The status of savings finance companies in Turkish tax legislation: Issues and proposed solutions

While the Savings Finance System originated in Europe, it is an alternative financial system which has been in existence for ages and known under several different names. This system is based on asset financing and the fact that the related party may use the finances only when they save for a certain period of time. The first companies which put this system into practice in Türkiye emerged in 1990s, and as these companies have adopted the principles of being interest-free, they have been regarded by certain circles as Islamic Financial Institutions, too. Without being subject to the legislation to which financial institutions are subject, these companies operated within the scope of general provisions under such names as cooperation, joint venture, saving-based finance etc till 2021. The sector's legal framework was established by Law No. 7292 in 2021. These companies which adopted this system have been accepted to be financial institutions and been included in the scope of Law 6361. The legal framework of their activities has been brought in and has been subjected to the regulation and supervision of the Banking Regulation and Supervision Agency (BRSA; BDDK in Turkish). This study aims to discuss the status of Savings Finance Companies which have been established as financial institutions by the legislation and official regulations with regard to Turkish Tax Legislation as well as the problems and the uncertainities which emerged from the changes in the financial obligations of these companies according to the recent legislation and official regulations. The first part of the study introduces the origins of Savings Financing Sector as well as their practices both in Turkey and in the world, taking the specificity and firstness of the system into consideration. The changes in the financial obligations following the recent legislation and official regulations are presented in Part II by exploring the tax legislation to which these companies are subject. The third part discusses the important points as regard to taxation of the companies based on auditors' reports. Part IV examines the problems and uncertainities in the financial obligations of the companies as a result of the legislation and official regulations which took place in 2021. In the final part of the paper, the official obligations of the companies are examined and advice is offered for the problems and uncertainities caused by the recent legislation and official regulations.