Following the cancellation of the 0% withholding tax for non-resident investors by the decision of the Constitution Court, the lawmaker has passed a new provision on Temporary Article 67 of the Income Tax Law regulating the taxation of trading in securities in Turkey (Law No.6009) to be effective 1 October 2010.

Rather than directly clarifying the applicable withholding tax rates, Law No.6009 grants authority to the Council of Ministers to promulgate the rate to be applied to a specific type of security, and it also grants authority to the Ministry of Finance to determine the entities that can qualify.

The decree on taxation rates under Temporary Article 67 of the Income Tax Law (Law No.193), which has been on the agenda of the Council of Ministers for some time and eagerly anticipated by public investors, has finally taken shape with the Council of Ministers Decree No:2010/926 dated 27 September 2010, published in the Official Gazette No.27715 dated 30 September 2010 (the “Decree”).

In accordance with the press release issued by the Ministry of Finance on 3 April 2010, the Decree establishes the 0% rate in place regarding listed Turkish equity and equity-based derivative products (including the newly regulated equity-based warrants). Regarding Turkish government bonds and T-bills, the existing 0% rates have not been revised.

In respect of private debt issues, the 10% tax rate on periodic interest income (coupon payments) has not been revised unless the related issue is placed in Turkey and duly registered with the CMB. On the other hand, capital gains (both on the maturity/redemption date and arising from trade until maturity) will continue to benefit from the 0% rate for corporate investors. Individual investors, however, will still be subject to a 10% tax under Temporary Article 67.