In brief
Decision of the Presidency no. 5872 extending the tax incentive for companies that convert their foreign currencies to Turkish lira was published in the Official Gazette on 27 July 2022. Incentives apply if companies convert the FX available on the balance sheet of 30 June 2022 to liras by year-end and deposit the liras in banks for at least 3 months. Originally, the tax exemption applied to FX available on the balance sheet of 31 December 2021 only, and it was later extended to FX on the balance sheet of 31 March 2022.
In detail
In December 2021, Turkey introduced a “foreign currency protected lira deposit” scheme with the aim of keeping deposit accounts in Turkish lira. The scheme promises to compensate depositors for any loss in the value of the lira that may be incurred during the time these funds are held in a lira account. Initially the scheme was available for individuals, then it was expanded to corporate accounts in January 2022. Subsequently, a tax incentive was introduced for companies to further encourage the switch: law number 7352, published on 29 January 2022, added a temporary provision to the Corporate Income Tax Law, establishing a tax exemption for gains derived under the concerned scheme (for details, please see our tax bulletin of 31 January 2022).
Law 7404, published on 28 May 2022, extended the tax incentive to conversion of foreign currencies available at the end of the first quarter of 2022. Originally the tax exemption applied to FX available on the balance sheet of 31 December 2021 only (for details, please see our tax bulletin of 31 May 2022).
The law published on 28 May 2022 also gave the president the authority to extend the tax incentive to foreign currencies available on the balance sheets of 30 June 2022 and 30 September 2022. With the Decision of the Presidency no. 5872 published in the Official Gazette on 27 July 2022, the president is using his authority with respect to foreign currencies available on the balance sheet of 30 June 2022. Accordingly, if the foreign currencies available on the balance sheet of 3o June 2022 are converted into liras by year-end, and if these amounts remain in lira deposit accounts for at least 3 months, then interest, profit shares and other earnings (including gains from restatement at period-ends) derived from the lira deposit accounts will be exempt from corporate income tax.
Additionally, the tax incentive will apply to income derived from renewal of these lira deposit accounts (after the maturity date) until the end of 2022.
