Merak Fiscal Model Library

A world-class collection of standardized fiscal models

Turkey R/T (1989)

Fiscal Term Description
Fiscal Regime Type Royalty/Tax.
• Petroleum Law 6326 of March 7 of 1964 (as amended by Laws 6558, 6987, 1702, 2217 and
2808 in 1955, 1957, 1973, 1979 and 1983 respectively).
Governing Legislation • Decree 88/13265 in October 1988 concerns rules for oil and gas exploration in Turkish
Continental Shelf beyond territorial waters in Black Sea and the Mediterranean.
• Decree 14111 of 1989 for Petroleum Regulations codified the previous changes.
Turkish Petroleum Corporation or Türkiye Petrolleri A.O. (TPAO) hold licenses on its own account,
State Participation some are held jointly with TPAO participation between 50% to 80%
Signature Bonus None.
• Surface rental rate in $/sq. km are estimated from research as follows;
US$ / sq. km.
Year Exploration Development
Phase Phase
1 2.75 15.52
Surface Rental 2 2.75 20.69
3 2.75 25.86
4 5.51 31.03
5 5.51 41.38
>6 8.27 51.72
• The rates are reduced by 50 % for offshore fields.
License holders have to provide educating and training for Turkish employees and have to employ
Training Fee Turkish employees not less than 25% of the number of expatriate personnel it has employed
(including through sub-contractors) during the previous calendar year.
Royalty Royalty Rate is 12.5%
• Petroleum right holders are allowed to export 35% of all petroleum and natural gas produced on
land from the areas discovered after January 1, 1980, and 45% from the sea in the form of crude
DMO or refined.
• Market price will be applied to crude and natural gas sold in domestic market (i.e. no effect).
• Effective Tax Rate is 33% (30% Corporate Tax plus a fund levy corresponding to 10% of the
Corporate Tax, this surtax levy also applies to withholding tax).
Income Tax • Retroactive from January 1, 2006, the income tax rate was reduced to 20%; yielding an effective
tax rate of 22% (20% Corporate Tax plus a fund levy corresponding to 10% of the Corporate
Tax)
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 Turkey R/T (1989)

Fiscal Term Description

• Surface Rental and Training Fee are expensed.
• Exploration costs, Intangible Development Drilling and Dry Hole costs (included in Intang Dev
Drilling in the model) can be expensed or capitalized.
*The Capitalized Exploration costs, Development Drilling and Dry Hole costs are eligible to
Depletion Allowance, which is a rate that applies to the total capital determined by the
Government for each contract area (assumed all capitalized and 5% depletion allowance rate in
the model). The investment tax allowance (depletion allowance) was abolished with effect from
January 1, 2006.
• The capitalized costs and other Development Costs can be depreciated on a 5-year SL basis or
25% Declining Balance. Companies can elect to switch the depreciation method from Declining
Balance to Straight Line basis any time in the life of the asset but not vice versa.
• Losses can be carried forward for 5 years, no carry back allowed.
• Withholding Tax Rate is 16.5% (15% plus 10% surtax). May vary for different home countries.

Withholding Tax • Tax rates for Income Tax and Withholding Tax may vary over time. Should the combined taxes
liability exceed 55 % of the taxable income, it will be adjusted to not exceed 55%. First by
reducing Withholding Tax, then Income Tax (currently not modeled).
Ring Fencing Around the contract area for royalty and tax.

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January 2007 Page 2 of 2

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