LOAN AGREEMENTS UNDER LABOUR LAW (JANUARY 2020)

Money lending-transactions as a line of business can only be executed by any legal entity or person holding license granted by Banking Regulation and Supervision Agency pursuant to The Turkish Code of Leasing, Factoring and Financing Companies numbered 6361 which annulled The Code on Lending Transaction on 13.12.2012. 

Principally, the term of “credit agency” means deposit banks and participation bank as per Code of Banking numbered 5411, which intends to provide consistency and reliance in the financial market.  And it is explicitly mentioned in the said Law that it is illegal to conduct money lending transactions or similar transactions by any legal entity or natural person without license.

Banker is a natural person or legal entity who merchandises permanently money, assets/bonds, common stock and bill of exchange. Pursuant to the decision of the Council of State, wording “permanently” in this regard means is an activity of lending money to lots of people in a year or to lend money several times in a year to a single person.

Pursuant to the decisions of the Council; even if the operation area  of the company is not brokerage activities, such company  would be taxpayer of Banking and Insurance Transactions Tax (BSMV), in case permanently engages in merchandising money, assets/bonds, common stock and bill of exchange activities. Considerably, the company would be taxpayer of BSMV but would be excluded from Value-Added Tax (KDV).  According to article 28/2 of the Code of Expenditure Tax; all incomes of bankers such as commissions and fees shall also be subject to taxation.

In a similar way, it would be considered as brokerage activity if the company permanentlytake out loans on behalf of itself but to provide to another company or to its reinsurance company or to its employee(s) in return for interest or fund. As a result of such activity, the company shall be subject to taxation. It must be well noted that; if the company receives loan on behalf of itself to provide to another company or to its r

einsurance company or to its employee(s) without any interest, fund or any other benefit; but only loan agreement’s costs, it shall not be considered as brokerage activity as it’s only a “cost transferring”. (Yaklaşım, December 2009, No: 203, p.192)

There is no doubt that the employer shall deduct the loan debt from emlpoyee’s salary, step by step. And the deduction would be considered as advance payment as per Labour Law. Article 61  of Income Tax is as follows: “Payments remitted to the employee such as allowances, compensations, bonuss, are deemed as salary.”

As a consequence, it is forbidden to set off any debt of employee from the salary without employee’s consent. This consent might be explicit or implicit but preferably written. The advance payment should be included to the bordereau of the related month and income tax and stamp tax must be paid duly by the employer.