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					Changes in Several Laws and Other Regulations
cover significant steps on;
  Istanbul Finance Center
  Increasing Domestic Savings
  Diversifying financing instruments and extending
   maturities
  Supporting entrepreneurship




                                                      2
In this regards, draft regulations on the following issues are
prepared;
   Private pension system,
   Insurance sector,
   Sukuk issuance by Turkish Treasury,
   Setting the framework of «Business Angels» system,
   Supporting «private equity»,
   Extending the maturity of financing




                                                                 3
               PENSION COMPANY
 Participant’s Individual Pension                  Participant’s State
                                                     Contribution
             Account                                  Subaccount


     Contribution                                  State
                    Contribution                Contribution
                       Data




                     Pension
Participant          Monitoring Center                        State
                                         Calculation of the
                                         State Contribution
                                                                         4
   Contribution Phase:
    ◦ State contribution will not be deducted from the tax base.
    ◦ Instead, 25% of the participant’s contribution will be paid by the State to the Participant’s
      State Contribution Subaccount. (subject to the vesting rules mentioned below)
    ◦ Max. State Contribution for each participant is limited by 25% of the annual gross minimum
      wage.

   Investment Phase:
    ◦ Like the current system, the invesment income from the pension funds and state
      contribution will not be taxed at this phase.

   Pay-out Phase:
    ◦ Taxation will be applied only on the investment income.
    ◦ The State contribution and the invesment income related to these contributions will be
      subject to vesting rules in order to encourage longer contribution periods in the system.

      (Vesting rules based on the years of participation within the system : 0-3 yrs 15% vesting;
       3-6 yrs: 35% vesting; 10+ yrs 60% vesting; retirement 100% vesting.)


                                                                                                      5
       REGULATIONS ON INSURANCE
 Regulations aim to strenghten the financial structure of insurance companies
and increase the effectiveness of risk management.
 The task and functions of the «Güvence Hesabı – Guarantee Fund» will be
redefined to cover mandatory insurance inspection and contribution to the
Insurance Training Center.
 Insurance Data and Monitoring Center will be reorganized through
strenghtening its structure.
Some measures will be taken to increase the effectiveness of Agricultural
Insurance practices.
 Association of Turkish Insurance and Reinsurance Companies will be
reorganized to include pension companies and its name will be changed to
«Association of Turkish Insurance, Reassurance and Pension Companies»
Support services related to insurance are defined and included in the law.
 Some concepts which lead to confusion in practice will be clarified. (Certain
technical reserves, minimum guarantee fund, internal control etc. )

                                                                                  6
 Sukuk is an increasing market. As of 2012 the total issuance volume in the global
  markets increased to 170 billion dollars.

 Main issuing countries are Malesia, Saudi Arabia, United Arab Emirates, Indonesia,
  Qatar, Bahrein, Kuwait.

 In addition to these countries, some western countries and compaines also issued in
  this market. (Ex: In 2004 Saxony-Anhalt State of Germany, General Electric in 2009,
  HSBC Bank in 2011).

 England and France are preparing regulations for sukuk.

 It is of great importance for Turkey to be in this market especially in terms of
  diversifying financing instruments.

 Sukuk issuance by Turkish Treasury will be an indicator for private companies as well
  contributing to deeping of such a market.

 When considered from the perspective of Istanbul Finance Center, deepening of sukuk
  market will also positively contribute to the process.




                                                                                          7
          BUSINESS ANGEL INVESTMENTS
               (Private Venture Capital )
• Private Venture Investor (Business Angel) means those transfering his/her
  private assets and expertise to entrepreneurs at their early or developing
  stages; Private Venture Capital (Business Angel Capital) means the capital
  transferred to such companies by Private Venture Investors.

Draft Law proposes;
• A new instrument for those companies at their early venture development
   stages and having funding difficulties,
• Increasing professionalism and improving business culture and ethics in such
   financial markets,
• Making PVCs an institutionalized and trustworthy financial market,
• Making PVC investments attractive by state supports




                                                                                 8
Lifecycle of a Venture
Financial Return




                   1-3 years   2-3 years   2-5 years   5 years-



                                                                  IPOs
                                                                  Time/
                                                                  Period




                                                                           9
Shareholder of PVIs in the Companies
                 and Exit Phase
       PVI                                       Entrepreneur




             Partnership Agreement


                                                  Entrpreneur
                                                 Company (JSC)




   IPO           Other
               Investors

  Private
  Equity        Resale               PVIs Exit

                                                                 10
Draft law proposes deduction of the %75 of the capital by PVIs which has license
from Turkish Treasury from the annual tax base, which is to be practiced till 2017.
 This deduction ratio will be applied as %100 for those PVIs investing on the
companies whose projects are supported by Ministry of Science, Industry and
Technology and The Scientific and Technological Research Council of Turkey
(TUBITAK) in the last 5 years.

Capital   gains as a result of sale of shares will be exempted from income tax.

Inorder to be exempted from tax , the following conditions will be required;
    The requirements of the PVC laws and regulations,
    Acquired stocks to be held at least by 2 years,
The maximum annual amount to be deducted from tax base will be 1 million




                                                                                   11
 LICENCING AND ELIGIBILITY FOR TAX EXEMPTION PHASE
Application for
State support                   Eligibility Letter to Ministry of
                                Finance
                   TURKISH                                                MINISTRY
                  TREASURY                                               OF FINANCE


                         Periodic
                         reporting by
                         the
                         Companies
         PVI
                                                    Eligibility of Tax
                                                       Exemption

                    PVI with
                    Licence




                                                                                      12
REGULATIONS ON VENTURE CAPITAL FUNDS
  Investments allocated as Venture Capital Funds will be exempted from
   the income and corporate tax bases (Not more than %10 of the
   declared income)
  Allocation of investments in the form of venture capital funds from the
   relevant period revenues is allowed for venture capital participation
   and for buying of such fund shares (Not more than %10 of corporate
   revenues and declared revenues and %20 of capital)
  The profits from venture capital fund investments and participation to
   such investments will be included in the participation revenue
   exemptions.




                                                                             13
                 OTHER REGULATIONS

 The Council of Ministers will be given the right to diversify the income
  tax ratio applied to deposits.
 Income tax ratio applied for the trade of investment funds which have
  more than %75 of its portfolio in the form of stocks will be %0.
 Activity fee applied for insurance and private pension companies
  operating in more than one sector will be consolidated and will be
  taken from only the highest one.




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posted:9/12/2012
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