to the legal system applicable to the woman or • Official costs only, no bribes man in question (as may be the case in economies where there is legal plurality), the • No professional fees unless services required by answer used will be the one that applies to the majority of the population. law or commonly used in practice Paid-in minimum capital (% of income per capita) • Funds deposited in a bank or with third party before registration or up to 3 months after incorporation Page 5 Doing Business 2019 Turkey Starting a Business - Turkey Standardized Company Legal form Limited Sirket (LS) Paid-in minimum capital requirement TRY 0 City Covered Istanbul Indicator Turkey Europe & OECD high Best Regulatory Central Asia income Performance Procedure – Men (number) 7 5.2 4.9 1 (New Zealand) Time – Men (days) 7 12.9 9.3 0.5 (New Zealand) Cost – Men (% of income per capita) 10.6 4.6 3.1 0.0 (Slovenia) Procedure – Women (number) 7 5.2 4.9 1 (New Zealand) Time – Women (days) 7 12.9 9.3 0.5 (New Zealand) Cost – Women (% of income per capita) 10.6 4.6 3.1 0.0 (Slovenia) Paid-in min. capital (% of income per capita) 0.0 2.3 8.6 0.0 (117 Economies) Figure – Starting a Business in Turkey and comparator economies – Ranking and Score DB 2019 Starting a Business Score 0 100 90.23: Tunisia (Rank: 63) 90.02: Regional Average (Europe & Central Asia) 88.21: Turkey (Rank: 78) 85.38: Bulgaria (Rank: 99) 83.90: Romania (Rank: 111) 80.96: India (Rank: 137) 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 2019 Turkey Figure – Starting a Business in Turkey – Procedure, Time and Cost Time (days) Cost (% of income per capita) 7 9 8 6 Cost (% of income per capita) 7 5 6 Time (days) 4 5 3 4 3 2 2 1 1 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 2019 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 Less than one day no charge temporary tax 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 2018 published in the Official Gazette No. 30,285 on December 29, 2017, the fees applicable upon the incorporation of a limited liability company are set as of January 1, 2018 as follows: - Registration fee for a limited liability company: TL 1,729.20 - 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 - Registration fee for manager’s signature: TL 420.60 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 205 - TL 1.001 - 25.000 : TL 220 - TL 25.001 - 250.000 : TL 250 - TL 250.001 - 1.000.000 : TL 340 - TL 1.000.001 - more : TL 400 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 TL 120 Agency : Notary with previous After incorporation, the company's managers or their representatives must visit a procedure) 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 2019 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 Agency : Municipality meter 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 no charge Agency : Social Security Institution (Sosyal Güvenlik Kurumu) (online 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 2019 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 2018. See the methodology for more information What the indicators measure Case study assumptions Procedures to legally build a warehouse To make the data comparable across economies, several assumptions about the (number) construction company, the warehouse project and the utility connections are used. • Submitting all relevant documents and obtaining The construction company (BuildCo): all necessary clearances, licenses, permits and certificates - Is a limited liability company (or its legal equivalent) and operates in the economy’s largest business city. For 11 economies the data are also collected for the second • Submitting all required notifications and receiving largest business city. all necessary inspections - Is 100% domestically and privately owned; has five owners, none of whom is a • Obtaining utility connections for water and legal entity. Has a licensed architect and a licensed engineer, both registered with sewerage the local association of architects or engineers. BuildCo is not assumed to have any other employees who are technical or licensed experts, such as geological or • Registering and selling the warehouse after its completion topographical experts. - Owns the land on which the warehouse will be built and will sell the warehouse Time required to complete each procedure upon its completion. (calendar days) The warehouse: • Does not include time spent gathering information - Will be used for general storage activities, such as storage of books or stationery. - Will have two stories, both above ground, with a total constructed area of • Each procedure starts on a separate day— approximately 1,300.6 square meters (14,000 square feet). Each floor will be 3 though procedures that can be fully completed meters (9 feet, 10 inches) high and will be located on a land plot of approximately online are an exception to this rule 929 square meters (10,000 square feet) that is 100% owned by BuildCo, and the • Procedure is considered completed once final warehouse is valued at 50 times income per capita. document is received - Will have complete architectural and technical plans prepared by a licensed architect. If preparation of the plans requires such steps as obtaining further • No prior contact with officials documentation or getting prior approvals from external agencies, these are counted Cost required to complete each procedure (% of as procedures. income per capita) - Will take 30 weeks to construct (excluding all delays due to administrative and regulatory requirements). • Official costs only, no bribes The water and sewerage connections: Building quality control index (0-15) - Will be 150 meters (492 feet) from the existing water source and sewer tap. If there • Quality of building regulations (0-2) is no water delivery infrastructure in the economy, a borehole will be dug. If there is • Quality control before construction (0-1) no sewerage infrastructure, a septic tank in the smallest size available will be installed or built. • Quality control during construction (0-3) - Will have an average water use of 662 liters (175 gallons) a day and an average • Quality control after construction (0-3) wastewater flow of 568 liters (150 gallons) a day. Will have a peak water use of 1,325 liters (350 gallons) a day and a peak wastewater flow of 1,136 liters (300 • Liability and insurance regimes (0-2) gallons) a day. • Professional certifications (0-4) - 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 2019 Turkey Dealing with Construction Permits - Turkey Standardized Warehouse Estimated value of warehouse TRY 1,896,936.30 City Covered Istanbul Indicator Turkey Europe & OECD high Best Regulatory Central Asia income Performance Procedures (number) 18 16.0 12.7 None in 2017/18 Time (days) 103 170.1 153.1 None in 2017/18 Cost (% of warehouse value) 3.9 4.0 1.5 None in 2017/18 Building quality control index (0-15) 13.0 12.0 11.5 15.0 (3 Economies) Figure – Dealing with Construction Permits in Turkey and comparator economies – Ranking and Score DB 2019 Dealing with Construction Permits Score 0 100 75.46: Bulgaria (Rank: 37) 73.81: India (Rank: 52) 73.19: Turkey (Rank: 59) 70.66: Tunisia (Rank: 77) 69.02: Regional Average (Europe & Central Asia) 58.20: Romania (Rank: 146) 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. Figure – Dealing with Construction Permits in Turkey – Procedure, Time and Cost Time (days) Cost (% of warehouse value) 1.8 100 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 11 Doing Business 2019 Turkey Figure – Dealing with Construction Permits in Turkey and comparator economies – Measure of Quality 15 14.0 14.0 13.0 13.0 12.0 12.0 Index score 10 5 0 Turkey Bulgaria India 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. The fee schedule based on the land area: 1 - 1.000 m2 : 143 TL 1.001 - 3.000 m2: 215 TL 3.001 - 5.000 m2: 430,25 TL 5.001-10.000 m2: 573,00 TL 10.001 - 20.000 m2: 788,25 TL 20.001 - 50.000 m2: 1.029,00 TL 50.001 - 100.000 m2: 1.251,00 TL 100.001 - 200.000 m2: 1.433,50 TL 200.001 - 500.000 m2: 1.719,50 TL In this case, 143,00 TRY will be charged by District Cadastral Office. 3 Obtain construction direction plan (Insaat Istikamet Rolevesi) and elevation 5 days TRY 1,020 of cross 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. The fee is provided in the fee schedule of Arnavutköy Municipality: - Construction direction plan = TRY 385. - Elevation of cross-section = TRY 385. - Zoning status = TRY 250. Page 12 Doing Business 2019 Turkey 4 Hire an independent building inspector 4 days TRY 29,403 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 5 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 Page 13 Doing Business 2019 Turkey 6 Obtain proof of payment and clearance of water and sewerage 7 days TRY 5,973 infrastructure 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. 7 Register with Social Security Institute before the commencement of 1 day no charge construction works 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. The fee is provided in the fee schedule of Arnavutköy Municipality: -Building construction fee: TRY 10/sq. meters -Road fee: TYR 9,625 9 Obtain excavation (Harfiyat) permit from the Department of Environment of 1 day TRY 2,817 the Municipality 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. The fee is provided in the fee schedule of Arnavutköy Municipality: -Singboard Board (Tabela Harci): TRY 185 -Project approval (Proje Tasdik Harci): 1300*0.29 = TRY 377 -Project registration fee (Proje Tescil Harci): TRY 110 -Excavation fee (Zemin Asma): (650*1.5)*0.47 = TRY 458.35 -Transportation (Tasima ve Kabul): TRY 80 -Disposal permit (Toprak Dokum): 650*1.5*0.9= TRY 1096.875 -Technical fee (Teknik Eleman): 185+1300 * 0.25= TRY 510 10 Obtain proof of "no outstanding taxes" clearance certificate from the Tax 1 day no charge Authority 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. Page 14 Doing Business 2019 Turkey 11 Request and obtain a “no outstanding social security premium” clearance 1 day no charge upon 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 5 days no charge municipality 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. The fee is provided in the fee schedule of Arnavutköy Municipality -Technical staff fee (Teknik Eleman Harci= 2*(185+(650*0.25)) = TRY 695 -(Iskan Harci) 1.23*1300= TRY 1,599 Change the title deed from a land title deed to a building title deed 10 days TRY 395 15 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. The fee is based on the area of the immovable property: -Between 1.001 and 3.000 sq. meters: TRY 395 Obtain operation permit from the Municipality 15 days TRY 3,887 16 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. The fee is provided in the fee schedule of Arnavutköy Municipality: 1. Unit Fee: TRY 1.75/sq. meters 2. Technical fee: TRY 165 + 0.10/sq. meters 3. License Report fee: TRY 15 4. Operation License fee: TRY 1/sqm Page 15 Doing Business 2019 Turkey 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. 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 2019 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; 1.0 Free of charge. Which requirements for obtaining a building permit are clearly specified in the building List of required 1.0 regulations or on any 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 Licensed 1.0 compliance with existing building regulations? (0-1) architect; 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? Inspections by 1.0 (0-2) 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 Yes, final 2.0 with the approved plans and regulations? (0-2) inspection 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 Professional in 1.0 once it is in use (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 No party is 0.0 structural flaws or problems in the building once it is in use (Latent Defect Liability Insurance required by law or Decennial Insurance)? (0-1) to obtain insurance . Professional certifications index (0-4) 4.0 What are the qualification requirements for the professional responsible for verifying that the Minimum number 2.0 architectural plans or drawings are in compliance with existing building regulations? (0-2) of years of experience; University degree in architecture or engineering; Being a registered architect or engineer. Page 17 Doing Business 2019 Turkey What are the qualification requirements for the professional who supervises the construction Minimum number 2.0 on the ground? (0-2) of years of experience; University degree in engineering, construction or construction management; Being a registered architect or engineer. Page 18 Doing Business 2019 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 2018. See the methodology for more information. What the indicators measure Case study assumptions Procedures to obtain an electricity connection To make the data comparable across economies, several assumptions about the (number) warehouse, the electricity connection and the monthly consumption are used. • Submitting all relevant documents and obtaining The warehouse: all necessary clearances and permits - Is owned by a local entrepreneur and is used for storage of goods. • Completing all required notifications and - Is located in the economy’s largest business city. For 11 economies the data are receiving all necessary inspections also collected for the second largest business city. • Obtaining external installation works and possibly - Is located in an area where similar warehouses are typically located and is in an purchasing material for these works area with no physical constraints. For example, the property is not near a railway. - Is a new construction and is being connected to electricity for the first time. • Concluding any necessary supply contract and - Has two stories with a total surface area of approximately 1,300.6 square meters obtaining final supply (14,000 square feet). The plot of land on which it is built is 929 square meters Time required to complete each procedure (10,000 square feet). (calendar days) The electricity connection: • Is at least 1 calendar day - Is a permanent one with a three-phase, four-wire Y connection with a subscribed • Each procedure starts on a separate day capacity of 140-kilo-volt-ampere (kVA) with a power factor of 1, when 1 kVA = 1 • Does not include time spent gathering kilowatt (kW). information - Has a length of 150 meters. The connection is to either the low- or medium-voltage distribution network and is either overhead or underground, whichever is more • Reflects the time spent in practice, with little common in the area where the warehouse is located and requires works that involve follow-up and no prior contact with officials the crossing of a 10-meter road (such as by excavation or overhead lines) but are all Cost required to complete each procedure (% of carried out on public land. There is no crossing of other owners’ private property because the warehouse has access to a road. income per capita) - Does not require work to install the internal wiring of the warehouse. This has • Official costs only, no bribes already been completed up to and including the customer’s service panel or • Value added tax excluded switchboard and the meter base. The reliability of supply and transparency of The monthly consumption: tariffs index (0-8) - It is assumed that the warehouse operates 30 days a month from 9:00 a.m. to 5:00 • Duration and frequency of power outages (0–3) p.m. (8 hours a day), with equipment utilized at 80% of capacity on average and that • Tools to monitor power outages (0–1) there are no electricity cuts (assumed for simplicity reasons) and the monthly energy consumption is 26,880 kilowatt-hours (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 • Regulatory monitoring of utilities’ performance supplier. (0–1) - Tariffs effective in January of the current year are used for calculation of the price of electricity for the warehouse. Although January has 31 days, for calculation • Financial deterrents limiting outages (0–1) purposes only 30 days are used. • 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 the ranking on the ease of getting electricity. Page 19 Doing Business 2019 Turkey Getting Electricity - Turkey Standardized Connection Price of electricity (US cents per kWh) 10.1 Name of utility CLK Boğaziçi Elektrik Perakende Satış A.Ş. City Covered Istanbul Indicator Turkey Europe & OECD high Best Regulatory Central Asia income Performance Procedures (number) 4 5.3 4.5 3 (25 Economies) Time (days) 55 110.3 77.2 18 (3 Economies) Cost (% of income per capita) 389.5 325.1 64.2 0.0 (3 Economies) Reliability of supply and transparency of tariff 5 5.5 7.5 8.0 (27 Economies) index (0-8) Figure – Getting Electricity in Turkey and comparator economies – Ranking and Score DB 2019 Getting Electricity Score 0 100 89.15: India (Rank: 24) 82.42: Tunisia (Rank: 51) 81.23: Turkey (Rank: 60) 71.66: Regional Average (Europe & Central Asia) 54.93: Bulgaria (Rank: 147) 53.53: Romania (Rank: 154) 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. Page 20 Doing Business 2019 Turkey Figure – Getting Electricity in Turkey – Procedure, Time and Cost Time (days) Cost (% of income per capita) 400 50 350 Cost (% of income per capita) 300 40 Time (days) 250 30 200 20 150 100 10 50 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 reflected here, see the summary below. Figure – Getting Electricity in Turkey and comparator economies – Measure of Quality 8 7 7 6.5 6 6 6 5.5 Index score 5 5 4 3 2 1 0 Turkey Bulgaria India Romania Tunisia Europe & Central Asia Page 21 Doing Business 2019 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 30 calendar days TRY 5,387.85 connection agreement Agency : CLK Boğaziçi Elektrik Perakende Satış A.Ş. The customer hires one or many electrical engineers registered with the Chamber of Electrical Engineers (EMO) or an engineering company (with an engineer on the payroll who is registered with the Chamber of Electrical Engineers). The Engineer prepares the electrical project based on the facility’s architectural project. Part of the electricity project, the engineer prepares a connection scheme (for both internal and external installations). For connection applications, this project is obligatory. The engineer will be in charge of the external works, and most of the time also carries out the internal installation. CLK Boğaziçi Elektrik Perakende Satış A.Ş. will check the network to see if at the point of connection a transformer is needed. If so, the client is required to install a transformer. Along with the application, the engineer submits the electricity project. The client submits the following in addition to the electricity project to the utility: • Letter of application • Copy of ID card of Company Representative • Company seal • Rental contract / ownership documentation (land deed, certificate of occupancy) • Technical Production Form (Description of the business) • Consent License ( from shareholders for the tenants ) • Trade Registry Gazette • Tax Registration Certificate • List of authorized signatories • Letter of authorization from public notary for the people managing the process, but not listed in the company's list of authorized signatories • Requested capacity • Invoice of payment of connection fees The application for connection is evaluated by CLK Boğaziçi Elektrik Perakende Satış A.Ş, taking into consideration the requirements for expansion investment or new investment within the framework of the existing circumstances of the distribution system. CLK Boğaziçi Elektrik Perakende Satış A.Ş. inspects the site accordingly: • If the existing circumstances of the distribution system are suitable for connection, the connection scheme is approved and a connection agreement is signed between the utility and the client upon submission of required documents; • If the existing circumstances of the distribution system are not suitable for connection (as in our case where a substation is needed), the client is advised about a reasonable period to complete the connection. 2 Obtain external works from private firm or registered electrical engineer 18 calendar days TRY 136,945.84 Agency : Private firm/Electrical engineer(s) In the assumed area connections are generally made underground. Physical implementation of both internal and external wiring is outsourced to the same Engineer or any other similar Engineers. The external works consist of the construction of private substation and underground connection to a central substation. The Engineer(s) will need to purchase the material for the external connection. 3 Obtain excavation permit from municipality 8 calendar days TRY 1,000 Agency : Istanbul Municipality/ Zeytinburnu Municipality (depending on whether land is on main arterial road or not) 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). Page 22 Doing Business 2019 Turkey 4 Submit Electricity Structural Project and await meter installation and final 7 calendar days TRY 4,426.1 connection Agency : CLK Boğaziçi Elektrik Perakende Satış A.Ş. 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 CLK Boğaziçi Elektrik Perakende Satış A.Ş. 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 23 Doing Business 2019 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) 22.4 System average interruption frequency index (SAIFI) 12.6 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 Yes supply? 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 Yes exceed a certain cap? Communication of tariffs and tariff changes (0-1) 1 Are effective tariffs available online? Yes Link to the website, if available online http://lisans.epdk.org .tr/epvys- tarife/faces/pages/tar ife.xhtml http://enerjienstitusu. com/elektrik-fiyatlari/ 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 24 Doing Business 2019 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 2018. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally transfer title on To make the data comparable across economies, several assumptions about the immovable property (number) parties to the transaction, the property and the procedures are used. • Preregistration procedures (for example, The parties (buyer and seller): checking for liens, notarizing sales agreement, paying property transfer taxes) - Are limited liability companies (or the legal equivalent). - Are located in the periurban area of the economy’s largest business city. For 11 • Registration procedures in the economy's largest economies the data are also collected for the second largest business city. business city. - Are 100% domestically and privately owned. • Postregistration procedures (for example, filling - Have 50 employees each, all of whom are nationals. title with municipality) - Perform general commercial activities. Time required to complete each procedure The property (fully owned by the seller): (calendar days) - Has a value of 50 times income per capita, which equals the sale price. • Does not include time spent gathering - Is fully owned by the seller. information - Has no mortgages attached and has been under the same ownership for the past • Each procedure starts on a separate day - 10 years. though procedures that can be fully completed - Is registered in the land registry or cadastre, or both, and is free of title disputes. online are an exception to this rule - Is located in a periurban commercial zone, and no rezoning is required. - Consists of land and a building. The land area is 557.4 square meters (6,000 • Procedure is considered completed once final square feet). A two-story warehouse of 929 square meters (10,000 square feet) is document is received located on the land. The warehouse is 10 years old, is in good condition, has no • No prior contact with officials heating system and complies with all safety standards, building codes and legal requirements. The property, consisting of land and building, will be transferred in its Cost required to complete each procedure (% of entirety. property value) - Will not be subject to renovations or additional construction following the purchase. • Official costs only (such as administrative fees, - Has no trees, natural water sources, natural reserves or historical monuments of duties and taxes). any kind. - Will not be used for special purposes, and no special permits, such as for • Value Added Tax, Capital Gains Tax and illicit residential use, industrial plants, waste storage or certain types of agricultural payments are excluded activities, are required. - Has no occupants, and no other party holds a legal interest in it. Quality of land administration index (0-30) • 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 25 Doing Business 2019 Turkey Registering Property - Turkey Indicator Turkey Europe & OECD high Best Regulatory Central Asia income Performance Procedures (number) 6 5.3 4.7 1 (4 Economies) Time (days) 5 20.3 20.1 1 (New Zealand) Cost (% of property value) 4.0 2.6 4.2 0.0 (Saudi Arabia) Quality of the land administration index (0-30) 23.0 19.6 23.0 None in 2017/18 Figure – Registering Property in Turkey and comparator economies – Ranking and Score DB 2019 Registering Property Score 0 100 76.58: Turkey (Rank: 39) 75.57: Regional Average (Europe & Central Asia) 74.96: Romania (Rank: 44) 69.32: Bulgaria (Rank: 67) 64.89: Tunisia (Rank: 87) 43.55: India (Rank: 166) 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. Figure – Registering Property in Turkey – Procedure, Time and Cost Time (days) Cost (% of property value) 5 4.5 4 Cost (% of property value) 4 3.5 3 Time (days) 3 2.5 2 2 1.5 1 1 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 26 Doing Business 2019 Turkey Figure – Registering Property in Turkey and comparator economies – Measure of Quality 30 25 23.0 Index score 19.0 19.6 20 17.0 15 13.0 10 8.7 5 0 Turkey Bulgaria India 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, no charge 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 1 day TRY 44 transactions on 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 27 Doing Business 2019 Turkey 3 Obtain a property tax clearance letter and a real estate value statement 1 day no charge from the 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 1 day no charge Agency : Land Registry office It is possible for parties to make an online appointment from the general IT system of the Land Registry in order to pick a date/time when to submit an application to the registration. The seller and the purchaser (or their representatives) meet at the registry office and fill in an application form. Once the required documents are presented, the parties declare the consideration to be paid by the purchaser. The officer calculates the mortar dues based on the declared purchase price, and gives the account details of the registry office for the payment, and makes an appointment on the very day or on the consecutive day for the parties to pay the dues and come back again for signature. The documentation shall include: (i) Annual property tax declaration of the seller and buyer. (ii) The Authorization Certificate of the manager obtained from trade registry, if transactions are carried out by the company signatories (obtained in Procedure No. 2). (iii) The notarized proxies of the representatives (if they will perform the transaction) (iv) The identity cards of signatories (passport for foreigners) (v) One photograph of of the seller (or his representative) and two photographs of the buyer (or his representative) (vi) Signature Circular of the buyer company and seller company, (vii)Title deed copy or information regarding the title deed of the property (viii) A document showing the current value of the property and that there are no outstanding debts related to property tax, issued by the Municipality (obtained in Procedure No. 3). (ix) Signatories shall keep the seal of the company during the Procedure. The Land Registry Office accepts application when all the above listed documents are submitted and informs interested parties (with a text message generated through the general IT system of the Land Registry) giving them the application number and notifying that the application is being processed. According to the Circular No. 2014/8 dated 17 October 2014 issued by the General Directorate of the Land Registry and Cadaster Department of Land Registry, it is possible to conduct title deed transactions for properties located all over Turkey in any Land Registry regardless of the property's location and jurisdiction area of the relevant office. For title deed transactions related to properties located outside jurisdiction area, the non-competent offices cannot carry out any transaction unless they request authorization and records of the relevant property from the competent office over the TAKBIS system. TAKBIS system enables the non-competent office to transfer a transaction request to the competent office and complete the transaction based on the authorization and records received over TAKBIS. In brief, it is possible to complete a title deed transaction without making a trip to the city/district where the land is located. In case this remote system is used, registration fees increase by 100%. Page 28 Doing Business 2019 Turkey 5 Registration fee is paid at a commercial bank Less than one day, TRY 76,136.2; (TL Agency : Commercial Bank online 258.75 (registration Mortar dues are paid to the bank account of the land registry, and the bank will fee of TL 103.5 give a receipt of the payment. The mortar due is equal to 4% of the declared multiplied by amount in Turkish Lira, collected 2% each from the parties, but in practice usually Istanbul's local the purchaser pays all. On September 30, 2017, mortar increased back to 4% of coefficient of 2.5 )+ 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 4% of declared Hizmet Bedeli) to cover overall expenses of Land Registries in Turkey. This is transaction price usually paid by the purchaser to the bank account of the Land Registry. (mortar dues) or 4% Registration fee is calculated by multiplying TL 103.50 fixed charge with local of the taxable value coefficients subject to the Law regarding Service Charges to Be Collected by of the real estate Land Registry Offices numbered 6544. Local coefficient for all districts of Istanbul (whichever is is set out as 2.5 in the tariff published by the Directorate General of Land higher).) 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. 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 29 Doing Business 2019 Turkey Details – Registering Property in Turkey – Measure of Quality Answer Score Reliability of infrastructure index (0-8) 8.0 What is the institution in charge of immovable property registration? Land Registry Office (Tapu) In what format are the majority of title or deed records kept in the largest business city—in a Computer/Fully 2.0 paper format or in a computerized format (scanned or fully digital)? digital Is there an electronic database for checking for encumbrances (liens, mortgages, restrictions Yes 1.0 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 the majority of maps of land plots kept in the largest business city—in a Computer/Fully 2.0 paper format or in a computerized format (scanned or fully digital)? digital Is there an electronic database for recording boundaries, checking plans and providing Yes 1.0 cadastral information (geographic information system)? Is the information recorded by the immovable property registration agency and the cadastral Single database 1.0 or mapping agency 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 Yes 1.0 same identification 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 Only 0.0 property registration in the largest business city? intermediaries and interested parties Is the list of documents that are required to complete any type of property transaction made Yes, online 0.5 publicly available–and if so, how? Link for online access: https://randevu.tk gm.gov.tr/en/App ointment/Appoint mentDocuments Is the applicable fee schedule for any property transaction at the agency in charge of Yes, online 0.5 immovable property registration in the largest business city made publicly available–and if so, how? Link for online access: https://www.tkgm. gov.tr/sites/defaul t/files/icerik/ekleri /2018_fiyat_listes i.pdf Does the agency in charge of immovable property registration commit to delivering a legally No 0.0 binding document that proves property ownership within a specific time frame–and if so, how does it communicate the service standard? Link for online access: Is there a specific and separate mechanism for filing complaints about a problem that Yes 1.0 occurred at the agency in charge of immovable property registration? Contact information: BIMER: https://www.bimer .gov.tr/ CIMER: https://bilgiedinm e.tccb.gov.tr/For ms/pgDefault.asp x Are there publicly available official statistics tracking the number of transactions at the Yes 0.5 immovable property registration agency? Number of property transfers in the largest business city in 2017: 238383.0 Page 30 Doing Business 2019 Turkey Who is able to consult maps of land plots in the largest business city? Freely accessible 0.5 by anyone Is the applicable fee schedule for accessing maps of land plots made publicly available— Yes, online 0.5 and if so, how? Link for online access: https://www.tkgm. gov.tr/sites/defaul t/files/icerik/ekleri /2018_fiyat_listes i.pdf Does the cadastral or mapping agency commit to delivering an updated map within a No 0.0 specific time frame—and if so, how does it communicate the service standard? Link for online access: Is there a specific and separate mechanism for filing complaints about a problem that Yes 0.5 occurred at the cadastral or mapping agency? Contact information: BIMER: https://www.bimer .gov.tr/ CIMER: https://bilgiedinm e.tccb.gov.tr/For ms/pgDefault.asp x Geographic coverage index (0–8) 4.0 Are all privately held land plots in the economy formally registered at the immovable property No 0.0 registry? Are all privately held land plots in the largest business city formally registered at the Yes 2.0 immovable property registry? Are all privately held land plots in the economy mapped? No 0.0 Are all privately held land plots in the largest business city 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 Yes 1.5 property registry to make them opposable to third parties? Is the system of immovable property registration subject to a state or private guarantee? Yes 0.5 Is there a specific 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? Does the legal system require a control of legality of the documents necessary for a property Yes 0.5 transaction (e.g., 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 Yes 0.5 transaction? If yes, who is responsible for verifying the identity of the parties? Registrar; Is there a national database to verify the accuracy of identity documents? Yes 1.0 For a standard land dispute between two local businesses over tenure rights of a property The Civil Court of worth 50 times gross national income (GNI) per capita and located in the largest business First Instance of city, what court would be in charge of the case in the first instance? Istanbul How long does it take on average to obtain a decision from the first-instance court for such a Between 1 and 2 2.0 case (without appeal)? years Are there any statistics on the number of land disputes in the first instance? Yes 0.5 Number of land disputes in the largest business city in 2017: Number of land disputes that were filed to Court in 2017: 28734 Page 31 Doing Business 2019 Turkey 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 32 Doing Business 2019 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 2018. 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 • Rights of borrowers and lenders through indicators. The depth of credit information index measures rules and practices collateral laws (0-10) affecting the coverage, scope and accessibility of credit information available • Protection of secured creditors’ rights through through a credit registry or a credit bureau. The strength of legal rights index bankruptcy laws (0-2) 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 Depth of credit information index (0–8) determined whether a unitary secured transactions system exists. Then two case • Scope and accessibility of credit information scenarios, case A and case B, are used to determine how a nonpossessory security distributed by credit bureaus and credit registries interest is created, publicized and enforced according to the law. Special emphasis (0-8) 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 In some economies the legal framework for secured transactions will allow only case credit bureau as a percentage of adult population A or case B (not both) to apply. Both cases examine the same set of legal provisions Credit registry coverage (% of adults) relating to the use of movable collateral. • Number of individuals and firms listed in credit Several assumptions about the secured borrower (ABC) and lender (BizBank) registry as a percentage of adult population are used: - 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 33 Doing Business 2019 Turkey Getting Credit - Turkey Indicator Turkey Europe & OECD high Best Regulatory Central Asia income Performance Strength of legal rights index (0-12) 7 7.2 6.1 12 (5 Economies) Depth of credit information index (0-8) 8 6.6 6.7 8 (42 Economies) Credit registry coverage (% of adults) 77.7 25.3 21.8 100.0 (4 Economies) Credit bureau coverage (% of adults) 0 43.4 65.3 100.0 (25 Economies) Figure – Getting Credit in Turkey and comparator economies – Ranking and Score DB 2019 Getting Credit Score 0 100 80.00: India (Rank: 22) 80.00: Romania (Rank: 22) 75.00: Turkey (Rank: 32) 68.70: Regional Average (Europe & Central Asia) 65.00: Bulgaria (Rank: 60) 50.00: Tunisia (Rank: 99) 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. Figure – Legal Rights in Turkey and comparator economies 8 9 9 8 7 7.2 7 6 Index Score 5 4 3 3 2 1 0 Turkey Bulgaria India Romania Tunisia Europe & Central Asia Page 34 Doing Business 2019 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 No enforcement of functional equivalents 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 No requiring a specific description of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring a Yes specific description of collateral? May a security right extend to future or after-acquired assets, and does it extend automatically to the products, proceeds and Yes replacements of the original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be Yes secured between parties; 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 Yes asset type, with an 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 No online by any interested third party? Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor defaults outside an insolvency Yes procedure? 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 No procedure? Does the law 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 Yes the secured creditor to sell 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 8 8 7 7 7 7 6.6 6 Index Score 5 5 4 3 2 1 0 Turkey Bulgaria India Romania Tunisia Europe & Central Asia Page 35 Doing Business 2019 Turkey Details – Credit Information in Turkey Depth of credit information index (0-8) Credit Credit Score bureau registry 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? Total Score ("yes" to either public bureau or private registry) 8 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 35,842,328 Number of firms 0 6,115,397 Total 0 41,957,725 Percentage of adult population 0 77.7 Page 36 Doing Business 2019 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 2018. See the methodology for more information. What the indicators measure Case study assumptions • Extent of disclosure index (0–10): Review and To make the data comparable across economies, a case study uses several approval requirements for related-party assumptions about the business and the transaction. transactions; Disclosure requirements for related- party transactions The business (Buyer): • Extent of director liability index (0–10): Ability - Is a publicly traded corporation listed on the economy’s most important stock of minority shareholders to sue and hold exchange. If there are fewer than ten listed companies or if there is no stock interested directors liable for prejudicial related- exchange in the economy, it is assumed that Buyer is a large private company with party transactions; Available legal remedies multiple shareholders. (damages, disgorgement of profits, fines, - Has a board of directors and a chief executive officer (CEO) who may legally act on imprisonment, rescission of the transaction) behalf of Buyer where permitted, even if this is not specifically required by law. • Ease of shareholder suits index (0–10): - Has a supervisory board in economies with a two-tier board system on which Mr. Access to internal corporate documents; James appointed 60% of the shareholder-elected members. Evidence obtainable during trial and allocation of - Has not adopted bylaws or articles of association that go beyond the minimum legal expenses requirements. Does not follow codes, principles, recommendations or guidelines that are not mandatory. • Extent of conflict of interest regulation index - Is a manufacturing company with its own distribution network. (0–10): Simple average of the extent of disclosure, extent of director liability and ease of The transaction involves the following details: shareholder indices - Mr. James owns 60% of Buyer, sits on Buyer’s board of directors and elected two • Extent of shareholder rights index (0-10): directors to Buyer’s five-member board. Shareholders’ rights and role in major corporate - Mr. James also owns 90% of Seller, a company that operates a chain of retail decisions hardware stores. Seller recently closed a large number of its stores. • Extent of ownership and control index (0-10): - Mr. James proposes that Buyer purchase Seller’s unused fleet of trucks to expand Governance safeguards protecting shareholders Buyer’s distribution of its food products, a proposal to which Buyer agrees. The price from undue board control and entrenchment is equal to 10% of Buyer’s assets and is higher than the market value. - The proposed transaction is part of the company’s principal activity and is not • Extent of corporate transparency index (0-10): outside the authority of the company. Corporate transparency on ownership stakes, - Buyer enters into the transaction. All required approvals are obtained, and all compensation, audits and financial prospects required disclosures made—that is, the transaction was not entered into fraudulently. • Extent of shareholder governance index (0– - The transaction causes damages to Buyer. Shareholders sue Mr. James and the 10): Simple average of the extent of shareholders executives and directors that approved the transaction. rights, extent of ownership and control and extent of corporate transparency indices • Strength of minority investor protection index (0–10): Simple average of the extent of conflict of interest regulation and extent of shareholder governance indices Page 37 Doing Business 2019 Turkey Protecting Minority Investors - Turkey Indicator Turkey Europe & OECD high Best Regulatory Central Asia income Performance Extent of disclosure index (0-10) 9.0 7.3 6.5 10 (13 Economies) Extent of director liability index (0-10) 5.0 4.9 5.3 10 (Cambodia) Ease of shareholder suits index (0-10) 6.0 6.8 7.3 10 (Djibouti) Extent of shareholder rights index (0-10) 8.0 7.1 6.4 10 (Kazakhstan) Extent of ownership and control index (0-10) 7.0 5.6 5.4 None in 2017/18 Extent of corporate transparency index (0-10) 8.0 7.5 7.6 10 (6 Economies) Figure – Protecting Minority Investors in Turkey and comparator economies – Ranking and Score DB 2019 Protecting Minority Investors Score 0 100 80.00: India (Rank: 7) 71.67: Turkey (Rank: 26) 68.33: Bulgaria (Rank: 33) 65.29: Regional Average (Europe & Central Asia) 60.00: Romania (Rank: 64) 56.67: Tunisia (Rank: 83) 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. Figure – Protecting Minority Investors in Turkey and comparator economies – Measure of Quality Turkey 8 5 9 7 8 6 Bulgaria 9 2 10 4 8 8 India 8 7 8 8 10 7 Romania 7 4 9 5 6 5 Tunisia 7 7 6 4 5 5 OECD high income 7.4 5.5 6.5 5.2 6.3 7.4 Europe & Central Asia 7.6 4.6 7.2 5.6 7.3 6.8 0 10 20 30 40 50 60 Sub-Indicator Score Extent of corporate transparency index (0-10) Extent of director liability index (0-10) Extent of disclosure index (0-10) Extent of ownership and control index (0-10) Extent of shareholder rights index (0-10) Ease of shareholder suits index (0-10) Page 38 Doing Business 2019 Turkey Details – Protecting Minority Investors in Turkey – Measure of Quality Answer Score Extent of conflict of interest regulation index (0-10) 6.7 Extent of disclosure index (0-10) 9.0 Whose decision is sufficient to approve the Buyer-Seller transaction? (0-3) Board of 2.0 directors 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 2.0 all 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 Yes 1.0 transaction caused to Buyer? (0-1) Can shareholders hold Mr. James liable for the damage the transaction caused to Buyer? (0- Liable if negligent 1.0 2) Can shareholders hold the other directors liable for the damage the transaction caused to Liable if negligent 1.0 Buyer (0-2) Must Mr. James pay damages for the harm caused to Buyer upon a successful claim by Yes 1.0 shareholders? (0-1) Must Mr. James repay profits made from the transaction upon a successful claim by Yes 1.0 shareholders? (0-1) 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 0.0 fraud 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 Yes 1.0 transaction documents? (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 No 0.0 specific ones? (0-1) 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 (0-10) 7.7 Extent of shareholder rights index (0-10) 8.0 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 Yes 1.0 shareholders? Page 39 Doing Business 2019 Turkey 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 Yes 1.0 shares? Must shareholders approve the election and dismissal of the external auditor? Yes 1.0 Are changes to the rights of a class of shares only possible if the holders of the affected Yes 1.0 shares approve? Assuming that Buyer is a limited company, does the sale of 51% of its assets require No 0.0 member approval? Assuming that Buyer is a limited company, can members representing 10% call for a Yes 1.0 meeting of members? Assuming that Buyer is a limited company, must all or almost all members consent to add a No 0.0 new member? Assuming that Buyer is a limited company, must a member first offer to sell their interest to Yes 1.0 the existing members before they can sell to non-members? Extent of ownership and control index (0-10) 7.0 Is it forbidden to appoint the same individual as CEO and chairperson of the board of No 0.0 directors? 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 Yes 1.0 of their term? Must the board of directors include a separate audit committee exclusively comprising board Yes 1.0 members? Must a potential acquirer make a tender offer to all shareholders upon acquiring 50% of Yes 1.0 Buyer? 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 Assuming that Buyer is a limited company, must Buyer have a mechanism to resolve Yes 1.0 disagreements among members? Assuming that Buyer is a limited company, must a potential acquirer make a tender offer to No 0.0 all shareholders upon acquiring 50% of Buyer? Assuming that Buyer is a limited company, must Buyer distribute profits within a maximum No 0.0 period set by law? Extent of corporate transparency index (0-10) 8.0 Must Buyer disclose direct and indirect beneficial ownership stakes representing 5%? Yes 1.0 Must Buyer disclose information about board members’ primary employment and Yes 1.0 directorships in other 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 Yes 1.0 agenda? 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 Assuming that Buyer is a limited company, must members meet at least once a year? Yes 1.0 Assuming that Buyer is a limited company, can members representing 5% put items on the No 0.0 meeting agenda? Assuming that Buyer is a limited company, must Buyer's annual financial statements be Yes 1.0 audited by an external auditor? Page 40 Doing Business 2019 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 2018 covering for the Paying Taxes indicator calendar year 2017 (January 1, 2017 – December 31, 2017). See the methodology for more information. What the indicators measure Case study assumptions Tax payments for a manufacturing company in Using a case scenario, Doing Business records taxes and mandatory contributions a 2017 (number per year adjusted for electronic medium size company must pay in a year, and measures the administrative burden and joint filing and payment) of paying taxes, contributions and dealing with postfiling processes. Information is also compiled on frequency of filing and payments, time taken to comply with tax • Total number of taxes and contributions paid or laws, time taken to comply with the requirements of postfiling processes and time withheld, including consumption taxes (value waiting. added tax, sales tax or 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, 2016. Time required to comply with 3 major taxes It produces ceramic flowerpots and sells them at retail. All taxes and contributions (hours per year) recorded are paid in the second year of operation (calendar year 2017). Taxes and • Collecting information, computing tax payable mandatory contributions are measured at all levels of government. • Preparing separate tax accounting books, if The VAT refund process: required - In June 2017, TaxpayerCo. makes a large capital purchase: the value of the • Completing tax return, filing with agencies machine is 65 times 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 • Arranging payment or withholding equally expensed per month (875 times income per capita divided by 12). The machinery seller is registered for VAT and excess input VAT incurred in June will be Total tax and contribution rate (% of commercial fully recovered after four consecutive months if the VAT rate is the same for inputs, profits) sales and the machine and the tax reporting period is every month. Input VAT will • Profit or corporate income tax exceed Output VAT in June 2017. • Social contributions, labor taxes paid by The corporate income tax audit process: employer - An error in calculation of income tax liability (for example, use of incorrect tax • Property and property transfer taxes depreciation rates, or incorrectly treating an expense as tax deductible) leads to an • Dividend, capital gains, financial transactions incorrect income tax return and a corporate income tax underpayment. TaxpayerCo. taxes discovered the error and voluntarily notified the tax authority. The value of the underpaid income tax liability is 5% of the corporate income tax liability • Waste collection, vehicle, road and other taxes due. TaxpayerCo. submits corrected information after the deadline for submitting the annual tax return, but within the tax assessment period. Postfiling Index • Time to comply with a VAT refund (hours) • Time to obtain a VAT refund (weeks) • Time to comply with a corporate income tax correction (hours) • Time to complete a corporate income tax correction (weeks) Page 41 Doing Business 2019 Turkey Paying Taxes - Turkey Indicator Turkey Europe & OECD high Best Regulatory Central Asia income Performance Payments (number per year) 10 16.6 11.2 3 (Hong Kong SAR, China) Time (hours per year) 170 214.8 159.4 49 (Singapore) Total tax and contribution rate (% of profit) 40.9 32.3 39.8 26.1% (32 Economies) Postfiling index (0-100) 50.00 64.41 84.41 None in 2017/18 Figure – Paying Taxes in Turkey and comparator economies – Ranking and Score DB 2019 Paying Taxes Score 0 100 80.30: Romania (Rank: 49) 75.80: Regional Average (Europe & Central Asia) 74.65: Turkey (Rank: 80) 72.00: Bulgaria (Rank: 92) 65.36: India (Rank: 121) 62.25: Tunisia (Rank: 133) 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. Figure – Paying Taxes in Turkey and comparator economies – Measure of Quality 100 80 76.82 71.02 64.41 Index score 60 50.00 49.31 40 22.91 20 0 Turkey Bulgaria India Romania Tunisia Europe & Central Asia Page 42 Doing Business 2019 Turkey Details – Paying Taxes in Turkey Tax or Payments Notes on Time Statutory Tax base Total tax Notes on mandatory (number) Payments (hours) tax rate and TTCR contribution contribution rate (% of profit) Corporate 1.0 online 24.0 20% taxable profit 18.08 income tax Employer 1.0 online 71.0 15.5% gross salaries 18.01 paid - Social security contributions Employer 0.0 online and 2% gross salaries 2.32 paid - jointly Unemployme nt insurance contributions Property 1.0 2% sale price 1.21 transfer fee Property tax 1.0 online 0.1% and value of 0.88 0.3% building and (doubled in land Istanbul) (reevaluated each year) Tax on 0.0 withheld 10%-12%-13 interest 0.38 included in interest %-15%-18% income other taxes Vehicle tax 1.0 TRY 2,821 fixed fee 0.25 Transaction 1.0 TRY 5.6 per number of 0.12 tax on checks check checks Environment 1.0 online varies 0.02 tax between TRY 3.250 to TRY 26 Fuel tax 1.0 included in 0.00 small amount fuel price Employee 0.0 online and 0.759% gross salaries 0.00 withheld paid - Payroll jointly tax Employee 0.0 online and 14% gross salaries 0.00 withheld paid - Social jointly security contributions Employee 0.0 online and 1% gross salaries 0.00 withheld paid - jointly Unemployme nt insurance contributions Value added 1.0 online 75.0 General rate value added 0.00 not included tax (VAT) is 18% but varies between 1%-18% Advertising 1.0 various rates advertising 0.00 small amount tax expense Totals 10 170 40.9 Page 43 Doing Business 2019 Turkey Details – Paying Taxes in Turkey – Tax by Type Taxes by type Answer Profit tax (% of profit) 18.1 Labor tax and contributions (% of profit) 20.3 Other taxes (% of profit) 2.5 Page 44 Doing Business 2019 Turkey Details – Paying Taxes in Turkey – Measure of Quality Answer Score Postfiling index (0-100) 50.00 VAT refunds Does VAT exist? Yes Does a VAT refund process exist per the case study? No Restrictions on VAT refund process Restricted to international traders and others 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 refund 0 per case study scenario Time to obtain a VAT refund (weeks) No VAT refund 0 per case study scenario 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 100 case 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 45 Doing Business 2019 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 2018. 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 Time: Time is measured in hours, and 1 day is 24 hours (for example, 22 days are or border handling in origin economy recorded as 22×24=528 hours). If customs clearance takes 7.5 hours, the data are • Obtaining, preparing and submitting documents recorded as is. Alternatively, suppose documents are submitted to a customs agency required by destination economy and any transit at 8:00a.m., are processed overnight and can be picked up at 8:00a.m. the next day. economies 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 Cost: Insurance cost and informal payments for which no receipt is issued are information excluded from the costs recorded. Costs are reported in U.S. dollars. Contributors Border compliance are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. Contributors are private sector • Customs clearance and inspections 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: - For all 190 economies covered by Doing Business, it is assumed a shipment is in a • Handling and inspections that take place at the warehouse in the largest business city of the exporting economy and travels to a economy’s port or border warehouse in the largest business city of the importing economy. - It is assumed each economy imports 15 metric tons of containerized auto parts (HS Domestic transport 8708) from its natural import partner—the economy from which it imports the largest • Loading or unloading of the shipment at the value (price times quantity) of auto parts. It is assumed each economy exports the warehouse or port/border product of its comparative advantage (defined by the largest export value) to its • Transport between warehouse and port/border natural export partner—the economy that is the largest purchaser of this product. Shipment value is assumed to be $50,000. • Traffic delays and road police checks while - The mode of transport is the one most widely used for the chosen export or import shipment is en route product and 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 46 Doing Business 2019 Turkey Trading across Borders - Turkey Indicator Turkey Europe & OECD high Best Regulatory Central Asia income Performance Time to export: Border compliance (hours) 16 22.1 12.5 1 (19 Economies) Cost to export: Border compliance (USD) 358 157.5 139.1 0 (19 Economies) Time to export: Documentary compliance (hours) 4 24.3 2.4 1 (26 Economies) Cost to export: Documentary compliance (USD) 55 97.9 35.2 0 (20 Economies) Time to import: Border compliance (hours) 11 21.1 8.5 0 (25 Economies) Cost to import: Border compliance (USD) 46 162.3 100.2 0 (28 Economies) Time to import: Documentary compliance (hours) 3 24.7 3.4 1 (30 Economies) Cost to import: Documentary compliance (USD) 80 93.9 24.9 0 (30 Economies) Figure – Trading across Borders in Turkey and comparator economies – Ranking and Score DB 2019 Trading Across Borders Score 0 100 97.41: Bulgaria (Rank: 21) 90.27: Turkey (Rank: 42) 86.17: Regional Average (Europe & Central Asia) 77.46: India (Rank: 80) 70.50: Tunisia (Rank: 101) 100.00: 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. Figure – Trading across Borders in Turkey – Time and Cost Time (hours) Cost (USD) 18 400 16 358 16 350 14 300 Time (hours) Cost (USD) 12 11 250 10 200 8 150 6 4 80 100 4 55 3 46 2 50 0 0 Export Export Import Import - - - - Border Documentary Border Documentary Compliance Compliance Compliance Compliance Page 47 Doing Business 2019 Turkey Details – Trading across Borders in Turkey Characteristics Export Import Product HS 87 : Vehicles other than railway or HS 8708: Parts and accessories of motor tramway rolling-stock, and parts and vehicles 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 4.0 48.0 by customs authorities Export: Clearance and inspections required 6.0 20.0 by agencies other than customs Export: Port or border handling 8.0 290.0 Import: Clearance and inspections required 5.5 46.0 by customs authorities Import: Clearance and inspections required 0.0 0.0 by agencies other than customs Import: Port or border handling 9.0 0.0 Page 48 Doing Business 2019 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 Tareks Reference number SOLAS certificate Customs import declaration Page 49 Doing Business 2019 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 2018. See the methodology for more information. What the indicators measure Case study assumptions Time required to enforce a contract through the The dispute in the case study involves the breach of a sales contract between 2 courts (calendar days) domestic 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 • Time to file and serve the case enforcement. • Time for trial and to obtain the judgment To make the data comparable across economies, Doing Business uses several • Time to enforce the judgment assumptions about the case: Cost required to enforce a contract through the - The dispute concerns a lawful transaction between two businesses (Seller and courts (% of claim) Buyer), both located in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city. • Attorney fees - The buyer orders custom-made goods, then fails to pay alleging that the goods are • Court fees not of adequate quality. - The value of the dispute is 200% of the income per capita or the equivalent in local • Enforcement fees currency of USD 5,000, whichever is greater. - The seller sues the buyer before the court with jurisdiction over commercial cases Quality of judicial processes index (0-18) worth 200% of income per capita or $5,000. • Court structure and proceedings (-1-5) - The seller requests the pretrial attachment of the defendant’s movable assets to secure the claim. • Case management (0-6) - The dispute on the quality of the goods requires an expert opinion. • Court automation (0-4) - The judge decides in favor of the seller; there is no appeal. • Alternative dispute resolution (0-3) - The seller enforces the judgment through a public sale of the buyer’s movable assets. Page 50 Doing Business 2019 Turkey Enforcing Contracts - Turkey Standardized Case Claim value TRY 64,487 Court name Istanbul Commercial Court of First Instance City Covered Istanbul Indicator Turkey Europe & OECD high Best Regulatory Central Asia income Performance Time (days) 609 496.3 582.4 None in 2017/18 Cost (% of claim value) 24.9 26.3 21.2 None in 2017/18 Quality of judicial processes index (0-18) 15.0 10.3 11.5 None in 2017/18 Figure – Enforcing Contracts in Turkey and comparator economies – Ranking and Score DB 2019 Enforcing Contracts Score 0 100 72.25: Romania (Rank: 17) 71.78: Turkey (Rank: 19) 67.04: Bulgaria (Rank: 42) 65.65: Regional Average (Europe & Central Asia) 59.33: Tunisia (Rank: 80) 41.19: India (Rank: 163) 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. Figure – Enforcing Contracts in Turkey – Time and Cost Time (days) Cost (% of claim value) 1600 1445 31.0 35 Cost (% of claim value) 1400 30 26.3 25.8 1200 24.9 Time (days) 21.8 25 21.2 1000 18.6 20 800 564 582.4 565 609 15 600 496.4 512 10 400 200 5 0 0 Bulgaria Europe India OECD Romania Tunisia Turkey & high Central income Asia Page 51 Doing Business 2019 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 India 2.5 1.5 2 4.5 Romania 3 4 2 5 Tunisia 2 0 0.5 4.5 OECD high income 2.5 3.1 2.3 3.6 Europe & Central Asia 2.1 3 1.4 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) 609 Filing and service 30 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 52 Doing Business 2019 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 Yes case? 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 No granted? 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 Yes 1.0 disposition report; (ii) 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 Yes 1.0 competent court? 5. Are there any electronic case management tools in place within the competent court for Yes 1.0 use by judges? 6. Are there any electronic case management tools in place within the competent court for Yes 1.0 use by lawyers? Court automation (0-4) 4.0 1. Can the initial complaint be filed electronically through a dedicated platform within the yes 1.0 competent court? 2. Is it possible to carry out service of process electronically for claims filed before the Yes 1.0 competent court? 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 Yes general public 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 Yes court level made 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 Page 53 Doing Business 2019 Turkey 1.a. Is domestic commercial arbitration governed by a consolidated law or Yes consolidated chapter or 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 Yes order or public policy—that cannot be submitted to arbitration? 1.c. Are valid arbitration clauses or agreements usually enforced by the courts? Yes 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 Yes consolidated chapter or section of the applicable code of civil procedure encompassing substantially all their aspects? 2.c. Are there financial incentives for parties to attempt mediation or conciliation Yes (i.e., if mediation or conciliation is successful, a refund of court filing fees, income tax credits or the like)? Page 54 Doing Business 2019 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 2018. 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 - The value of the hotel is 100% of the income per capita or the equivalent in local estate) currency of USD 200,000, whichever is greater. - The hotel has a loan from a domestic bank, secured by a mortgage over the hotel’s • Measured as percentage of estate value real estate. The hotel cannot pay back the loan, but makes enough money to • Court fees operate otherwise. • Fees of insolvency administrators In addition, Doing Business evaluates the quality of legal framework applicable to • Lawyers’ fees judicial liquidation and reorganization proceedings and the extent to which best • Assessors’ and auctioneers’ fees insolvency practices have 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 55 Doing Business 2019 Turkey Resolving Insolvency - Turkey Indicator Turkey Europe & OECD high Best Regulatory Central Asia income Performance Recovery rate (cents on the dollar) 14.7 38.6 70.5 None in 2017/18 Time (years) 5.0 2.3 1.7 0.4 (Ireland) Cost (% of estate) 14.5 13.2 9.3 1.0 (Norway) Outcome (0 as piecemeal sale and 1 as going 0 .. .. .. concern) Strength of insolvency framework index (0-16) 10.5 11.1 11.9 None in 2017/18 Figure – Resolving Insolvency in Turkey and comparator economies – Ranking and Score DB 2019 Resolving Insolvency Score 0 100 59.87: Romania (Rank: 52) 57.52: Bulgaria (Rank: 56) 55.58: Regional Average (Europe & Central Asia) 54.19: Tunisia (Rank: 67) 40.84: India (Rank: 108) 40.71: Turkey (Rank: 109) 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. Figure – Resolving Insolvency in Turkey – Time and Cost Time (years) Cost (% of estate) 6 14.5 16 13.2 5.0 14 Cost (% of estate) 5 4.3 12 Time (years) 10.5 4 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 India OECD Romania Tunisia Turkey & high Central income Asia Page 56 Doing Business 2019 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 India 4.5 2 1 1 Romania 6 2.5 2 2.5 Tunisia 5.5 2 1 0 OECD high income 5.3 2.8 2.2 1.9 Europe & Central Asia 4.5 2.6 2.3 1.8 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) 100 80 60 51.3 37.2 35.8 38.6 40 26.5 20 14.7 0 Turkey Bulgaria India Romania Tunisia Europe & Central Asia Page 57 Doing Business 2019 Turkey Details – Resolving Insolvency in Turkey Indicator Answer Score Proceeding liquidation (after The most common and practical way for the hotel to proceed was the postponement of bankruptcy an attempt at procedure. Article 377 of Turkish Commercial Code and Article 179 of the Turkish Enforcement reorganization) and Bankruptcy Code regulate this 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 14.5 The largest part of the expenses is government levies (4.55% for bankruptcy) and other case- estate) 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 14.7 (cents on the dollar) Page 58 Doing Business 2019 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 1.0 file for 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 (c) Both (a) and 1.0 insolvency framework? (b) options are available, 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 No 0.0 and services to the debtor? Does the insolvency framework allow the rejection by the debtor of overly burdensome No 0.0 contracts? 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 Yes 1.0 commencement of 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 Yes 1.0 least as much as what they would obtain in a liquidation? Are the creditors divided into classes for the purposes of voting on the reorganization plan, No 0.0 does each class vote 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 Yes 1.0 appointment of the insolvency representative? Does the insolvency framework require approval by the creditors for sale of substantial No 0.0 assets of the debtor? Does the insolvency framework provide that a creditor has the right to request information Yes 1.0 from the insolvency representative? Does the insolvency framework provide that a creditor has the right to object to decisions Yes 1.0 accepting or rejecting 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 59 Doing Business 2019 Turkey Labor Market Regulation Doing Business presents detailed data for the labor market regulation indicators on the Doing Business website (http://www.doingbusiness.org). The report 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 2018. 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 (i) whether fixed-term contracts are prohibited for worker and the business are used. permanent tasks; (ii) maximum cumulative duration of fixed-term contracts; (iii) length of the The worker: probationary period; (iv) minimum wage. - Is a cashier in a supermarket or grocery store, age 19, with one year of work experience. Working hours - Is a full-time employee. (i) maximum number of working days allowed per - Is not a member of the labor union, unless membership is mandatory. week; (ii) premiums for work: at night, on a weekly rest day and overtime; (iii) whether there are The business: restrictions on work at night, work on a weekly rest - Is a limited liability company (or the equivalent in the economy). day and for overtime work; (iv) whether - Operates a supermarket or grocery store in the economy’s largest business city. nonpregnant and nonnursing women can work For 11 economies the data are also collected for the second largest business city. same night hours as men; (v) length of paid annual - Has 60 employees. leave. - Is subject to collective bargaining agreements if such agreements cover more than 50% of the food retail sector and they apply even to firms that are not party to them. Redundancy rules - Abides by every law and regulation but does not grant workers more benefits than (i) whether redundancy can be basis for terminating those mandated by law, regulation or (if applicable) collective bargaining workers; (ii) whether employer needs to notify agreements. and/or get approval from third party to terminate 1 redundant worker and a group of 9 redundant workers; (iii) whether 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 due when terminating a redundant worker. Job quality (i) whether law mandates equal remuneration for work of equal value and nondiscrimination based on gender in hiring; (ii) whether law mandates paid or unpaid maternity leave; (iii) length of paid maternity leave; (iv) whether employees on maternity leave receive 100% of wages; (v) availability of five fully paid days of sick leave a year; (vi) eligibility requirements for unemployment protection. Page 60 Doing Business 2019 Turkey Labor Market Regulation - Turkey Details – Labor Market Regulation 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) 584.7 Ratio of minimum wage to value added per worker 0.4 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 Whether nonpregnant and nonnursing women can work the same night hours as men No 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 4.0 Notice period for redundancy dismissal for a worker with 5 years of tenure 8.0 Notice period for redundancy dismissal for a worker with 10 years of tenure 8.0 Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure) 6.7 Severance pay for redundancy dismissal for a worker with 1 year of tenure 4.3 Page 61 Doing Business 2019 Turkey Severance pay for redundancy dismissal for a worker with 5 years of tenure 21.7 Severance pay for redundancy dismissal for a worker with 10 years of tenure 43.3 Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure) 23.1 Job quality Equal remuneration for work of equal value? Yes Gender nondiscrimination in hiring? Yes Paid or unpaid maternity leave mandated by law? Yes Minimum length of maternity leave (calendar days)? 112.0 Receive 100% of wages on maternity leave? No Five fully paid days of sick leave a year? Yes Unemployment protection after one year of employment? Yes Minimum contribution period for unemployment protection (months)? 6.0 Page 62 Doing Business 2019 Turkey Business Reforms in Turkey In the past year, Doing Business observed a peaking of reform activity worldwide. From June 2, 2017, to May 1, 2018, 128 economies implemented a record 314 regulatory reforms improving the business climate. 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. 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 63 Doing Business 2019 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 64 Doing Business 2019 Turkey Page 65