What are investment fund taxes in Turkey?

It is normal for investment gains in investment funds in Turkey to be subject to the tax system, but the process of taxing profits is almost like a maze for investors, which requires them to take deliberate steps to find the right path in this maze, so the investor needs to delve a little deeper into the legal and legislative foundations to avoid some expenses that may affect his capital.

Investment stakes in Turkish mutual funds are taxable under the Income Tax Law, where the gains obtained are considered capital income.

According to Article 75 of the Income Tax Law, profits from mutual fund participation certificates are taxable if they exceed a certain exemption amount, while the exemption limit is determined by the Ministry of Finance every year.

Participation units in investment funds may be categorized as variable or fixed income, depending on the type of assets being invested. As a result, fixed income from these funds attracts low withholding rates, while variable income securities may be taxed at a higher rate.

Taxes on capital gains

First of all, we must know that the tax applied to investment fund profits is on the source of the money (the fund), which facilitates the tax collection process, as the tax is automatically deducted by the fund manager, so there is no need for the investor to declare these profits to the tax authority.

The tax is calculated on the profits realized after the sale of the fund's units, where the difference between the price of the assets at the time of purchase and the price at the time of sale constitutes taxable income.

The percentage of this tax varies depending on the type of fund and the holding period, and some investments may include certain exemptions, which vary from case to case.

Taxes on distributed income

This is the tax applied to the amounts distributed by the fund to depositors, which is subject to personal income tax, as the investor must declare his income and its source.

Taxes on money transfers

This is the tax related to the transfer of funds and the purchase and sale of fund units.

Tax exemptions and reductions on investment funds in Türkiye

It is useful to know that profits from investing in investment funds in Turkey may be subject to various deductions, which vary from case to case depending on the duration and type of investment. For example, gains from the disposal of mutual funds held for more than one year are not subject to withholding tax, provided that at least 51% of the portfolio is consistently made up of shares traded on BIST. Similarly, the withholding tax rate on dividends from venture capital investment funds and real estate investment fund shares held for more than two years is 0%. For foreign investors, for example, the provisions of the Double Taxation Avoidance Agreement must be observed.

The impact of taxes on investment fund returns

In many cases, taxes can have a significant impact on a fund's returns. When calculating a fund's returns, it is important to take into account what the fund has earned and what it owes in taxes.

As explained earlier, taxes are usually related to the duration and type of investment, so the investor needs to be aware of when their capital will be taxed, and tax planning to take advantage of legal avenues to obtain deductions or exemptions.

Comparing investment fund taxes with other investment taxes in Turkey

The nature of taxation for individual investments is different from that of investment funds. Funds are subject to a special tax regime and incentive rebates, which in many cases means a higher investment benefit for fund investors. For example, investment in real estate funds is tax-free for two years, while individual real estate investments are subject to some taxes on accrued profits.

Comparing taxes on investment funds in Turkey with other countries

The taxation of investment funds varies significantly from one country to another, as these regulations are influenced by several economic and political factors for each country.

As countries usually seek to achieve certain economic goals through the imposition of a specific tax system, to encourage long-term investment or support certain economic sectors to develop them, as a result, financial market regulations differ from one country to another, which affects how taxes are applied to investment funds.

To revitalize the investment sector in Turkish investment funds, we find that tax cuts have been extended to some investment plans, making the investment season in these funds an incentive season fraught with advantages.

Start your successful investment in Turkish funds with Oragon

With the expansion of Oragon's activities, through its license as a creator and manager of venture capital portfolios, and the launch of a range of ambitious investment funds, Oragon, through its superior management team in the field of fund management, has been able to offer an encouraging investment model for investors in this important sector.

Today, Oragon makes its investment funds available to ambitious investors who want to grow their savings, through its strategic plans to grow its funds and diversify their portfolios, while taking into account investment risks following clear and well-thought-out investment principles.

In addition, all those interested in learning more detailed information about our business model in our funds or in the field of establishing and licensing investment funds can benefit from our advisory services or visit our headquarters, where you will find the most complete information and the most important advice in this regard.

Edited by Oragon Company ©