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The Levy of Stamp Duty on Contracts Regarding the Formal Notices of the Unilateral Termination

The Notaries Union published a circular numbered 2021/12 dated 6 July 2021 regarding the nature of the notices of unilateral termination of contracts, as well as the stamp duty obligation arising from such notices.

The purpose of the circular addressed to the Notaries is to (i) prevent any legal error in the practice of levying stamp duty on contracts, and (ii) to avoid grievances that may arise in terms of both the concerning parties involved in the transaction and the notaries which are involved in processing of the notices of termination. The said Circular that the Notaries are required to abide by, is specifically regulating the situations where a party unilaterally terminates the contract and in which cases the obligation regarding the payment of the stamp duty shall arise.

  • Accordingly, in the event where the contract stipulates an explicit provision allowing unilateral termination of the contract by one of the parties, the notices of termination issued as per the said provision should be considered as a termination transaction (in Turkish, “fesihname”) which will be subject to stamp duty. Stamp duty to be calculated over the value of the contract which has been terminated, in accordance with the sub-clause I/A-5 of the table no (1) attached to Stamp Duty Law Numbered 488. Therefore, the rate of stamp duty for such termination transaction will be levied at 1.89 per thousand (as per the rates valid as of 8 July 2021) and shall be collected over the value of the contract in question.
  • On the other hand, in cases where there is no provision in the contract granting the right for unilateral termination, (i) the termination notices regarding the declarations of intent stating that the contract is terminated, as well as (ii) the termination notices regarding the declarations of intent stating that the contract will be terminated in the event that the conditions are not fulfilled within a certain period of time, shall not be regarded as a “termination transaction” (in Turkish, “fesihname”), and consequently, will not be subject to stamp duty.
Nevertheless, the above-mentioned notices and/or notifications will continue to be subject to charges by virtue of Article II/2 of the Tariff Numbered (2), attached to the Act of Charges (in Turkish,” “Harçlar Kanunu”).

The opinion of Revenue Administration (in Turkish, “Gelir İdaresi Başkanlığı”) on this subject, on which the Notaries’ Circular is based, provides as well the following examples. The first example is where the contract is regarded as a termination transaction and is subject to stamp duty

1. Since notices such as; “I hereby notify you that I have terminated this contract based on the unilateral termination authority given to the parties by the article ….. of the contract dated …..” are accepted as termination transaction (in Turkish, “fesihname”), such notices shall be subject to a stamp duty to be calculated over the contract value to be terminated.
2. On the other hand, since the notices and or notifications of termination issued in the form of the examples here below are not considered as “termination transaction”, the transaction will not be subject to stamp duty. The following is the examples of contracts termination of which shall not be subject to stamp duty:
a. “As per our discretionary decision, we hereby notify you that we have terminated the contract dated ..…, which was executed between us in relation to the business of …..”
b. “I hereby notify you that I have terminated the contract dated ..… which was executed between us in relation to the business of….. due to justified reasons, due to your failure to fulfill the obligations in the contract.”

c. “I hereby notify you that I will terminate the contract that we have concluded dated ….., which was executed between us in relation to the business of …., in the event that you do not fulfill the obligations in the contract until the date of…”

We would like to kindly draw to your attention that, in addition to the stamp duty payable over the total value of the contract at the date of its execution, the stamp duty shall also arise over the total value of the contract in the event where the contract stipulates an unilateral termination provision and when one of the parties will terminate the contract as per the said provision.

Our Law Firm remains at your disposal for any further clarifications or assistance you may need about the subject matter.

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