UPDATE: Withholding Tax Rates on Deposits and Funds Increased

Forex - The withholding tax rates applied to Turkish lira deposits and participation accounts, as well as funds, have been increased. The decision by the Presidency on this matter has been published in the Official Gazette.

With the amendment, the application of reduced withholding tax rates on income obtained from deposits, participation accounts, and certain securities has been extended until January 31, 2025, with some rate changes made. However, the reduced withholding tax application for income derived from certain investment funds has been discontinued without an extension.

Accordingly, the withholding tax rate for demand and notice accounts, as well as accounts with maturities of up to 6 months (including 6 months), has been increased from 7.5% to 10%; for accounts with maturities of up to 1 year, the rate has been increased from 5% to 7.5%; and for maturities longer than 1 year, the rate has been raised from 2.5% to 5%.

With this regulation, within the framework of the authority specified in the seventeenth paragraph of the temporary Article 67 of the Income Tax Law No. 193, the references to October 31, 2024, in the annex of the Presidential Decision No. 9075 dated October 31, 2024, and in the temporary Articles 2, 3, 4, and 5 of the annexed Decision of the Council of Ministers No. 2006/10731 have been amended to January 31, 2025, extending the implementation period until January 31, 2025 (inclusive) by 3 months.

With the amendment introduced by the mentioned Presidential Decision, interest and profit shares paid on foreign exchange-protected accounts (including YUVAM) and other TL deposits/participation accounts, income derived from bonds and bills issued by banks, and incomes obtained from lease certificates issued by asset leasing companies that have these banks as asset users have been extended for reduced withholding tax rates per the provisions of the Capital Markets Law. The incomes obtained from asset-backed securities, mortgage-backed securities, asset-backed securities, and mortgage-backed securities issued by mortgage finance institutions established in accordance with the Law have also been included, as well as income from government bonds and treasury bills and leasing certificates issued by asset leasing companies established under Law No. 4749.

The reduced withholding tax rate (7.5%) applied to income obtained from investment funds has not been extended, returning to the general withholding tax rate (10%) for income derived from participation shares acquired as of November 1, 2024. Thus, withholding tax at a rate of 10% has been ensured for all investment fund participation share income, except for capital-intensive fund participation shares taxed at a 0% rate and gains from venture capital investment funds and real estate investment fund shares held for more than two years.

On the other hand, gains derived from participation shares acquired before November 1, 2024, will continue to be taxed at the reduced rates in effect at the time of acquisition. For variable, mixed, eurobond, foreign borrowing, foreign, hedge funds, and investment funds with the term "foreign currency" in their title, since no reduced rate applies, regarding the income obtained from these funds, withholding will continue at the pre-existing rate of 10%.