On Supporting Currency-Protected Deposit Accounts

On Supporting Currency-Protected Deposit Accounts

Summary With the Article 2 of the Law No. 7352 published in the Official Gazette dated 29/01/2022 and numbered 31734, a provisional Article 14 has been added to the Corporate Tax Law No. 5520 and an exemption has been introduced for the income to be obtained from conversion to Turkish Lira and exchange rate protected deposit accounts. Explanations regarding this exemption are given below.

 

1. Conversion to Turkish Lira until the filing date of the Fourth Provisional Taxation Period Declaration:

 

In the event that the corporations convert the foreign currencies included in their balance sheets dated 31/12/2021 into Turkish Lira at the conversion rate until the date of submission of the declarations of the fourth provisional taxation period and use the amount obtained in this way in deposits or participation accounts with a maturity of at least three months, the following earnings will be exempt from corporate tax:

 

• The portion of the foreign exchange gains arising from the period-end valuation of the aforementioned foreign currencies corresponding to the period between 01/10/2021-31/12/2021,
• Foreign exchange gains arising from the accounts converted into Turkish Lira until the date of the provisional tax declaration of 2021/4th,
• Interest, dividends and other gains at maturity, including those arising from end-of-period valuation.

According to this;

 

1. The part of these incomes corresponding to the period between 01/10/2021-31/12/2021 will not be subject to tax for the institutions that have obtained foreign exchange difference income arising from the valuation as of 31/12/2021 due to the foreign currency deposits in their accounts.
2. Exchange difference income from 31/12/2021 until the date of opening the deposit or participation account (until 17/02/2022 at the latest) will also be exempt from corporate tax.
3. All earnings from deposit or participation accounts, including interest, dividends and state subsidies, will be exempt from tax.
4. Amounts in deposit or participation accounts will benefit from exchange rate protection.

2. Conversion to Turkish Lira by the end of 2022:

 

In the event that the foreign currencies in the balance sheets of the institutions dated 31/12/2021 are converted into Turkish Lira at the conversion rate within the scope of supporting the conversion to Turkish Lira deposits and participation accounts until the end of 2022 and the Turkish Lira assets obtained are invested in Turkish Lira deposits or participation accounts for at least three months;

 

• Foreign exchange gains between the valuation at the end of the temporary tax period and the date of conversion into Turkish Lira,
• Interest, dividends and other gains at maturity, including those arising from period-end valuations

will be exempt from Corporate Tax.

 

According to this;

 

1. The portion of the gains from the conversion of foreign currencies included in the balance sheets dated 31/12/2021 into Turkish Lira until the end of 2022 between the end of the provisional tax period and the date of conversion will not be subject to tax.
2. All earnings from deposit or participation accounts, including interest, dividends and state subsidies, will be exempt from tax.
3. Amounts in deposit or participation accounts will benefit from exchange rate protection.

It is possible to benefit from the exemption under the same conditions if the gold accounts in the balance sheets of the institutions dated 31/12/2021 and the balances in the processed and scrap gold accounts to be opened after this date are converted into Turkish Lira until the end of 2022.

 

3. Other Considerations:

 

• Article 5/3 of the Corporate Tax Law will not be applied to such earnings and expenses related to the exempted earnings or losses arising from the activities within the scope of the exemption can be deducted from the corporate income. Therefore, foreign exchange losses that may arise from the conversion to Turkish Lira can be taken into account as expenses.
• In the event that the assets converted into time deposit accounts in accordance with the above conditions are withdrawn before their maturity, the taxes not accrued on time due to the exemption will be collected together with the tax loss penalty.
• Income taxpayers who keep books according to the balance sheet basis will also be able to benefit from this exemption under the same conditions.

cThe text of Law No. 7352 is available here.

 

Regards,

 

BİLGENER