The Turkish government is seeking a way to end exchange rate volatility. As a result, a new package was announced on 21 December 2021 which promises significant tax advantages. Natural persons and corporations are able to benefit from this regulation.
For institutions that convert the foreign currencies in their balance sheets into Turkish lira deposit accounts with a maturity of at least three months before the end of 2022, the interest, dividends and other gains from this transaction are exempt from corporate tax upon maturity.
In addition to tax advantages, banks can provide lower interest and higher limit loans to companies benefiting from this regulation. With these measures, the Turkish government hoped to bring the volatility of the exchange rate under control without increasing interest rates and keep economic activity going in Turkiye.
The Turkish government’s measures to stabilise the economy are taking effect.Uğur Kaan Bora, CPA, ECOVİS DİPLOMAT Denetim ve Yeminli Mali Müşavirlik A.Ş., Izmir, Turkiye
The measures are working
As of mid-2022, it seems that the Turkish government has achieved its goal. By the end of May, total currency deposits had reached TRY 904.1 billion. As a result, companies benefiting from this regulation may receive significant reductions in corporate tax. In addition, the measures have slowed depreciation of the Turkish lira. However, high inflation and exchange rate volatility remain the biggest challenges facing the Turkish Economy.
New procedure for requesting foreign currency
The government has also introduced a new practice to reduce demand for foreign currency. With this instrument, known as Revenue Indexed Bonds, investors’ returns will be indexed to the revenue share of public economic enterprises transferred to the budget.
For further information please contact:
Uğur Kaan Bora, CPA, ECOVİS DİPLOMAT Denetim ve Yeminli Mali Müşavirlik A.Ş., Izmir, Turkiye