Law Concerning the Encouragement of Foreign Capital

(Offcial Gazette date: Jan. 24,1954 )

No: 6224 Date: Jan.18,1954

Subject and Scope of the Law

Article 1- This law applies to foreign capital to be imported from abmad and to foreign credit loans to be procured from abroad upon decision of the Committee for the Encouragement of Foreign Capital and the approval of the Council of Ministers and upon ratification by the Council of Ministers, provided that the subject of investment : a) is useful for the economic development of the country, b) is in a field of activity open to Turkish private enterprise. Moreover, foreign capital to be imported to Turlcey can not acquire majority share of institutions performing activities consisting of monopoly within the Country.

The "Committee for the Encouragement of Foreign Capital' mentioned in this article and established in accordance with Article 8, shall hereafter referred as the "Committee'.(The Functions of this Committee were transferred to the Undersecrctariat of Treasury by the Law No: 4059).

Principal Foreign Capital

Article 2- For the purposes of implementation of the present Law, the term "Principal Foreign Capital" shall mean the total of the various values determined and evaluated as follows; a) The following assets destined for the efficient establishment, expansion or revival of a business included in the scope of the present law, and to be imported from abroad; 1.Capital funds in the form of foreign currency, 2.Machinery, equipment, tools and similar goods, machinery components, spare parts and materials and other necessary commodities to be approved by the Committee, 3.Services and rights over immaterial property such as patent rights, licenses and trade marks, 4.Portions of profit converted into and integrated with investment capital, by way of reinvestment in accordance with Article 3 thereunder. b) The values of the imported assets: whether in goods, services or proprietary rights, as well as their necessity and appropriateness for the approved enterprise are determined by experts to be appointed by the Committee. The values to be assessed by experts may be reexamined and reappraised by the Committee.

The appraisal shall be made both in currency of the country of the origin and in Turkish Lira at the offcial rate of exchange prevailing at the time of importation. With the condition that objection rights indicated in Article 8 are reserved, the decision of the Committee conceming the evaluation of assets is final.

Conversion of Profits Into Capital

Article 3- Subject to the decision of Committee, the shares of profits accruing in favor of principal foreign capital investors, in accordance with the current tax laws, may, either in whole or part, be added to the principal foreign capital or reinvested another enterprise which meets the qualification requirements indicated in Article 1 above.

Transfer of Profits and Principal Capital

Article 4- a) Pursuant to the provisions of Paragraph (c) of this Article, the tollowing profits and capital funds shall be transferred abroad in th national currency of the principal foreign capital at the current offcial exchange rate:

1. Net profits accruing in favor öf the owner, of the principal foreign capital out of income realized after Dec. 31, 1953 and calculated in accordance with the tax laws in force, 2. In case of a partial or total liquidation of an enterprise established under the present law, the share accruing in favor of the owners of the principal foreign capital at reasonable prices, 3. The proceeds obtained from the sales, at a reasonable price and whether in whole or in part ,of the principal foreign capital invested in a business founded or working under the terms of the present law. 4. Repayment installments and interest payments, as they become due and payable in accordance with the respective foreign loan agreements, over a credit loan contacted pursuant to the terms and provisions of Article 6 of this law.

b) If deemed necessary, Ministry of Finance or the Committee may;

1. Order the examination of the accounting books and tax declarations of an enterprise established under the present law, in order to determine the amount available for transfer under subparagraph (1 ) of paragraph (a) of this Article. 2. Order an inquiry in order to ascertain whether the sale of capital shares or of liquidation sale of assets, or aedit loans are executed in genuine goodwill.

c) Upon applications for the transfer of proft shares, sales proceeds, loan repayment installments and interest payments of the sorts classified as transferable in Paragraph (a) of this Article, the Ministry of Finance will grant permission for same.

Transfer of Shares

Article 5- a) On request therefore, the Ministry of Finance will undersign the following guarantee for the registered shares or share certifcates or provisional receipts of a Turkish company representing the principle foreign capital as defined in Article 2.

"The dividends on this share, upon presentation of this share certificate or provisional receipt to the Central Bank of Republic of Turkey or to authorized representatives of the said Bank abroad, will be immediately transferred....(in foreign currency of origin).... converted at the current rate of exchange at the time of transfer. Proceeds from the sale of this share certificate or provisional receipt from the proceeds of liquidation of the enterprise shall be transferable to the rightful holder of this share or provisional receipt (in the currency of the country of origin).... in accordance with Article 4 of the Law No: 6224 of Republic of Turkey."

The Minister of Finance

or

His Authorized Officer

b) The registered share certificates or provisional receipts bearing this guarantee will freely circulate between persons of all nationalities, both within and outside of Turkey. Prior to the sale of these share certificates or provisional receipts to real or legal persons resident in Turkey - whether or not new share certificates or provisional receipts are issued in substitution thereof they must be submitted to the Ministry of Finance for cancellation of the guarantees thereon.

Guarantees on Credit Loans

Article 6- a) The Ministry of Finance may, by decision of the Council of Ministers, issue a guarantee on the principal sum and interest of a foreign credit loan to be contracted by an enterprise which meets the qualification requirements in Article 1 of this Law, up to the maximum limit of one billion Turkish Liras, and against counter guarantees or collateral.

b) Such guarantee shall automatically be abolished for the repaid portion of the principal or interest of the loan.

Employment ot Foreigners

Article 7- a) During the survey, foundation and operation phases of an enterprise established pursuant to this Law, the terms, conditions and restrictions imposed by Laws No: 2007 and 2818 shall not apply to foreigners investing into such enterprises, to foreigners acting as agents or representatives of such investors, to experts, foremen and to other skilled personnel, for a period of time which is considered necessary by the Committee for the effcient establishment, expansion or operation of the business or for its being put again into activity.

b) The above provision shall also apply to foreign experts, foremen and other skilled or trained personnel to be employed by a domestic enterprise, provided that such enterprise will be accepted by the Committee to meet the conditions set forth in Article 1 of this Law.

c) The foreigners to be employed in accordance with the terms and provisions of this Article subject to procurement of approval of the Ministry of Finance obtained in advance, for the purpose of providing subsistence to their immediate families or accumulating their normal and reasonable savings, transfer abroad such parts of their eamings as shall be dully specified in their employment contracts, in the currencies of their origin countries and subject to conversion at current rates of exchange.

Committee for the Encouragement of Foreign Capital

Article 8- a) With the aim of implementing the provisions of this Law, a Committee has been established under the Chairmanship of the General Director of the Turkish Central Bank and consisting of the General Director of Treasury, General Director of Intemal Trade, General Director of Industry, Head of the Department of Research and Planning of Ministry of State Administrations and the General Secretary of the Union of Chambers of Commerce and Industry and Commodity Exchanges. In cases where it is deemed necessary, the Committee may consult the other Ministries, as well as the representatives of other institutions. The issues submitted to the Committee shall be decided upon within at least 15 days from the date of their submittance to the Committee.

The General Director of Intemal Trade shall act as the General Secretary of the Committee and in cases when it is deemed necessary, the General Secretary can convene the Committee for a meeting.

The remuneration to be paid to the Chairman and members of the Committee shall be determined by the Council of Ministers.

b) The appeals to be raised against the decision of the Committee shall be carried out within 30 days from the date of their announcement to the parties concemed. The appeals shall be directed to the Minister of Finance, the Minister of Economy and Commerce, and Minister of State Administrations. The decisions of these organs are final.(According to yhe amendment in Article 6 of Law No: 933, the authority to appeal is the Higher Planning Board).

Article 9- a) The Ministry of Economy and Commerce is responsible for the implementation of this law. b) Upon the decision to be taken by the Committee, the Ministry of Economy and Commerce shall give orders to Custom Offce concemed regarding the importation of the real capital into the country.

Equal Treatment For Domestic and Foreign Capital

Article 10- All rights, exemptions, privileges and facilities recognized for domestic capital and enterprises shall be equally applicable to foreign capital and foreign enterprises engaged in comparable fields of business.

Article 11- a) All rights granted to persons engaged in investment activities in accordance with Article 31 of Decree No:13 which has been issued under the authority of Law No:1567 and by the Laws No: 5583 and 5821, are reserved. (According to the amendment in Article 6 of Law No: 933, the authority to appeal is the Higher Planning Board).

b) All investments which have been realized pursuant to Law No: 5821 between the period from Aug.1,1951 and the date of coming into force of this law shall enjoy the provisions granted by this Law.

Repeal of tho Former Law

Article 12- Law No: 5821 is hereby repealed.

Coming into Force

Article 13- This law shall come into force on the date of its publication.

Article 14- The Council of Ministers is entrusted with the enforcement of this law.