Extension of deadline for reduced withholding tax rates applied in accordance with Temporary Article 67 and new withholding tax rates for certain securities

Scope

1. Bank deposit withholding rates:

At first, in accordance with the Presidential Decision dated 29/09/2020 and numbered 3032 and the temporary article 2 added to the Council of Ministers Decision no. 2006/10731, until 31/12/2020, for the current and special current accounts in TL, deposit interests to be paid to TL accounts opened between 30/09/2020 and 31/12/2020 (including this date) or renewed between these dates, and dividends paid by participation banks against participation accounts in TL, the withholding tax rates were arranged as follows:

i) 5% for time deposit accounts of up to 6 months (including 6 months) with demand and notice accounts,

ii) 3% for accounts with a time deposit of up to 1 year (including 1 year),

iii) 0% for accounts with a maturity of more than 1 year iv) Depending on the inflation rate 0% for deposit accounts with a maturity of more than 1 year on which a variable interest rate is applied, 

v) 0% for currency-protected time deposit accounts and deposit accounts converted from foreign currency deposit accounts into Turkish lira at the conversion rate.

vi) 0% of the profit shares paid by the participation banks against the participation account in the deposit accounts converted into Turkish lira over the conversion price from the golddenominated deposit accounts.

From the profit shares paid by the participation banks in return for the participation accounts:

i) 5% in current accounts with a time deposit of up to 6 months (including 6 months),

ii) 3% in accounts with a time deposit of up to 1 year (including one year),

iii) 0% in accounts with a maturity of more than 1 year

iv) 0% in participation accounts converted from exchange-protected participation accounts and foreign exchange denominated participation fund accounts to Turkish lira at the conversion rate

v) 0% in participation accounts converted from gold-denominated participation fund accounts into Turkish lira over conversion price.” 

The implementation period for the said withholding tax rates was extended to 30/6/2022 with the President's Decision no. 5360. Now, with the Decree Supplement to the Presidential Decree No. 5752, the application date has been determined as 31/12/2022 and the application period of the low rate in TL deposit and participation accounts has been extended.

In addition, the discounted withholding tax rates mentioned previously in accordance with the aforementioned decision are applied to Turkish lira deposit and participation accounts opened in banks within the scope of the implementation of supporting the conversion to currency-protected time deposits and participation accounts, and Turkish lira deposit and participation accounts.

Furthermore, within the scope of supporting the conversion to Turkish lira deposit and participation accounts, it can also be applied to gold deposit accounts, gold-denominated participation fund accounts, and deposit and participation accounts which have been converted from gold accounts against scrap gold to Turkish lira at the conversion price.

Previously, the discounted withholding rates applied for the accounts mentioned in the previous paragraph could only be applied, 

for the following accounts belonging to Turkish resident real persons: 

• FX deposit accounts and participation fund accounts in FX available as of 20 December 2021 and evaluated as having the effect of supporting the conversion to deposit and participation accounts in Turkish lira, 
• Gold deposit accounts and participation fund accounts in gold available as of 28 December 2021, and deposit and participation accounts, opened after the aforementioned dates, converted from gold accounts to Turkish lira based on the conversion price in return for processed and scrap gold,

for the following accounts belonging to Turkish resident legal entities:

• FX deposit accounts and participation fund accounts in FX available as of 31 December 2021 and evaluated as having the effect of supporting the conversion to deposit and participation accounts in Turkish lira, 
• Gold deposit accounts and participation fund accounts in gold available as of 31 December 2021, and deposit and participation accounts, opened after the aforementioned dates, converted from gold accounts to Turkish lira based on the conversion price in return for processed and scrap gold. 

2. Bonds and bills issued by banks and lease certificates issued by asset leasing companies of which banks are fund users:

Firstly, within the framework of the temporary article 3 added to the Council of Ministers Decision No. 2006/10731 and the President's Decision dated 22/12/2020 and numbered 3321, for those acquired between 23/12/2020 and 31/03/2021 (including this date), the withholding tax rates to be applied to the income and earnings from the bonds and bills issued by the banks and the income and earnings from the lease certificates issued by the asset leasing companies where the fund user is banks were arranged as follows. 

Securities investment income:

i) 5% for those with maturities up to 6 months (including 6 months)

ii) 3% for those with maturities up to 1 year (including 1 year)

iii) 0% for those with maturities longer than 1 year: 

Capital Gains on trading:

i) disposal of held for less than 6 months (including 6 months) 5%

ii) disposal of held for less than 1 year (including 1 year) 3%

iii) disposal of held for more than 1 year 0% 

The implementation period for the said withholding tax rates was extended to 30/6/2022 with the President's Decision no. 5360.

Now with the Supplementary Decision of the Presidential Decree No. 5752, the application date of the low withholding tax rates has been re-extended to 31/12/2022.

3. Income and earnings from investment funds: 

With the President's Decision dated 22/12/2020 and numbered 3321, it was first acquired between 23/12/2020 and 31/03/2021 (including this date) (variable, mixed, eurobond, foreign bonds, foreign, hedge funds and in its title) The withholding tax rate to be applied in investment funds was determined as 0% (excluding investment funds with “foreign currency” in the title) The period, which was last extended as 30/6/2022 with the Presidential Decision no.5360, has now been redefined as 31/12/2022 with the Supplementary Decision of the Presidential Decree no 5752

4. Earnings from participation shares of Private Equity Investment Funds and Real Estate Investment Funds: 

With the President's Decision No. 4454 published in the Official Gazette dated 04/09/2021, the withholding tax rate on the income from the participation units of Private Equity Investment Funds (PIEFs) and Real Estate Investment Funds (REIFs) held for more than two years was reduced to 0%, and this Decision had become effective on 04/09/2021. With the Presidential Decree No. 4454, the 0% withholding tax application for real persons who are PEIF and REIF investors became applicable not according to a certain acquisition date (and temporarily), but based on the holding period.

With the decision annexed to the Presidential Decree No. 5752, which is the subject of our bulletin, 0% withholding tax continues depending on the acquisition date and temporarily. 

Hence, for domestic persons:

(a) Earnings obtained after the 2-year holding period from the PEIF or REIF participation units that are acquired before 23/12/2020 will be subject to 0% withholding;

(b) PEIF or REIF participation units acquired between 23/12/2020 and 31/12/2022 (unless the 31/12/2022 date is further extended) without any time limit (i.e., before or after the 2-year holding period has expired) earningswill be subject to 0% withholding;

(c) Unless an additional time extension is made for the date determined as 31/12/2022, earnings to be obtained from the PEIF or REIF participation units that will be acquired as of 31/12/2022 and held for more than two years 0% rate will be subject to withholding;

(d) Unless an additional time extension is made for the date determined as 31/12/2022, the earnings to be obtained from the PEIF or REIF participation units that will be acquired as of 31/12/2022 and which have not been retained for more than two years, will be subject to 10% withholding tax.

5. Income and Gains from Asset Based Securities, Mortgage Based Securities, Mortgage Covered Securities and Asset Guaranteed Securities Issued by Mortgage Financing Institutions Established under the Law No. 6362,

Income from asset based securities, mortgage based securities, mortgage covered securities and asset guaranteed securities issued by mortgage finance institutions established under Law No. 6362, acquired between 28.06.2022 and 31.12.2022 (including this date). The withholding tax rate to be applied was determined as 5%. The withholding tax on these securities was previously applied at the rate of 10%.