In 1st of October, 2006 effective changes were made in the taxation of gains secured on the sale of shares in Mutual Funds that are subject to tax under transition article 67 of the income tax law. The new rules do not introduce a new system of taxation or calculation but rather change the way in which the calculated tax is collected. - The scope of the withholding of tax at source from gains are secured on investment products that was introduced on 1st of January, 2006 under transition article 67 was extended to include Mutual Funds that is effective on 1st of October, 2006.
- 10% is withheld as tax on the gains that an investor secures when selling shares in a Mutual Fund. In this way, the tax that used to be charged on a day-to-day basis from the gains in the value of a Mutual Fund's portfolio has been effectively shifted outside the fund itself.
As of May 2012, tax rate on the gains made from “Stock-Intensive Mutual Funds” is 0%. - Until 22 July 2006, tax was charged at the rate of 15% of the increase in the fund's portfolio value.
- From 23 July 2006 to 30 September 2006 (inclusive), tax was charged at the rate of 10% of the increase in the fund's portfolio value.
- Effective 1 October 2006, tax is to be charged at the rate of 10% of the gains that an investor secures.
- Better fund performance comparisons: Tax is charged not on the fund's portfolio gains but rather on the gains that the investor secures. This change in the way the tax is collected will have a positive impact on a fund's earnings and make it easier to compare the performances of different funds.
- Improved fund yields: Shifting the tax burden outside the Mutual Fund effective 1 October 2006, will have a significant impact on funds' yields.
- Easier tax reporting and calculation: The procedures involved in reporting and calculating withheld tax by business enterprises have been made much simpler than what existed prior to 1 October 2006.
- Exemption: Tax will not be withheld on gains secured from the sale of Mutual Fund shares if more than half their portfolios regularly consist of shares in companies that have been held onto for more than a year's time.
- Tax charged at the moment of sale: No tax is charged on the gains secured by an investor until the shares are actually sold.
Foreign nationals who are residing in Turkey shall submit their passport or residence permit and tax identification number to the bank in order to trade and invest in securities. Non resident individuals or legal entities, in addition to the documents mentioned above, shall also submit a notarized evidence issued by the official public institutions in their own country indicating that all their worldwide income is subject to taxation in the country where they reside.
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