All the news/developments about Garanti and the banking sector.All the news/developments about Garanti and the banking sector.

New withholding tax rules on futures and options trading

Gains that are secured on future contracts traded on the Turkish Derivatives Exchange (TurkDEX), which are subject to a zero rate of tax withholding until 31 December 2008, will be subject to new withholding rules in 2009.

Council of Ministers resolution 2009/14580 dated 12 January 2009 sets the rate of tax that is to be withheld from gains that corporate and non-corporate resident taxpayers secure on futures and options contracts which are based on company shares or share indexes at “0%” for transactions that take place on or after 1 January 2009. In the case of both index-based contracts and the new “single equity-based” contracts whose introduction is planned, the tax withholding rate will also be 0%.

For all other futures contracts (FX, interest rate, commodity), gains on positions that are initiated during 2009 will be subject to a 10% rate of withholding for tax. “Gains” are defined as the net amount received after trading commissions have been deducted. However if the positions on which such contracts are based were initiated during 2008, the gains will be subject to a 0% rate of withholding when the positions are closed.

The gains that non-resident taxpayers secure on future contracts of any kind will continue to be subject to a 0% rate of withholding for tax.

The finance ministry has also spelled out the rules governing withholding tax offsets. Under these rules, tax that is withheld on TurkDEX-traded FX future contracts, interest rate future contracts, index future contracts, and commodity future contracts may be offset against amounts of tax that are withheld on securities in those categories for which the ministry permits offsetting (variable-yield securities, fixed-yield securities, futures and options contracts, and shares in mutual funds). On this basis, in the taxation of gains secured on TurkDEX on or after 1 January 2009, gains will have to be offset according to the following offset categories based on the types of contract:

  • Contracts that are to offset in the “Variable Yield Securities” group (EQUITIES): Index-based contracts and the new “single equity-based” contracts whose introduction is planned
  • Contracts that are to offset in the “Fixed-Yield Securities” group (FIXED-YIELD TRADING): Interest rate future contracts
  • Contracts that are to offset in the “Futures and Options Contracts” group (DERIVATIVE TRANSACTIONS): FX future contracts and commodity future contracts.

Accordingly, the withholding tax on gains secured on TurkDEX will be automatically offset by the system on the last day of each quarter and based on the offset groups indicated above. If there is any withheld tax that needs to be refunded, it will automatically be credited to the appropriate customer accounts.

Customers may display their withholding tax assessment bases and the amounts of their withheld tax on the “View withholding” screens under the separate TurkDEX-Index, TurkDEX-Interest, and TurkDEX-FX/Commodity headings.

Because of these finance ministry rules, tax has been withheld retroactively as of 11 February 2009 on the gains that our customers secured on FX, commodity, and interest rate contracts that they initiated in 2009. Beginning on Thursday 12 February 2009, withholding tax collections and refunds will take place instantaneously online when transactions are completed.

Please be advised.
Very truly yours,
Office of the General Manager