The Istanbul Finance Center (IFC) was established under Law No. 7412 to position Istanbul as a competitive hub within the global financial system. The draft bill currently before the Grand National Assembly proposes a renewed package of tax incentives, corporate income tax exemptions, and supervisory adjustments aimed at the licensed participants operating within the IFC perimeter.
Background of the Proposal
Since the IFC framework entered into force, market feedback has indicated that the existing incentive set falls short of the regimes offered by competing centers such as Dubai DIFC and Singapore. The Ministry of Treasury and Finance has prepared the new draft after consultations with sector participants, the Banks Association of Turkey, and the Capital Markets Board. The proposal carries forward the IFC's strategic objective of becoming a regional financial hub while addressing implementation gaps observed in practice during the first phase.
Key Provisions
The draft expands the corporate income tax exemption under Article 7 of Law No. 7412 for export-oriented financial services. Earnings derived from financial services rendered to non-residents and recorded in the participant's books are proposed to be exempt from corporate income tax up to 100%, replacing the previous capped regime. A reduced withholding regime is also envisaged for dividend distributions made from IFC entities to foreign shareholders.
In addition, the bill provides for stamp duty and fee exemptions for transactions executed within the IFC, and aligns the participant certificate procedure with international practice. Provisions concerning expatriate staff include simplified work permit procedures and limited income tax exemptions during the early period of assignment, subject to thresholds to be set by secondary legislation.
Implications for Sector Participants
Banks, capital markets intermediaries, portfolio management firms, insurance companies, and fintechs holding an IFC participant certificate are within the immediate scope of the proposal. The expanded exemption may particularly support the relocation of regional treasury, asset management, and fund administration functions to Istanbul. Existing participants are advised to assess how their service mix qualifies under the revised export-services definition.
Outlook
The draft is expected to be discussed in the relevant parliamentary commission in the coming weeks. Sector participants should follow the legislative process closely and review their corporate structure, transfer pricing position, and service contracts in light of the proposed framework. Our office continues to provide tailored guidance on IFC participation and the impact of the proposed amendments.