Tax shock on Turkish stock exchange

Istanbul Stock Exchange BIST 100 index falls below 10,400 with a drop of over 3% just one hour before closing.

The index, which started the day positively, began to decline following Treasury and Finance Minister Mehmet Simsek’s announcement regarding a study on taxing stock market gains. A similar tax was introduced in 2006, imposing a 15% withholding tax on stock market profits. Currently, FX market profits are subject to a 10% tax, and deposit and fund income are taxed based on their maturity periods.

Markets started the week’s first trading day with intense and surprising news flow. Recently, the topic of “transaction tax” in the stock market had made headlines, but the decision was postponed. On Monday, in a statement on a private TV channel, Simsek said that the next tax package would include work on “taxing gains from the stock market.”

Sharp decline in the stock market

The index, which made a positive start to the week and rose to 10,743 points in the morning, began to decline after Simsek’s statements. As of 5 p.m., the index fell below the 10,400 support level with a drop of over 3%. Notably, bank stocks experienced declines exceeding 3%.

Tax introduced in 2006

A tax on stock market gains was introduced in 2006 but not implemented in subsequent years. According to the decision, a 15% withholding tax was to be deducted from profits obtained from the sale of stocks on a quarterly basis. The collection of the taxable gains was planned to be carried out directly through the banks and intermediary institutions involved in the transactions.

Taxes on other investment tools

Currently, Turkish lira time deposit accounts opened for up to six months are subject to a 7.5% withholding tax. The tax rate drops to 5% for deposits with maturities of six months to one year and to 2.5% for those longer than a year. Profits from forex transactions conducted through intermediary institutions supervised by the Capital Markets Board are taxed at 10% quarterly. Fund income is also subject to a 7.5% withholding tax. Similar rates are expected for stock market income.