Türkiye moves to cancel tax exemption for some investment funds

Türkiye aims to cancel the exemption from the withholding tax on some investment funds, which would affect 84 funds managing about 71 billion Turkish liras ($2.1 billion), according to an analysis seen by Bloomberg. The proposal will end the exemption on dividends from fund units (documents) held for more than a year by investors in portfolios investing in local shares. This exemption allowed some investors to take advantage of “tax planning” beyond the original goal of encouraging long-term investment in stocks, according to the proposal. The ruling party (Justice and Development) submitted the bill to Parliament on Friday. Funds restricted to qualified investors, which do not trade on a Turkish electronic fund trading platform and are not subject to portfolio composition restrictions, will lose the tax exemption. Other funds that focus heavily on equities will continue to benefit from the tax exemption. Also read: To support the budget… Turkey levies tax on deposits and funds denominated in the lira. New Turkish financial measures. The draft law gives the president the authority to modify the state’s contribution to private retirement plans, known as BES, to reach a maximum of 50% or to zero. This step will affect the pool of contributions for retirement plans, which is estimated at around 132 billion lire for the year 2026. Any 1% adjustment to the current ratio of 30% will also change the allocations by about 4.5 billion liras. Also read: Turkey increases minimum retirement salaries by 15%. Financial measures include increasing the employer premium rate for long-term insurance by one percentage point, reducing the four-point discount on employer contributions for disability, retirement and death insurance to two points, and canceling incentives for young entrepreneurs, which is expected to have a total financial impact of around 220 billion liras.