Turkey: Tax on foreign currency savings up

By Muhammed Ali Gurtas

ANKARA

Turkey has taken a new temporary measure to curb the exchange rate volatility seen in the recent weeks by changing tax levels on bank deposits.

According to a new presidential decree published early Friday in the official gazette, tax on foreign currency bank deposits was hiked while that on Turkish lira savings was reduced.

Withholding tax on Turkish lira savings held at the banks with a maturity of up to six months was decreased from 15 to 5 percent. Savings with a maturity between six months and one year was lowered from 12 percent to 3 percent.

Tax on lira deposits with a maturity of more than one year was reduced to zero from 10 percent.

The presidential decree said that withholding tax on foreign currency bank deposits -- up to six months -- was increased to 20 percent from 18 percent while it was hiked to 16 percent from 15 percent for deposits with maturity of six months to one year.

The tax cut for foreign currency savings with more than one year was held constant at 13 percent.

As noted in the official gazette, the new measure will be implemented for a limited period of time -- three months.

Since the beginning of this year, the U.S. dollar/Turkish lira exchange rate saw harsh fluctuations as lira lost around 40 percent against the dollar. The average USD/TRY exchange rate was 5.74 this month while it was 3.78 in January.