Turkey: CIRCULAR Number 88 - Redetermination Of Certain Amounts In Income Tax Law And I

Last Updated: 23 January 1997
SUBJECT: Certain amounts in the Income Tax Law and income tax withholding rates have been re-determined

Through the promulgation of the Council of Ministers Decree No: 96/8955, in the Official Gazette dated December 29, 1996 and No. 22862, certain amounts specified in the Income Tax Law applicable in 1997, have been increased, meanwhile, certain withholding rates have been rearranged.


Article 31 in the Income Tax Law     Effective on the incomes 
                                     earned in 1997, the 
                                     amount of personal 
                                     deduction applied on wage 
                                     earners has been raised from TL 
                                     60,000 to TL 105,000 daily. 
                                     Accordingly, the monthly 
                                     personal deduction amount has 
                                     been re-determined as TL 
                                     3,150,000, and the annual 
                                     personal deduction amount has 
                                     been redetermined as TL 

Additional Article 2 in 
the Income Tax Law                   The minimum investment amounts 
                                     to be taken into consideration 
                                     during investment allowance 
                                     applications on the Incentive 
                                     Certificates to be issued within 
                                     1996, have been raised from TL 
                                     12 Billion to TL 18 Billion in 
                                     commercial and industrial 
                                     investments, and from TL 2 
                                     Billion to TL 3 Billion in 
                                     agricultural investments.

Articles 86/87 
of the Income Tax Law                The applicable limits during the
                                     non consolidation of income and 
                                     optional consolidation has been
                                     raised from TL 900 Million to TL 
                                     1.5 Billion.  


Additional Article 111 of the 
Income Tax Law                       Effective on 1996, the minimum 
                                     tax amounts applicable, have 
                                     been determined as TL 400 
                                     million each for the first six 
                                     game tables, TL 300 million 
                                     monthly for each table exceeding 
                                     the said limit; and to TL 40 
                                     million for each game machine 
                                     for the first 60 game machines 
                                     and to TL 30 Million for each 
                                     game machine exceeding the said 

Article 103 of the Income Tax Law    The following taxes will be 
                                     applied on the income earned in 
                                     1996 calendar year 1996 

up to 500,000,000                             25%
of 1,000,000,000                     for 500,000,000 - TL
                                     125,000,000; for the outstanding 
                                     amount - 30% 
of 2,000,000,000                     for TL 500,000,000 - TL 
                                     125,000,000 ; for the 
                                     outstanding amount - 35% 
of 4,000,000,000                     for TL 2,000,000,000 TL 
                                     625,000,000; for the outstanding 
                                     amount - 40% 
of 8,000,000,000                     for TL 4,000,000,000 TL 
                                     3,225,000,000; for the 
                                     outstanding amount - 45% 
of TL 16,000,000,000                 for TL 8,000,000,000 - TL 
                                     3,225,000,000 for the 
                                     outstanding amount - 50% 
for above TL 16,000,000,000          for TL 16,000,000,000 - TL 
                                     7,225,000 for the outstanding 
                                     amount - 55% 
Certain amendments have been introduced on Council of Ministers Decree No. 93/5148 regulating the withholding rates applicable as per Article 94 of the Income Tax Law. Accordingly, withholding will be applied at the following rates :

1. The withholding rates specified in paragraphs (a) and (c) of Article 5 of the Decree in question have been amended as follows (excluding Fund Share)

a) From payments made against the leasing of the properties and rights specified in Article 70 : 20 %

b) From payments of rent for the leasing of immovable properties belonging to cooperatives : 20 %

The above rates will gain applicability as of 01.01.1997.

2. The withholding rates applicable on the interests of bonds will be as follows (excluding Fund Share)

a) From the interests of Government Bonds : 12%

b) From the interests of Treasury Bills : 12%

c) From the income derived over the securities issued by the Mass Housing Administration and the Directorate of Public Partnership Administration : 12%

d) From the interest of bonds registered to name : 12%

e) From the interest of bonds issued to the bearer : 12%

f) From others : 12%

The above rates will be valid for the bonds issued after 01.01.1997.

3. The withholding rates applicable on the interests to be paid on the deposit accounts will be as follows (excluding Fund Share)

a) For interests accrued over the foreign exchange accounts and for the dividends paid by the private finance institutions over the foreign exchange participation accounts : 12%

b) For interests accrued over foreign exchange accounts opened to name : 12%

c) For interests accrued over foreign exchange accounts opened to the bearer : 12%

d) For others : 12%

The above rates will be valid for the interests to be paid for accounts to be opened as of 01.01.1997 or whose maturity dates will be renewed as of the said date. The wording used in the Council of Ministers Decree concerning the interests payable over demand deposits was somehow vague. During our contacts with the authorities from the Ministry of Finance, we have been informed that the new withholding rates will also be applicable for the demand deposits as of 01.01.1997.

The previous rates will be applicable on the interests to accrue prior to 01.01.1997.

4. Furthermore, the applicable withholding rates on accounts opened as of 01.01.1997 or whose maturity dates will be renewed as of the said date, and on the dividends to be paid on the time deposits, will be as follows:

a) For dividends paid to those who provide loans without interests : 12%

b) For dividends paid against profit and loss sharing certificates : 12%

c) For dividends paid against account for participation in profits and losses : 12%

Please do not hesitate to contact us if you need any additional information regarding the matters discussed here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

For further information contact Mustafa Camlica, Tax Manager on tel: +90 212 232 1210, fax: +90 212 230 8231, or e-mail mustafa.camlica@arthurandersen.com or enter a text search 'Arthur Andersen' and 'Business Monitor'.

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