Turkey plans 10% withholding tax on money market funds

The Turkish Ministry of Treasury and Finance has completed preliminary studies to implement a 10 percent withholding tax on earnings from money market funds. The measure aims to redirect short-term capital, often referred to as ‘hot money,’ toward more long-term and productive investments.

The proposed regulation will apply equally to both domestic (full taxpayers) and foreign (limited taxpayers) institutional investors. Under the new system, domestic corporations will be able to deduct the withheld 10 percent from their quarterly provisional tax declarations. For foreign institutional investors, the 10 percent withholding will serve as a final tax.

Individual investors are expected to remain unaffected by this change, with the current 17.5 percent withholding rate for natural persons continuing as is. The regulation is planned to be prospective, applying only to earnings generated after the official publication date in the Official Gazette.