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Angel investment regulation announced!

The “Individual Participation Capital Regulation” that entrepreneurs and investors have been expecting due to tax exemption went into effect on February 15th Friday after being announced in the Official Gazette. The Undersecretariat of Treasury announced information about the regulation during the opening speeches of Etohum “Startup Turkey” held at Antalya Rixos Downtown Otel. Etohum which has been bringing together internet entrepreneurs and investors since 2008 hosted high level Undersecretariat of Treasury bureaucrats during the Startup Camp where about 50 startups and over 100 investors came together. Undersecretariat officials made detailed explanations regarding the “Individual Participation Capital Regulation” that was announced in the Official Gazette yesterday and answered the questions of the participants.

Undersecretariat of Treasury Financial Sector Relations and Foreign Exchange General Manager Ali Arslan, Undersecretariat of Treasury Financial Sector Relations and Foreign Exchange Vice General Manager Hayrettin Demircan and Undersecretariat of Treasury Department Head Hakan Ertürk stated that individual participation investment and individual participation capital is gaining importance in Turkey just like in the rest of the world and that public support is required.

Following the motivational speeches of Etohum founder Burak Büyükdemir and Özyeğin University Rector Prof. Erhan Erkut with a message stating that “Investment is made to the entrepreneur spirit in you,” Undersecretariat of Treasury Financial Sector Relations and Foreign Exchange General Manager Ali Arslan came to the stage. Arslan emphasized that the opinions of investors and entrepreneurs were taken during the preparation of the regulation which has also been published online at their website and summarized the goal of the regulation as such: “We adapted the model that has been applied in England since 1995 to Turkey via investors. Our goal is to ensure that investors not only make financial support but also transfer their experiences to the process and also ensuring that investors individual participation networks with public support. Individual participation capital can of course be continued without public support. However, investors that wish to benefit from public support should do so based on various criteria. The criteria that will be applied during this licensing process will ensure that certain standards are formed in the sector and ethical approaches are established.”

“Angel investors are exempt from taxes”

Undersecretariat of Treasury Financial Sector Relations and Foreign Exchange Vice General Manager Hayrettin Demircan who spoke after Arslan informed the participants regarding how the regulation works and how investors will benefit from tax exemption during this process.

According to the regulation, individual participation investors that wish to benefit from public support will first apply to the Undersecretariat of Treasury in order to receive their license. Following the evaluation of the required documents within the framework of various accreditation criteria, the “licensed investor” will be able to start conversing with entrepreneurs and will help in the formation of local investment-entrepreneur networks.

Whereas the Ministry of Finance that will step in during the transfer of capital to the venture company will provide tax exemption to the investors at this stage. However, in order for the investors to benefit from tax exemption, they will have to keep their stocks for two years and to turn it into an expense during the first year after investment.

“At most 1 million TL investment to each venture company”

The regulation has also determined various criteria regarding venture companies. The annual company turn over should not exceed 5 million TL in order for the company to receive investment. In addition, the company should be an incorporated company, should have at most 50 employees and should not be under the control of another company. These criteria are required for venture companies to receive the necessary support.

Another important information that was given about the regulation was that the highest investment amount for each venture company will be 1 million TL. This criterion that came into effect to ensure that syndication investments increase in the sector specifies that the investment amount can go up to 2 million TL if required.

─ February 20, 2013