Our Information Note on the latest developments concerning credit guarantees and the accommodation tax implementation as part of the measures in the fight against COVID-19 has been published.

1. INTRODUCTION

Law No. 7226 on the Amendment of Certain Laws (the “Law”), which introduces a list of measures in the fight against the COVID-19 pandemic, has been published in the Official Gazette (repeating issue) dated 26 March 2020 and numbered 31080. The Law introduces certain measures pertaining to public financing, debt management and digital service taxation.

2. AMENDMENT TO THE LAW ON PUBLIC FINANCING AND DEBT MANAGEMENT

As background information, credit guarantee institutions (“CGIs”) are established to support small and medium-sized enterprises (“SMEs”) that would otherwise not have access to credit, by sharing or assuming default risks through financial guarantees. In recent years, CGIs have received incrementally greater Treasury support allocations, with the allocation ceiling being raised from TL 1 billion to TL 25 billion in 2017, helping CGIs become a critically important resource for many SMEs amidst tightening liquidity and difficult market conditions.

Prior to the enactment of the Law, the “credit guarantee” provided by CGIs was only available to companies. The amendment of provisional article 20 of the Law No. 4749 on the Regulation of Public Financing and Debt Management (the “Public Financing Law”)[1] extends the scope by changing the term “firm” to “real or legal persons and commercial enterprises”. The Law further increases the ceiling of the amount the State will provide to CGIs from TL 25 billion to TL 50 billion.

This is another measure of the government to mitigate against the negative effects of the COVID-19 pandemic by providing real persons with an opportunity to benefit from the credit guarantee scheme and to obtain financing for their business affected by the outbreak of COVID-19. The resources of the Ministry of Treasury and Finance to be allocated to CGIs have been increased and it is therefore now possible for CGIs to provide such coverage to a larger group of people, thereby increasing liquidity in the market.

3. AMENDMENTS TO THE LAW AMENDING THE DIGITAL SERVICES TAX, CERTAIN LAWS AND STATUTORY DECREE NO. 375

The accommodation tax payable by providers of accommodation and ancillary services, which was previously introduced with article 52 of the Law No. 7194 Amending the Digital Services Tax, Certain Laws and Statutory Decree No. 375[2] (the “Digital Service Tax Law”), was initially foreseen to be effective as of 1 April 2020. The Law has postponed such effective date to 1 January 2021, meaning that the relevant tax will not be payable until next year.

Accordingly, the amendment provides relief to accommodation providers of hotels, motels, hostels, etc. that are heavily affected by the outbreak of the COVID-19 pandemic.

4. CONCLUSION

These amendments aim to mitigate against the adverse effects of the continuing COVID-19 pandemic on certain specific sectors and the economy as a whole.