Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

June 8, 2020
2020-5845

Turkey introduces guidelines on exemption applied on FX gains related to calculation of capital gains derived from shares

Executive summary

The Turkish Ministry of Treasury and Finance published General Income Tax Communiqué No. 311 (the Communiqué) in the Official Gazette dated 27 May 2020 and it entered into force on the same day. The Communiqué introduces guidelines regarding the exemption provided under Repeated Article 81 of the Income Tax Code which is applicable to the foreign exchange (FX) gain related to the capital gains calculated in the disposal of Turkish company participation shares by nonresidents (including corporations).

Detailed discussion

Capital gains arising from the disposal of Turkish company shares by nonresidents are subject to capital gains taxation in Turkey, under certain conditions.

In the calculation of the capital gains, there are various methods used to decrease the capital gains tax base. One of the methods is the exemption applied on the gains arising from the FX rate differences, under the conditions stipulated under Repeated Article 81 of the Income Tax Code.

The Communiqué, which entered into force on 27 May 2020, provides guidelines with respect to the application of the exemption applied on the gains arising from the FX rate differences in the disposal of the participation shares.

One of the conditions to benefit from such exemption is that the acquisition value in foreign currency of the participation shares should be physically brought into Turkey or transferred to banks operating in Turkey.

Where the participation shares that were acquired by nonresident persons (including corporations) by bringing the foreign currency into Turkey are acquired by other nonresident taxpayers, and where the acquisition value is not brought into Turkey, the FX exemption corresponding to the initial acquisition value (where the foreign currency is brought into Turkey) can be utilized however, for the remaining acquisition value it would not be possible to benefit from the FX exemption.

Acknowledging that such condition of “bringing the acquisition value into Turkey” in the case of transfers between nonresidents is not clearly stipulated under the Income Tax Code; this guidance introduced by the Communiqué may lead to ambiguities in the practical application of the mentioned exemption.

Provisions of Double Tax Treaties that Turkey is a party to, without prejudice, continue to be used in the taxation treatment of the capital gains derived by nonresidents arising from the disposal of participation rights in Turkish companies.

_____________________________________________________________________________________________________________

For additional information with respect to this Alert, please contact the following:

Kuzey Yeminli Mali Müsavirlik A.S., Istanbul

ATTACHMENT

 
 

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

 

Copyright © 2024, Ernst & Young LLP.

 

All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.

 

Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

 

"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

 

Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.

 


Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or ey.com. Please refer to the privacy notice/policy on these sites for more information.


Yes, I accept         Find out more