Turkey could see a rapid development of Islamic bonds in the future, as a landmark US$1.5 billion sovereign Sukuk issuance on the 18th September 2012 has set a benchmark for future issuances.
The issue was oversubscribed by more than five times, with a yield of 2.8% and maturing in 2019, bringing in more than US$8 billion. It is noted by the bankers that US$8 billion in demand was highly impressive for a first-time sovereign Sukuk issuance.
Ali Babacan, the deputy prime minister of Turkey, said: “We believe this is going to set a benchmark for the government and private sector. For this issuance, we have prepared the adequate legal framework and tax regime.”
The treasury issued the Sukuk with the mediation of Citigroup, HSBC and Kuwait Finance House. Kuwait Finance House’s subsidiary, Kuwait Türk, meanwhile has two Sukuk issuances worth US$100 million and US$350 million which are trading on the London Stock Exchange.
Increase in Islamic banking assets
Ali said that the country’s four Islamic banks now account for 5.6% of the Islamic banking assets, a growth of over five times since the Islamic banking laws were introduced in 2005.
The treasury’s dollar Sukuk and the Turkish lira Sukuk within the next few weeks are both expected to trigger the private sector as well as provide Turkey with the opportunity to receive millions of dollars in funds from the Islamic world.
It is stated by the strategists that the treasury was able to finance its external debt within the first six months of 2012 and would use the Sukuk to finance its 2013 needs, translating to a lower Eurobond supply in 2013.
Private consumption tax hike
The government has raised the price of gasoline by TRY0.26 (US$0.14) per liter as part of the private consumption tax (ÖTV) in a move to lower the budget deficit. The ÖTV was increased from TRY1.87 (US$1.04) to TRY 2.76 (US$ 1.53) per liter of 95 octane unleaded and leaded gasoline. The tax was increased from TRY1.99 to TRY2.29 (US$1.27) per litre of 98 octane unleaded gasoline. The government also increased ÖTV from TRY1.29 (US$ 0.71) to TRY1.59 (US$0.88) per litre of diesel fuel. With this recent ÖTV hike, the price of a litre of 95 octane unleaded gasoline became TRY4.74 (US$2.64) over the previous TRY4.48 (US$2.49) in Istanbul.
Proportional fees for the title deed transactions increased
The Council of Ministers Decree numbered 2012/3735 published in the Official Gazette on the 22nd September 2012 and numbered 28419 has changed the title fee percentage which is paid for specific real estate transaction, including sales.
It stipulates the proportional fees for the below transactions:
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Sale of the real estate (separately by the transferor and transferee).
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Real estate barter (separately by the transferor and transferee).
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Carrying out lifelong support agreement provisions (separately by the transferor and transferee).
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Real estate as a capital of the company (only by the transferor).
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Establishment and transfer of the real estate title (only by the transferee).
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Establishment and transfer of the independent and permanent rights in immovable (separately by the transferor and transferee).
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Establishment and transfer of servitudes (excluding the construction servitude) (separately by the transferor and transferee).
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Bare ownership acquisitions (separately by the transferor and transferee).
The previous proportional fee for the above transactions was 16.5 per thousand calculated on the basis of the total transaction amount. The decree increased this percentage to 20 per thousand.
Ali Ceylan is a partner at Baspinar & Partners Law Firm. He can be contacted at
[email protected]
.