Government Raises Tax on Foreign Currency Purchases from 0.2% to 1%

The Presidential decree numbered 2568 published in the Official Gazette dated 24 May 2020 and no. 31136 provides for a raise in the banking and insurance transaction tax (BITT) rate applied to foreign currency purchases. Effective from the date of publication of the decree, the BITT rate will be increased from 0.2% to 1%. However, the decree provides that the BITT will not apply to the following foreign exchange transactions:

• Foreign exchange sales executed by banks and authorized institutions among themselves or between each other,

• Foreign exchange sales to the Ministry of Treasury and Finance,

• For the purposes of repayment of a foreign currency loan, foreign exchange sales to borrowers by the banks who extended the loan or who acted as an intermediary in extension of the loan,

• Foreign exchange sales to businesses holding an industrial registry certificate,

• Foreign exchange sales to exporters affiliated with exporters’ associations.

According to information obtained from ministry officials, the additional funds made available with the increase in the BITT rate will be utilised “to allow the government to give more aid to businesses and citizens hurt by the virus”. However, it is not yet clear how and in what form such aid will be structured. Please follow the updates published in our Covid-19 Insights page or subscribe to our newsletter to keep abreast of the developments in this respect.