Bad news for those with money in banks and funds! Income is decreasing...
A new withholding tax regulation that closely concerns those who invest their money in time deposits or investment funds has been published in the Official Gazette. With the increases, interest earnings will fall.
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Withholding tax rates applied to earnings from deposits and investment funds have been increased. The new regulation has been published in the Official Gazette and has entered into force.
According to NTV, the regulation has increased the withholding tax rate on investment funds from 15 percent to 17.5 percent. A similar increase was made for time deposit accounts:
For maturities up to 6 months, the withholding tax rate has risen from 15 percent to 17.5 percent.
For maturities up to 1 year, the withholding tax, which was 12 percent, will now be applied at 15 percent.
INTEREST EARNINGS WILL FALL
The net interest income of individuals who invest their money in time accounts or funds will decrease with these new rates. As the Central Bank of the Republic of Turkey (TCMB) is also expected to cut interest rates at the end of July, an indirect "interest rate cut" process has effectively begun for investors.
HOW WILL THE WITHHOLDING TAX CALCULATION BE MADE?
With the new rates, the deduction made on interest returns will increase. For example, a person who invests 1 million TL for a 32-day maturity at an annual interest rate of 48 percent earns a gross return of approximately 42 thousand 82 TL.
From this earning:
While a deduction of 6 thousand 312 TL was previously made with a 15 percent withholding tax,
The deduction rises to 7 thousand 364 TL with the new 17.5 percent rate.
In this case, the investor will earn 1052 TL less solely due to the tax increase.
NO CHANGES FOR EXISTING DEPOSITS AND FUNDS
The old rates will remain valid for existing accounts and funds that have not yet reached maturity. However, when the maturity is renewed or a new fund purchase is made, the current withholding tax rate will be applied.
On the funds side, while existing funds will continue to be taxed at the same rate, new contributions to these funds will fall under the 17.5 percent withholding tax scope. For this reason, it is recommended to be careful when adding to funds and to conduct transactions through alternative funds or accounts.
INVESTORS MAY CHANGE DIRECTION
The increase in withholding tax rates and the expected fall in interest rates may lead investors toward different instruments. In this process, physical investments such as foreign currency and gold may come to the fore. Since no withholding tax is applied to foreign currency or gold investments, investors are expected to reconsider their savings preferences.
THE EXPECTED DATE WAS JULY 31
In fact, the regulation in question was expected to be announced on July 31, 2025. However, the decision was brought forward. It is anticipated that another regulation could be made on that date and that the rates could be changed again.
ALL EYES ON THE CENTRAL BANK
The Monetary Policy Committee of the TCMB will meet on July 24, 2025. Market expectation is for a 350 basis point cut in the policy rate. The policy rate, which is currently at the 46 percent level, is projected to fall to 42.5 percent.