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Tax Law Word with Wooden Cubes

Updated Withholding Rates Under Provisional Article 67 of the Income Tax Law No. 193

With Presidential Decision No. 9075 published in the Official Gazette No. 32709 on November 1, 2024, Provisional Article 67 of the Income Tax Law No. 193, which regulates the withholding tax on income and revenues derived from financial markets, has been revised. The newly published decision introduces significant updates to the withholding tax rates, assigning different rates based on types of income. This article explores the implications of these changes for investors and taxpayers.

Scope and Importance of Withholding Rates

Withholding refers to the tax deducted at the source and paid to the state when specific income is earned. This mechanism is crucial for enhancing tax collection efficiency and preventing tax evasion. Provisional Article 67 sets forth the withholding rates applicable to financial earnings, ensuring significant regulatory oversight for both individuals and institutions.

Key Highlights of the Updated Withholding Rates

The new decision brings modifications to the withholding rates applied to various types of income. Here are some notable categories:

  1. Interest on Deposits and Profit Shares from Participation Accounts

For the period between November 1, 2024, and January 31, 2025, the withholding rates applied to demand deposits and participation accounts are as follows:

  • Demand and notice accounts and term deposits up to 6 months: 10%
  • Term deposits up to 1 year: 7.5%
  • Term deposits exceeding 1 year: 5%
  • Inflation-indexed deposits (over 1 year): 0%
  1. Bonds and Bills Issued by Banks and Lease Certificates

During the same period, the withholding rates for bonds and bills issued by banks and lease certificates are:

  • Maturity up to 6 months: 10%
  • Maturity up to 1 year: 7.5%
  • Maturity exceeding 1 year: 5%
  1. Investment Funds

Income derived from investment funds acquired between November 1, 2024, and January 31, 2025 (excluding specific fund types), will be subject to a 10% withholding rate.

  1. Government Bonds and Treasury Bills

The withholding rate for government bonds and treasury bills issued by the Ministry of Treasury and Finance between December 22, 2021, and January 31, 2025, is set at 0%.

  1. Mortgage-Backed Securities

Income derived from securities such as asset-backed securities issued by mortgage financing institutions will be subject to a 7.5% withholding rate.

Key Points and Recommendations for Investors

The new regulations have made tax withholdings on financial income more specific, emphasizing the importance of strategic planning for investors:

  • Investment Options: As the updated rates affect the yield of investment instruments such as deposits and bonds, investors should consider these changes when making decisions.
  • Tax Planning: It is recommended that corporations and individuals take these rates into account when preparing financial statements and adjust their tax obligations accordingly.

The recent updates to Provisional Article 67 of the Income Tax Law No. 193 aim to improve tax collection efficiency and maintain transparency in financial markets. Understanding the opportunities and obligations brought by these new rates is crucial for ensuring sustainable financial success for both investors and corporations.

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