Turkey: New Withholding Tax Rates On Interest Income Paid For Time Deposits And Premiums Paid For Participation Accounts

Last Updated: 12 August 2013
Article by Fırat Yalcın

A brief on significant legal developments in Turkey

The withholding tax rates on interest paid for time deposits and premiums paid for participation accounts are determined based on the maturity period and the currency of the deposit, pursuant to the Council of Ministers Decree No. 2012/4116 (published in the Official Gazette in January 1, 2013 and No. 28515), which amended the Council of Ministers Decree No. 2006/10731 (published in the Official Gazette in July 23, 2006 and No. 26237). Please find below the new withholding tax rates;

  • Interest paid for foreign currency deposits and premiums paid for the foreign currency participation accounts will be subject to below withholding tax rates;

  • Interest paid for Turkish currency deposits and premiums paid for the Turkish currency participation accounts will be subject to below withholding tax rates;

Please note that the above stated rates are applicable to interests and premiums which will be paid for checking accounts and private checking accounts the day after the publication date of the above mentioned Decree, dated 02.01.2013.

Please note that the above stated rates are applicable to interests and premiums paid for deposit accounts, which are opened or its maturity date renewed, after the day following the publication date of the above mentioned Decree, dated 02.01.2013.

New Rates of Resource Utilization Support Fund on Loans

Pursuant to the Council of Ministers Decree No 2012/4116, Resource Utilization Support Fund (published in the Official Gazette in August 26, 2006 and No. 20264) (the "RUSF") rates are determined with regard to loans granted by foreign institutions as foreign currency and gold to Turkish residents other than banks and financial institutions. The rates are stated below;

Please also note that the above stated RUSF rates are applicable to the loans which are granted the day following the publication date of the above Decree, dated of 02.01.2013.

Corporate Income Tax Circular No.26

Pursuant to Corporate Income Tax Circular No. 26 (dated 12 January 2013), the servers, which are used by the foreign investors during sale and purchase transactions performed in TURKDEX (Turkish Derivatives Exchange) and/or ISE (Istanbul Securities and Stock Market) based on the brokerage agreements signed with Turkish resident companies will not be deemed as permanent establishment.

Taxation of Foreign Investment Funds

Following the changes made by Law No. 6322 (published in the Official Gazette dated June 15, 2012 and No. 28324) to the Corporate Income Tax Code (Law No. 5520) (published in the Official Gazette dated June 21, 2006 and No. 26205) (the "CIT Code"), further clarifications have been provided by the Communique No. 7 (published in the Official Gazette dated December 31, 2012 and No. 28514) with regard to the taxation of foreign investment funds and portfolio management companies.

Pursuant to the explanations provided under Communique No. 7, portfolio management companies will not be deemed as permanent establishment of the foreign investment funds if the below conditions are met, with regard to income which is derived through the below stated instruments;

  • All kind of securities and capital market instruments,
  • Derivative exchanges,
  • Warrants,
  • Foreign currency,
  • Derivatives based on commodity,
  • Credits and similar financial instruments,
  • Commodities traded under precious metal exchanges.

Please find below the conditions to be met in order to benefit from the above stated regulation;

  • The transactions which are conducted on behalf of the foreign investment fund by the portfolio management company shall fall under the customary services of the portfolio management company,
  • The relationship between the foreign investment fund and the portfolio management company shall be similar to a relationship between two independent parties,
  • The cost of the portfolio management services shall be at an arm's length price and a transfer pricing report shall be submitted,
  • The portfolio management company shall not have more than %20 shareholding interest in the foreign fund.

Venture Capital Funds

Pursuant to Article 325/A of the Tax Procedure Code (Law No. 213) (published in the Official Gazette dated January 10, 1961 and No. 10703 - 10705) (the "TPC"), which was amended by Law No.6322, taxpayers who are subject to corporate income tax are allowed to allocate funds from the income of the relevant financial year, in order to invest as capital into venture capital investment companies and to purchase shares of venture capital investment funds in that financial year.

Also, pursuant to Article 10 of the CIT Code, which was amended by Law No.6322, venture capital fund allocated by the taxpayers could be deducted from the corporate income tax base. Please find below the conditions in order to benefit from such deduction right;

  • The venture capital fund which is allocated in the relevant financial year shall not exceed %10 of the income declared for that financial year, and the total of the venture capital fund shall not exceed %20 of the equity (please note that both conditions shall be fulfilled on the same time),
  • The allocated venture capital fund shall be invested, in the relevant financial year, in venture capital investment companies or funds established or will be established in Turkey which are subject to the supervision of the capital markets board,
  • The venture capital fund shall be separately stated on the corporate income tax return

E-Invocing

Pursuant to Communique No. 421 of the TPC the use of the electronic invoice and the electronic commercial books has become compulsory for the below stated taxpayers.

  1. Taxpayers who have mineral oil license in accordance with to Law 5015 (Petroleum Market Law) (published in Official Gazette in 20 December, 2003 and No. 25322) and taxpayers who purchase goods from the preceding taxpayers and who has the gross sale of TL 25.000.000,
  2. Taxpayers who produce, process and/or export goods which are under the List No.3 of the Special Consumption Tax Law and taxpayers who purchase goods from the preceding taxpayers and who has the gross sale of TL 10.000.000.
  3. in addition to the above stated taxpayers, if the both seller and the buyer of a trade prefer or are obliged to use e-invoice, the taxpayers are obliged to issue e-invoice in their transactions performed between each other.

The gross sale amount to determine whether a taxpayer falls under the scope of e-invoice is the one stated at the balance sheet of the taxpayers. It is also clarified that the sector is not important to be subject to obligatory e-invoice application for the taxpayers stated under (c) above. For the determination of the gross sale, the 2011 financials of the taxpayers will be considered.

It has been also stated in the Communique No.421, the mandatory use of e-invoice will come into force in 1 September, 2013 and the mandatory of the use of e-commercial books will come to force in 1 September, 2014.

Tax authority has issued the TPC circular No. 58 (dated 8 February 2013) in order to provide further explanations and clarifications with regard to the TPC Communique No. 421. According to the circular No.58, only the purchase of goods will trigger the mandatory use of e-invoice, and the purchase of the services will not trigger the mandatory use of e-invoice.

Advance Ruling

TPC Communique No. 425 (published in the Official Gazette dated March 27, 2013 and No. 28600) contains additional explanations regarding Article 140 of the TPC. Pursuant to Article 140 of the TPC, tax inspectors are not allowed to conduct assessments contrary to laws, decrees, regulations, communiques and circulars. Pursuant to Communique No. 425, assessment committees, which evaluate the assessment reports prepared by the tax inspectors, shall also take advance rulings into consideration. Accordingly, tax inspectors will be take advance rulings into consideration in their tax inspections since the tax inspection reports contrary to any advance ruling issued by the commission will be returned to the tax inspector by the assessment committee.

New Value Added Tax Rate for Residences

Pursuant to Article 7 of the Council of Ministers Decree No. 2012/4116, value added tax rates are re-determined for residences, depending on their square meters, the kind of the material used in the construction and the location. Four criteria have been regulated by the Council of Ministers in order to determine the VAT rate of a residence. If a residence meets any of the regulated criteria, a VAT rate of %8 or %18 could be applicable. These criteria are stated as below:

  1. Whether a residence is placed in a state which is subject to a metropolitan municipality pursuant to Metropolitan Municipality Law Code (Law No. 5216) (published in the Official Gazette dated July 23, 2004 and No. 25531),
  2. Whether a building is classified as luxury or first class building pursuant to the "Table regarding the Determination of the Classes of the Buildings" (published in the Official Gazette dated December 15, 1982 and No. 17899),
  3. Whether the residence is constructed in an area which is valued more than TL 500 per square meter,
  4. Whether the residence is smaller than 150 m2 net.

Judgment of the Constitutional Court with regard to court fees

Pursuant to Article 28 of the Law Regarding the Fees (Law No. 492) (published in the Official Gazette dated July 17, 1964 and No. 11756) which was amended by Law No. 6009 (published in the Official Gazette dated July 23, 2010 and No. 27659), one fourth of the court fees regarding the court judgments shall be paid in advance, and the rest shall be paid two months following the court judgment. The above stated provision has been brought before the Constitutional Court by arguing that it is against the certainty principle of the tax law, since there is no way of knowing the amount to be paid by the party who is not present at the judgment hearing and that the party will not be able to know the amount until the notification of the final judgment. Following the above stated claim, Constitutional Court cancelled the term "...following the court judgment."

Council of Ministers Decree Issued in respect of Independent Audit

The corporations which meet the below stated criteria under to the Decree No. 2012/4213 (published in Official Gazette in 23 January, 2013 and No. 28537),

  • Corporations which have total assets equal to 150.000.000 Turkish Lira or more,
  • Corporations which have net sales revenue equal to 200.000.000 Turkish Lira or more,
  • Corporations which have 500 employees or more.

Also, the below corporations are subject to independent audit regardless of the above stated criteria;

  • Corporations which are subject to Capital Markets Law,
  • Corporations which are subject to regulations and supervision of Banking Regulation and Supervision Agency,
  • Insurance, reassurance and private pension funds,
  • Corporations which operate on Istanbul Gold Market,
  • Storage companies with a agriculture license and companies which are established according to Public Store Law and which are incorporated as joint stock companies,
  • Media service provider corporations which own a television channel.

Developments in International Taxation

Double tax treaties between Turkey – Brazil, Turkey – Finland and Turkey – Switzerland has come to effect on 01.01.2013. All of the abovementioned treaties are based on OECD Model Tax Convention on Income and Capital.

Double tax treaty between Turkey and Malta has been approved by the Turkish Parliament pursuant to Law No. 6370(published in the Official Gazette dated January 17, 2013 and No. 28531). The Treaty comes into effect with the approval of the Parliaments of both parties. The Treaty is based on OECD Model Tax Convention on Income and Capital. The treaty also includes an "exchange of information" provision and a "limitation of benefits" clause.

The tax Information Exchange Agreement between Turkey and Bermuda has been approved by the Turkish Parliament pursuant to Law No. 6371(published in the Official Gazette dated January 17, 2013 and No. 28531). The Treaty will be applicable with the approval of the Parliaments of both parties. When the Treaty enters into force, the tax administration of both parties will be able to request information from the tax administration of the other party. The treaty will also allow cross-border tax audits to be conducted.

The tax Information Exchange Agreement between Turkey and Jersey has been approved by the Turkish Parliament with Law No. 6418(published in the Official Gazette dated March 01, 2013 and No. 28547). The Treaty, which contains 13 provisions, will be applicable with the approval of the Parliaments of both parties. When the Treaty enters into force, the tax administration of both parties will be able to request information from the tax administration of the other party. The treaty will also allow cross-border tax audits to be conducted.

The Double Tax Treaty between Turkey and Singapore, signed in July 9, 1999, has been amended pursuant to Law No. 6419 (published in the Official Gazette dated March 01, 2013 and No. 28547). The amendments will come to effect with the ratification of the Parliament of Singapore. With the amended Article 26 of the Treaty, exchange of information is expected to improve between Singapore and Turkey.

Amended Turkish Incentive System

Pursuant to the Decree No. 2012/3305 (Decree on State Incentives in Investments) (published in Official Gazette June 19, 2012 and No. 28328) certain investments have privileged investment status. Accordingly, such investments benefit from the incentives provided for the fifth investment zone, regardless of their location. However, if such investments are made in the sixth investment zone, such investments will benefit from the incentives provided for the sixth investment zone. Pursuant to the Decree No. 2013/4288 (published in Official Gazette 15 February, 2013 and No. 28560) the below stated investments are included in the privileged investments stated under Article 17 of the Decree No. 2012/3305;

  1. Investments in automotive industry which are valued 300.000.000 Turkish Lira or more,
  2. Investments in motor industry which are valued 75.000.000 Turkish Lira or more,
  3. Investments in automotive electronics and or auto components which are valued 20.000.000 Turkish Lira or more,
  4. Investments in electric production industry which are based on certain minerals listed under the Article 4 of Mining Law No. 3213.

Article 29 of the Decree No. 201273305 was amended by Article 2 of the Decree No. 2013/4288. After the stated amendment, investors benefit from subsidized credits, which were granted by public institutions, has been allowed to benefit from the incentives provided under the Decree No. 2012/3305 (except for interest incentive) at the same time.

Pursuant to Article 1/B-4 of the Appendix 4, which is "Subjects of Investment Not Supported or Supported conditionally", of the Decree No. 3305 electricity production investments based on natural gas is excluded from the investments which can benefit from the incentives. Article 1/B-4 of the Appendix 4 was amended by the Decree No. 2013/4288, and certain electricity production investments based on natural gas are now excluded from the Appendix 4.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions