Turkey passes law exempting converted lira deposits from corporate tax

Turkey’s parliament approved a law late on Thursday under which lira deposits converted from foreign currency under a scheme to support the lira will be exempt from corporate income tax on gains resulting from the conversion.

State-owned Anadolu news agency said interest and profits earned on the converted lira accounts with at least three months’ maturity will be exempt from the tax if they are converted by the fourth-quarter tax return submission date, which is Feb. 17.

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On Jan. 11, Turkey’s Official Gazette announced that Ankara had included corporate foreign currency and gold deposit accounts converted to lira in the scheme that protects local currency savings against exchange rate volatility.

The scheme, announced by President Recep Tayyip Erdogan in December, compensates depositors for any loss in the value of the lira incurred during the duration of the deposit.

The lira slumped 44 percent in value against the dollar last year after the central bank slashed its benchmark interest rate by 500 basis points to 14% since September. The lira has steadied this month. It was 0.8 percent weaker at 13.43 against the dollar on Friday.

Deposits under the scheme have so far reached 163 billion lira ($12.1 billion), Erdogan said on Wednesday. But Reuters has reported that most of that amount comes from existing lira accounts rather than dollars or euros.

Also under the legislation, inflation accounting will be postponed until Dec. 31, 2023, even if all necessary conditions are met for inflation accounting in the 2021, 2022 fiscal periods and the 2023 quarterly periods.

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