Turkish tax law has been changed to include measures to
protect the Turkish lira's value and a recent tax amnesty for
the repatriation of foreign assets.
New withholding tax rates on savings
Turkey has recently faced currency problems, and the lira
has been devalued by more than 40% against the US dollar since
the beginning of the year.
The lira's weakness has led the government to introduce new
monetary and fiscal policies, including recently issuing a
presidential decree to counter lira volatility.
The decree introduced a temporary tax regulation on lira and
foreign currency savings, the aim of which was to reduce lira
fluctuations and create a stable investment environment in
Turkey.
The regulation is applicable for three months from August 31
2018, and will allow interest and profit sharing to be paid to
accounts which are opened or renewed in the next three
months.
Accordingly, withholding tax rates applicable for the
three-month period are shown in Table 1 alongside the previous
ones.
| Table
1 |
| Account
Type |
Term |
Previous
Ratio |
New
Ratio |
Foreign Exchange Deposits and Foreign Exchange
Participation Accounts
|
Drawing and
current call accounts and up to 6 months deposit
accounts |
18% |
20% |
| Up to 1-year
deposit accounts |
15% |
16% |
| More than 1-year
deposit accounts |
13% |
13% |
Turkish Lira Deposits and Turkish Lira
Participation Accounts
|
Drawing and
current call accounts and up to 6 months deposit
accounts |
15% |
5% |
| Up to 1-year deposit
accounts |
5% |
3% |
| More than 1-year deposit
accounts |
12% |
0% |
The table shows a considerable decrease in withholding rates
on lira deposits and participation accounts. Particularly for
funds held in savings accounts for more than a year, no
withholding tax is applicable. This clearly indicates that the
government supports long-term lira savings with its tax
policy.
Amendment of recent tax amnesty
Turkey has introduced a new tax amnesty law (No. 7143) for
the repatriation of foreign assets. One important aspect of the
amnesty is that it allows tax exemption for the following
incomes of individual and corporate income taxpayers (including
those obtained before October 30 2018):
- Income from the alienation of foreign
participation shares;
- Income from foreign participation;
- Income from subsidiaries and permanent
establishments.
This exemption also includes income from liquidation of
foreign entities by individual and corporate income
taxpayers.
The single requirement to benefit from the amnesty programme
is to transfer this income to Turkey by December 31 2018 (the
start date was May 18 2018).
The president is authorised to extend these dates for six
months under the tax amnesty law, and he has used this
authorisation.
Accordingly, income from: (i) the alienation of foreign
participation shares; (ii) foreign participation; (iii)
subsidiaries and permanent establishments including that
received by April 30 2019; and (iv) income from the liquidation
of foreign entities, including that obtained by June 30 2019,
will be tax-exempt provided that it is transferred to Turkey by
June 30 2019.
Dr. Burçin Gözlüklü (burcin.gozluklu@centrumauditing.com) Ramazan
Biçer (ramazan.bicer@centrumauditing.com)
Centrum Consulting
Tel: +90 216 504 20 66 and +90 216 504 20 66
Website: centrumauditing.com