Ministry of Finance Prepares 10% Withholding Tax Regulation on Money Market Funds

Preliminary work carried out by the economic administration to tax hot money flowing into money market funds has been completed. According to the planned regulation, it is envisaged that a 10 percent withholding tax will be deducted from the earnings generated by domestic and foreign institutional investors from these funds.

Details of the Studies

It is stated that preliminary work carried out by the finance unit has been completed and strategies have been developed to tax hot money flows. This step regarding fund gains in the portfolios of institutional investors is stated to be planned by taking economic balances into consideration.

Full and Limited Taxpayer Institutions

Without making any distinction between fully taxpayer institutions and limited taxpayer institutions in Turkey, it is planned to subject the relevant fund gains to a 10 percent withholding tax. A new era is beginning in the process previously carried out through provisional tax returns for fully taxpayer institutions.

Offsetting and Final Tax Application

While fully taxpayer institutions currently declare their earnings in three-month periods, the new regulation will allow the withholding tax amount to be offset against provisional tax. Regulations focusing on making the 10 percent withholding tax to be paid by foreign institutions a final tax are also being emphasized.

Situation for Individuals

In these ongoing new taxation studies, no changes are foreseen in the withholding tax rates applied to the fund gains of domestic and foreign individuals.