In its verdict dated 15 October 2009, the Constitutional Court cancelled the part of the Provisional Article 67 of the Income Tax Law (Law No. 193) in relation to the withholding tax exemption granted to non-resident investors with respect to their capital gain incomes arising from trading in fixed income securities through Turkish banks and financial institutions. The main motivation underlying the Court ruling was in fact the two-pillar practice introduced by the Tax Regulation of 2006, which reduced the withholding tax rate for the trade of fixed income securities by non-resident investors while keeping the same rate for local investors at 10%. The above mentioned Court intervention will enter into force at the end of the ninth month starting from the publication of the decision in the Official Gazette. The decision of the Court was published in the Official Gazette dated 8 January 2010 (hence the cancelation will be effective as of 8 September 2010). However, the Turkish Revenue Administration has already started testing public opinion regarding a fixed withholding tax rate of 1.5-3% for both resident and non-resident investors. Moreover, the scope of the new rates may also be expanded to cover repo- and investment fund-related incomes, which are currently taxed at 15% and 10%, respectively.

In addition to the foregoing, the Constitutional Court has introduced two other potentially far-reaching practices with: (i) the cancelation of the maximum 35% income tax bracket for annual incomes exceeding TL50,000, and (ii) the cancelation of the provision limiting the deduction of unused amounts of corporate investment allowance exemption (based on the regulation in force from 31 December 2005 to 2008).