Recent Developments
The Banking and Insurance Transaction Tax (“BITT”) imposed on foreign currency (“FX”) transactions decreased to 0.2% from 1%
The BITT rate on FX transactions was increased from 0.2% to 1% with the Presidential Decree No. 2568 published in the Official Gazette dated 24 May 2020 and No. 31136.
The rate was then decreased to 0.2% with the Presidential Decree No. 3031 published in the Official Gazette No. 31260 dated 30 September 2020. The new rate is in force as of 30 September 2020.
The 0.2% BITT rate for FX transactions will be calculated over the FX sales amounts. The BITT will remain 0% for the following transactions:
- FX sales made between banks and authorized foreign exchange dealers (among themselves or to each other)
- FX sales made to the Ministry of Treasury and Finance
- FX sales made to the borrower of an FX loan by the lender or the intermediary bank that mediated the utilization of the FX loan, for the purposes of repaying the FX loan
- FX sales made to enterprises holding industrial registration certificates
- FX sales made to exporters that are members of exporters’ associations
- FX sales made to institutions resident abroad and dealing with at least one transaction deemed to be the transactions of financial institutions according to the Banking Law.
The withholding tax imposed on interests and dividends derived from deposit accounts and participation accounts in TRY decreased
The Presidential Decree No. 3032 published in the Official Gazette dated 30 September 2020 and No. 31260 decreased the withholding tax rates imposed on interests and dividends to be paid
- to the TRY drawing accounts and private checking accounts until and including 31 December 2020; and
- to the TRY accounts opened between 30 September 2020 and 31 December 2020 or the maturity of which is renewed during these dates.
Decreased Withholding Tax Rates
| Previous Rate | Decreased Rate | |
| Deposit interests | ||
| 15% | 5% |
| 12% | 3% |
| 10% | 0% |
| Dividends paid by participation banks for participation accounts | ||
| 15% | 5% |
| 12% | 3% |
| 10% | 0% |
Conclusion
We believe these developments moderate the fiscal measures previously taken due to the COVID-19 pandemic, and encourage the conversion of foreign exchange savings into TRY and their use in TRY deposit and participation accounts.
