Turkey Increases VAT and Consumer Loan Tax
Türkiye has increased its value-added tax (VAT) by 2 percentage points in two categories, while also raising the tax collected on bank consumer loans, the country’s Official Gazette said Friday.
The VAT rate charged on goods and services was increased to 20% from 18% while that on basic goods such as toilet paper, detergents and diapers was raised to 10% from 8%, the gazette showed.
Bank Insurance and Transaction Tax (BSMV) Raised on Consumer Loans
In the Gazette announcement effective immediately, President Recep Tayyip Erdoğan signed several decisions, including one that increased the Bank Insurance and Transaction Tax (BSMV) applied to consumer loans to 15% from 10% previously.
The registering fee for mobile phones that are brought from abroad was increased by 228% to TL 20,000 ($765.74) from the previous TL 6,091, one of the decisions on the gazette showed.
Dividend Payments Exempt from Withholding Tax
Separately, Türkiye also decided dividend payments of own shares purchased by companies listed on the Borsa Istanbul Stock Exchange (BIST) will be exempt from withholding tax.
The moves came after the introduction of a draft law in parliament earlier this week that seeks to increase corporate tax to 25% from 20%, mainly to fund the recovery from major earthquakes that struck the country in February.
The quakes in February in southern Türkiye killed over 50,000 people, left millions homeless, razed hundreds of thousands of buildings and inflicted severe infrastructural damage.
Business groups, economists and the government have said rebuilding could cost more than $100 billion.
Rebuilding Efforts and Proposed Tax Rises
The government promised to rebuild over 600,000 homes for people left homeless by the quakes, including 319,000 to be delivered in a year.
Among several proposed tax rises, the draft law envisages an increase in corporate tax for banks and financial institutions to 30% from 25% currently.
In order to encourage foreign trade, the bill foresees introducing a 5 percentage point corporate tax discount for companies’ export income, according to the draft text sent to the parliament.
Additional motor vehicle taxes will be received from vehicles that will be registered by the end of the year. According to the draft law, the one-off additional payment will be the same as the amount of motor vehicle tax accrued for 2023.
The bill also would also transfer the Treasury-run part of the foreign exchange-protected Turkish lira deposit accounts scheme to the central bank.
Unveiled in late 2021 and known by its acronym KKM, the scheme sought to keep dollarization at bay by encouraging people to keep their savings in lira through guarantees to compensate for losses from the decline of the national currency.
Under the scheme, the government and the central bank compensate lira depositors for losses because of depreciation.
The government paid TL 92.54 billion ($3.6 billion) from the budget to depositors with lira savings under the scheme last year.
