Tax Rates on Foreign Currency Accounts Increased and Withholding Periods Extended.
With the Presidential Decree No. 7332 published in the Official Gazette No. 32235 on 28.06.2023, amendments were made to the Cabinet Decision No. 2006/10731, increasing the tax rate applied to the profit shares paid/earned on foreign currency deposit and participation accounts to 25%. Additionally, deadlines for applying certain reduced withholding tax rates under the Temporary Article 67 of the Income Tax Law have been extended.
1. Tax Rate Applied to Profit Shares Paid/Earned on Foreign Currency Deposit and Participation Accounts
According to the Cabinet Decision No. 2006/10731, various tax rates were applied to the profit shares paid/earned on foreign currency deposit and participation accounts based on their maturities. With the aforementioned Presidential Decree, a withholding tax rate of 25% will be applied to demand, notification, special current accounts, and time deposit accounts.
2. Withholding Tax Rates to Continue to Apply at a Reduced Rate
Information regarding the withholding tax rates that will continue to apply at a reduced rate under the mentioned Presidential Decree are as follows:
1) Withholding Tax Rates on Deposit Interest and Profit Shares
a) Withholding Tax Rates on Deposit Interest
- i) 5% for demand and notification accounts and time deposit accounts with a maturity of up to 6 months (inclusive),
- ii) 3% for time deposit accounts with a maturity of up to 1 year (inclusive),
- iii) 0% for time deposit accounts with a maturity of over 1 year,
- iv) 0% for time deposit accounts with a variable interest rate based on inflation for a maturity period of over 1 year,
- v) 0% for foreign currency deposit accounts and time deposit accounts converted to Turkish lira at the exchange rate,
- vi) 0% for gold deposit accounts converted to Turkish lira at the conversion price.
b) Withholding Tax Rates on Profit Shares Paid by Participation Banks
- i) 5% for demand, notification, special current accounts and time deposit accounts with a maturity of up to 6 months (inclusive),
- ii) 3% for time deposit accounts with a maturity of up to 1 year (inclusive),
- iii) 0% for time deposit accounts with a maturity of over 1 year,
- iv) 0% for participation accounts converted to Turkish lira from foreign currency under the exchange rate,
- v) 0% for participation accounts converted to Turkish lira from gold-based participation funds at the conversion price.
2) Withholding Tax Rates on Bank Bonds and Bills and Lease Certificates Issued by Asset Leasing Companies Whose Users Are Banks, and Withholding Tax on Gains from Investment Funds
a) Withholding Tax Rates on Lease Certificates
- i) 5% on income from those with a maturity of up to 6 months (inclusive),
- ii) 3% on income from those with a maturity of up to 1 year (inclusive),
- iii) 0% on income from those with a maturity of over 1 year,
- iv) 5% on gains from the sale of certificates held for less than 6 months,
- v) 3% on gains from the sale of certificates held for less than 1 year,
- vi) 0% on gains from the sale of certificates held for more than 1 year.
b) Withholding Tax Rate on Gains from Investment Funds
A 0% withholding tax will apply to income and gains from investment funds (excluding variable, mixed, eurobond, foreign, and free funds, as well as investment funds whose name includes “foreign currency”).
3) Withholding Tax Rate on Income and Gains from Products Issued by Mortgage Financing Institutions
For income and gains derived from asset-backed securities, mortgage-backed securities, mortgage-guaranteed securities, and asset-backed securities issued by mortgage financing institutions acquired between 28.06.2022 and 30.06.2023 (inclusive), a withholding tax rate of 5% will apply until 30.06.2023.
You can access the relevant Presidential Decree here.
Sincerely,
BİLGENER
