Turkey Ministry of Treasury and Finance evaluates new taxes on money market funds

The Turkish Ministry of Treasury and Finance is reviewing short-term capital movements, specifically focusing on the rapid growth within money market funds. The government is evaluating new taxation models to address the high volume of capital entering these funds, which is often characterized by quick inflows and outflows.

A primary objective of this study is to encourage capital to remain in the country longer and shift toward productive, long-term investments rather than staying in highly liquid, short-term financial instruments.

The investigation highlights a disparity in current taxation: while individual investors are subject to a 17.5% withholding tax on income from money market funds, institutional investors currently benefit from different tax treatments. The Ministry is considering narrowing these advantages or creating a new taxation model specifically targeting the gains made by institutional and foreign corporate investors to mitigate economic risks associated with volatile short-term capital.