Executive summary

Published in the Turkish Official Gazette on 1 November 2024, Presidential Decree No. 9075 (Decree) amends withholding tax rates and further extends, from 31 October 2024 to 31 January 2025, the period for reduced withholding tax on income and gains derived from various sources.

The changes are made to aspects of Article 1, Provisional Articles 2, 3, 4 and 5 of Decree No. 2006/10731 and are summarized in this Alert.

Specific changes

Article 1 of Decree No. 2006/10731

For interest and dividends that are either:

• Paid to checking and special current accounts from 1 November 2024 until 31 January 2025 (including this date)
• Payable on accounts opened between 1 November 2024 and 31 January 2025 (including this date) or renewed between these dates

The following withholding rates will be applied:

• For interest on deposits:
• 10% for checking and notice accounts and time-deposit accounts with maturities up to six months (inclusive)
• 7.5% for time-deposit accounts with the maturity up to one year (inclusive)
• 5% for accounts with maturity longer than one year
• 0% for accounts with maturities longer than one year with variable interest rates depending on the inflation rate
• For dividends paid by participation banks on participation accounts:
• 10% for checking, notice and private current accounts with maturities up to six months (inclusive)
• 7.5% for time-deposit Accounts with the maturity up to one year (inclusive)
• 5% for accounts with maturity longer than one year
• For foreign-exchange (FX)-protected time-deposit accounts and FX/gold deposits converted to Turkish Lira at the conversion rate:
• 10% for time-deposit accounts with a maturity of up to six months (inclusive)
• 7.5% for time-deposit accounts with a maturity of up to one year (inclusive)
• For participation accounts converted into Turkish Lira at the conversion rate from foreign currency/gold denominated participation accounts and foreign currency/gold denominated participation fund accounts with FX protection:
• 10% for accounts with a maturity of up to six months (inclusive)
• 7.5% for accounts with a maturity of up to one year (inclusive)

Provisional Article 2 of Decree No. 2006/10731

The following rates apply through 31 January 2025 on interest and participations to be paid to checking and private current accounts and accounts opened between the effective date of Provisional Article 2 (20 September 2020) and 31 January 2025 (inclusive of this date) or accounts with maturity terms renewed:

• On deposit interest:
• 10% for demand deposit, notice deposit and time-deposit accounts with maturity of up to six months (inclusive)
• 7.5% for time-deposit accounts with a maturity of up to one year (inclusive)
• 5% for time-deposit accounts with a maturity of more than one year
• 10% for foreign currency-protected time-deposit accounts and for foreign currency deposit accounts converted into Turkish lira over the conversion rate with a maturity of up to six months (inclusive)
• 7.5% for foreign currency-protected time-deposit accounts and for foreign currency deposit accounts converted into Turkish lira over the conversion rate with a maturity of up to one year (inclusive)
• 5% for foreign currency-protected time-deposit accounts and for foreign currency deposit accounts converted into Turkish lira over the conversion rate with a maturity longer than one year
• 10% for deposit accounts converted from gold deposit accounts into Turkish lira over the conversion price with a maturity of up to six months (inclusive)
• 7.5% for deposit accounts converted from gold deposit accounts into Turkish lira over the conversion price with a maturity of up to one year (inclusive)
• On participation earnings paid by the participation banks for the participation accounts:
• 10% for demand deposit, notice deposit, private current accounts, and time-deposit accounts with a maturity of up to six months (inclusive)
• 7.5% for time-deposit accounts with a maturity of up to one year (inclusive)
• 5% for time-deposit accounts with a maturity of more than one year
• 10% for foreign currency-protected participation accounts and foreign currency participation accounts that are converted into Turkish lira over the conversion rate with a maturity of up to six months (inclusive)
• 7.5% for foreign currency-protected participation accounts and foreign currency participation accounts that are converted into Turkish lira over the conversion rate with a maturity of up to one year (inclusive)
• 5% for foreign currency-protected participation accounts and foreign currency participation accounts that are converted into Turkish lira over the conversion rate with a maturity longer than one year
• 10% for participation accounts converted from gold participation accounts into Turkish lira over the conversion price with a maturity of up to six months (inclusive)
• 7.5% for participation accounts converted from gold participation accounts into Turkish lira over the conversion price with a maturity of up to one year (inclusive)

Provisional Article 3 of Decree No. 2006/10731

The following rates apply for income and earnings derived from bonds and bills issued by banks, and lease certificates issued by asset leasing companies where the fund user is bank, that are acquired between the effective date of the Article (23 December 2020) and 31 January 2025 (inclusive of this date):

• 10% for earnings derived from those with maturity of up to six months (inclusive)
• 7.5% for earnings derived from those with a maturity of up to one year (inclusive)
• 5% for earnings derived from those with a maturity longer than one year
• 10% for gains from disposal of those held for less than six months (inclusive)
• 7.5% for gains from disposal of those held for less than one year (inclusive)
• 5% for gains from disposal of those held for more than one year

Provisional Article 4 of Decree No. 2006/10731

A 0% rate applies on the income and earnings derived from government bonds and treasury bonds issued by the Ministry of Treasury and Finance, and income and earnings derived from lease certificates issued by asset leasing companies that are established as per Law No. 4749. These bonds and lease certificates must be acquired between the effective date of Provisional Article 4 (22 December 2021) and 31 January 2025 (inclusive of this date).

Provisional Article 5 of Decree No. 2006/10731

A 7.5% rate applies on the income and earnings derived from asset-backed securities, mortgage-backed securities, covered bonds and asset guaranteed securities issued by mortgage finance institutions (including asset finance funds and housing finance funds founded by these companies) that are established as per Capital Markets Law No. 6362. These securities must be acquired between the effective date of Provisional Article 5 (28 June 2022) and 31 January 2025 (inclusive of this date).

Implications

These provisions became effective upon publication in the Gazette. In light of the changes, multinational entities should evaluate their financial assets and operations in Turkiye, ensuring their compliance with the amended withholding tax rates and considering the updated rates' potential effect on their tax position. Strategic planning may also involve reviewing how investments in eligible securities or accounts could be affected.