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Omnibus Bill Amending Tobacco Legislation Was Published

Omnibus Bill Amending Tobacco Legislation Was Published

Turkiye
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Law on the Amendment of the Law on the Regulation of Tobacco, Tobacco Products and Alcohol Market and Certain Laws No. 7423 (the “Omnibus Bill”), which was submitted to the Grand National Assembly of Turkey on October 18, 2022 was legalized and published in the Official Gazette dated December 10, 2022 and numbered 32039. Some of the amendments in the Omnibus Bill entered into force on the date of its publication; while other amendments will enter into force on January 1, 2024.

The Omnibus Bill amended the:
Tax Procedure Law No. 213 (the “TPL”);
Special Consumption Tax Law No. 4760 (the “SCT Law”);
Law on Regulation of Tobacco, Tobacco Products and Alcohol Market No. 4733 (the “Tobacco and Alcohol Law”);
Anti-Smuggling Law No. 5607 (the “Anti-Smuggling Law”);
Electronic Communication Law No. 5809.

What is the Purpose of the Omnibus Bill?
The Omnibus Bill aims to prevent (i) tax evasion and unfair competition; (ii) the supply of non-standard and poor-quality products to the market, and (iii) market-entry of the products that endanger the environmental and public health due to production conditions and the substances they contain, in case of tobacco, tobacco products and alcohol are being subject to smuggling.

What Does the Omnibus Bill Bring?
The regulations introduced by the Omnibus Bill are categorized under 5 (five) main headings. These headings and relevant regulations are as follows:

Regulations on the Special Labels and Markings
In the markets regulated by the Tobacco and Alcohol Law, regardless of whether they are authorized by the Ministry of Treasury and Finance (the "Ministry"); an imprisonment of 3 (three) to 8 (eight) years is envisaged for those who prevent the transmission of documents, information or data required to be transmitted to the Ministry electronically by intervening Product Monitoring System (the "PMS"), which enables the labelling and marking of products with special labels and signs that are obligatory to be used to ensure tax security, and the transfer of labelled or marked product information to the established data center, physically or through informatics or those who cause them to be transmitted in a non-realistic manner. Stamps, barcodes, holograms, clippings, seals, and symbols are among such special labels and marks. According to the preamble of the Omnibus Bill, it is aimed to prevent unregistered production by criminalizing unlawful interference to the PMS. An administrative fine of TRY 1.00 (one Turkish Lira) per each product produced, with a minimum limit of TRY 10,000.00 (ten thousand Turkish Lira) will be imposed for those who conduct machine operation tests, product trials or trial production in macaron and cigarette production facilities without notifying the Ministry of Agriculture and Forestry and without labelling or marking such products with the aforementioned special labels and signs, which are obligatory to be used in order to ensure tax security.

In the preamble of the Omnibus Bill it was stated that the purpose of the Omnibus Bill is to ensure product trials, machine operation tests or trial productions in cigarette and macaron production are carried out within the scope of the PMS, by adding the PMS to the necessary conditions at the stage of facility establishment permission, and thus, to establish product safety and to maximize deterrence by stipulating a heavy administrative fine in case it is detected that product trials, machine operation tests or trial productions are executed out of the scope of the PMS.

Regulation Regarding the SCT Law
On the other hand, in order to increase the effectiveness of the fight against smuggling, the determination of macarons subject to a special consumption tax without a special label or sign, which are obliged to be used in accordance with the TPL was included in the scope in addition to cigarettes solely made of tobacco replacer substitutes, and it was envisaged that those who possess, produce or import these products in a certain number will be held severally liable from the penalized assessment.

Regulations on the Production of Tobacco Products
In advance of the Omnibus Bill, under the Tobacco and Alcohol Law, within the scope of the conditions for those who wish to produce tobacco products in Turkey, it was required to establish facilities with complete and new technology, including tobacco preparation departments, with an annual production capacity of 2 (two) billion units in a single shift for cigarettes only; whereas, by the effectiveness of the Omnibus Bill, macarons, rolling paper and cigarette filters have been included within the requirement to establish facilities with complete and new technology, including tobacco preparation departments having a production capacity of 2 (two) billion units.

Accordingly; in addition to cigarettes by the Omnibus Bill, macarons, rolling paper and cigarette filters have been included within the scope of the procedures and principles to be determined by the president of the Republic regarding the importation of cigarettes, determination of the price of imported tobacco products and domestic marketing of cigarettes and the opportunities on being able to freely import, price and sell cigarettes from the same brand of those who produce annually at least 2 (two) billion units of cigarettes in Turkey.

These regulations will enter into force on the date of their publication.

Regulations on the Authorization Certificate
The Omnibus Bill has introduced that in order to fulfil requests for the application, amendment or extension of permits, conformity and authorization certificates for the production and import activities of tobacco, tobacco products, macarons, rolling paper, cigarette filters, alcohol and alcoholic beverages and the activities within the scope of the tobacco trade authorization certificate; it is mandatory not to have administrative fine debts which were imposed under the Tobacco and Alcohol Law and not paid in due time, unpaid premium and administrative fine debts to the Social Security Institution and unpaid debts to tax offices.

With the Omnibus Bill it was regulated that any documents related to the activities carried out within the scope of the Tobacco and Alcohol Law will not be issued by the Ministry of Agriculture and Forestry, not only for those who have finalized verdict of convictions for acts contrary to the Tobacco and Alcohol Law, but for those who have finalized verdict of convictions for acts contrary to the Law on the Monopoly of Alcohol and Alcoholic Beverages No. 4250, TPL and Anti-Smuggling Law as well. Additionally, it was stipulated that the certificates given to those who are detected to have committed acts contrary to the aforementioned provisions regarding the activities carried out within the scope of the Tobacco and Alcohol Law will be suspended until the decision of non-prosecution or court decision is finalized and no certificate will be given to the other real or legal person for such facility or workplace during this period.

Regulations on the Granting of Collateral
Regarding the production and import activities of tobacco, tobacco products, macarons, rolling paper, cigarette filters, alcohol and alcoholic beverages and activities within the scope of tobacco trade authorization certificate; it was introduced that the Ministry of Agriculture and Forestry is authorized to take collateral up to 50 (fifty) million Turkish Liras from those who have a permit, conformity and authorization certificate and those who have requests for the application, amendment or extension of the permit, conformity and authorization certificate, and in this context; it was envisaged that among those who are engaged in activities subject to the permit, conformity and authorization certificate, certificates related to the activity of those who do not provide the specified collateral may be suspended until the collateral is provided, and aforementioned documents for the facility in question may not be given to another real or legal person within this period.

Regulations on the Unauthorized Tobacco Trade
The Omnibus Bill has amended the penal provisions regarding unauthorized tobacco trade. In this context, it was regulated that if the macarons and cigarettes produced within the scope of machine operation tests, product trials or trial production in the macaron and cigarette production facilities are not destroyed within the period, an administrative fine of 1.00 (one Turkish Lira) for each unit produced, not less than TRY 10,000.00 (ten thousand Turkish Liras), will be imposed.

Enforcement
All regulations that are not separately stated in this Client Alert to enter into force on the date of its publication will enter into force on January 1, 2024.

By Asli Pamukkale, Senior Partner, Nur Duygu Bozkurt Kadirhan, Senior Associate, Ilayda Sak, Associate, Deniz Yontuk, AssociateMoral, Kinikoglu, Pamukkale, Kokenek