Turkey decreases taxes on foreign currency banking and insurance transactions

Turkey

Turkey has decreased its Banking and Insurance Transaction Tax (BITT) from 1% to its new level of 0.2%. 

This tax decrease to 0.2% was issued in Presidential Decree 3031 published in the Official Gazette on 30 September 2020 and amends Decision 98/11591 of the Council of Ministers on Tax Rates for Banking and Insurance Transactions. According to the Expenditures Tax Law (No. 6802), the BITT applies to money received by and in favour of banks and insurance companies arising out of all transactions except for those falling within the scope of the Financial Leasing Law (No. 3226). The tax base for the BITT in foreign currency is the amount of foreign currency sales and the relevant tax is triggered when a bank concludes a foreign currency sale.

The decrease in the BITT, which came into force on 30 September, reverses an earlier decision passed on 24 May 2020, which had elevated this tax from 0.2 to 1%. According to market data published by the Turkish Central Bank, the average daily trading volume in the local foreign-exchange spot market was $2.049 billion in April. This volume decreased to a daily average of $1.75 billion in September.

Since the aim of the previous increase in the BITT rate on foreign currency transactions was interpreted as a government effort to provide aid to businesses and citizens during the pandemic, the recent decrease is seen as a step towards normalisation.

The newly passed BITT does not apply to the sales of forex by banks to borrowers with foreign currency loans, forex transactions between banks and certain authorised institutions, and forex sales to the Turkish Ministry of Finance and Treasury. 

For more information on this tax decrease and forex regulations in Turkey, contact your regular CMS partner or local CMS experts: Dr. Döne Yalçın and Alaz Eker Ündar.