Non-Physical Gold Sales and BITT

July 2020 Canan Doksat
% 0

Introduction

Previously, the Revenue Administration’s approach was to impose 5% Banking and Insurance Tax (“BITT”) over the earnings that banks received for non-physical gold transactions based on the understanding that non-physical gold transactions are not in the nature of foreign exchange transaction.

However, through the Revenue Administration’s letter dated 21st May 2020 sent to Turkish Bank Association, the above-mentioned approach is amended, and it is stated that non-physical gold sales should be accepted to be in the nature of foreign exchange transactions. This amendment of the Revenue Administration’s opinion has also changed the BITT application over non-physical gold sales transactions.

Within the scope of this Article, the evaluation of non-physical gold sales as foreign exchange transactions, and our evaluations regarding the issue, is provided.

Former Opinions

As per the first opinion, gold should be evaluated as an investment tool instead of a commodity. Accordingly, gold sales should be accepted to be in the nature of foreign exchange transactions.

As per the second opinion, gold is in the nature of precious metals, and gold sales cannot be evaluated as foreign exchange transactions. Therefore, the BITT should be calculated based on the earnings that banks receive for non-physical gold transactions.

Current Opinion of the Revenue Administration

Through the Revenue Administration’s letter dated 21st May 2020 sent to Turkish Bank Association, the approach of the Revenue Administration in relation to non-physical gold sales is amended as follows:

“Under Article 2/h of Decree No. 32 on The Protection of The Value of Turkish Currency, entitled “Definitions,” foreign currency is defined as foreign currency banknotes and all kinds of accounts, instruments, and means of enabling payments in foreign currency and Gold, silver, platinum and palladium of all kinds and in every form, qualify as precious metals.

Due to the fact that (i) precious metals and foreign currencies are regulated under the foreign exchange regulation, (ii) no specific definition is made in relation to the non-physical amounts treated in the deposit accounts; non-physical gold sales should be accepted to be in the nature of foreign exchange transactions.”

In line with the current opinion of the Revenue Administration, due to the fact that non-physical gold transactions are evaluated as foreign exchange transactions, the BITT should be calculated over the sale amount of the referred transactions.

Increase in the BITT Rate and Current Situation

The BITT rate in respect of foreign exchange (“FX”) transactions has increased from 0.2% to 1% through the presidential decree no. 2568 sayılı published in the Official Gazette dated 24th May 2020 and No. 31136. The BITT for FX transactions will be calculated over FX sales. The BITT will continue to be 0% for the following transactions:

  • FX sales made between banks and authorized foreign exchange dealers (amongst themselves, or to each other)
  • FX sales made to Ministry of Treasury and Finance
  • FX sales made to the borrower of an FX loan by the lender or the intermediary bank that mediated the utilization of the FX loan, for the purposes of repaying the FX loan
  • FX sales made to enterprises holding industrial registration certificates
  • FX sales made to exporters that are members of exporters’ associations

Within this scope, at the current stage, the BITT rate to be applied for non-physical gold sales transactions to be conducted after 24th May 2020 will be 1%.

Our Evaluations

No specific regulation stating that gold or other precious metals should be accepted to be in the nature of foreign exchange transactions is specified under Decree No. 32 on The Protection of The Value of Turkish Currency and the relevant Communiqué No. 2008-32/35.

Additionally, as per Article 73 of the Constitution, the scope of the tax should be regulated by the law in line with the legality of the tax principle.

Therefore, evaluation of non-physical gold sale transactions as foreign exchange is disputable in terms of the above-mentioned legality principle.

Conclusion

No specific regulation stating that non-physical gold sales should be accepted to be in the nature of foreign exchange transaction. This application came into “force” as a result of the Revenue Administration’s letter sent to Turkish Bank Association. Therefore, we believe that this approach should be discussed in terms of the legality and predictability principles regulated under Article 73 of the Constitution.

All rights of this article are reserved. This article may not be used, reproduced, copied, published, distributed, or otherwise disseminated without quotation or Erdem & Erdem Law Firm's written consent. Any content created without citing the resource or Erdem & Erdem Law Firm’s written consent is regularly tracked, and legal action will be taken in case of violation.

Other Contents

Exclusion of Immovables from the Scope of Tax-Free Partial Spin-off
Newsletter Articles
Exclusion of Immovables from the Scope of Tax-Free Partial Spin-off

Law No. 7456 on Additional Motor Vehicle Tax for Compensation of Economic Losses Caused by the Earthquake on 6/2/2023 and on Amendments to Certain Laws and Decree-Law No. 375 (“Law No. 7456”) was published in the Official Gazette dated 15.07.2023 and No. 32249. Law No. 7456 introduced significant...

Tax Law 30.09.2023
General Communiqué on Collection Serial B No. 18
Newsletter Articles
General Communiqué on Collection Serial B No. 18

In order to determine the procedures and principles regarding the implementation of certain articles of the Misdemeanor Law No. 5326 (“Law”), which is the general procedural law for administrative fines, the Ministry of Treasury and Finance (“Revenue Administration”) has published the General...

Tax Law 31.05.2023
New Tax Law Provisions on Debt Push Down for Merger Transactions
Newsletter Articles
New Tax Law Provisions on Debt Push Down for Merger Transactions

Through Article 20 of Law No. 7440 on Restructuring of Certain Receivables and Amending Certain Laws (“Law No. 7440”), published in the Official Gazette dated 12 March 2023 and No. 32130, significant and new tax regulations regarding debt push down financing structure for merger transactions are introduced...

Tax Law 30.04.2023
Stamp Duty Exemptions For Financial Restructuring Agreements
Newsletter Articles
Stamp Duty Exemptions For Financial Restructuring Agreements

Provisional Article 32 was added to Banking Law numbered 5411 (“BL”) through Article 17 of the Law No. 7186 on Amendments to the Income Tax Law and Certain Laws ("Law No. 7186") in the Official Gazette on 19.07.2019. This law enables companies that are experiencing financial difficulties, but which are...


Tax Law 31.12.2022
Taxation of Capital Decrease Under Law No. 7420
Newsletter Articles
Taxation of Capital Decrease Under Law No. 7420

Law No. 7420 on the Amendment of Income Tax Law and Certain Laws and Decrees (“Law No. 7420“) which was published in the Official Gazette dated 09.11.2022 introduced important amendments and regulations in the tax legislation. The addition of Article 32/B, entitled "Taxation in Capital Decrease" to...

Tax Law 30.11.2022
Stamp Tax Liability in Free Zones
Newsletter Articles
Stamp Tax Liability in Free Zones

Free Zones are zones that are established to promote export-oriented investment and production, accelerate foreign direct investment and technology access, direct enterprises towards export, and develop international trade. There are many tax advantages provided to taxpayers operating in...

Tax Law 31.08.2022
Analyzing Capital Replenishment Funds in Terms of Tax Law
Newsletter Articles
Analyzing Capital Replenishment Funds in Terms of Tax Law

Through the promulgation of Law No. 7394 on the Amendments of Treasury-Owned Immovable Property Valuation and the Value Added Tax Law and on the Amendments of Certain Other Laws and Decrees, published in the Official Gazette dated 15 April 2022 and No. 31810, significant amendments...

Tax Law May 2022
Digitalization of the Economy and the Global Minimum Corporate Tax
Newsletter Articles
Digitalization of the Economy and the Global Minimum Corporate Tax

In recent years, many new business models have emerged and traditional business models have changed greatly, within the increasing digitalization in the economy. Along with said change, challenges arose for taxing the international business income of...

Tax Law March 2022
Security Requirement Envisaged for Tax Refund Cases in order to Claim Suspension of Execution
Newsletter Articles
Security Requirement Envisaged for Tax Refund Cases in order to Claim Suspension of Execution

Through the promulgation of the Law No. 7351, published in the Official Gazette dated 22.01.2022 and no. 31727, essential amendments are introduced to Turkish tax legislation. Apart from the tax amendments, a new provision has been added to...

Tax Law February 2022
Taxation of Social Media Content Producers Earnings in Light of Recent Changes
Newsletter Articles
Taxation of Social Media Content Producers Earnings in Light of Recent Changes

Social media has emerged with the development of the digital world and internet technology and has greatly influenced the world today. One of the main categories of actors in social media is social media content producers. These people earn through social networks in...

Tax Law December 2021
Withholding Tax Issue in Digital Advertising Services
Newsletter Articles
A New Tax Controversy: Valuable House Tax
Newsletter Articles
Withholding Tax Regime Envisaged for Share Buybacks
Newsletter Articles
Taxation of Sportsperson in Light of Current Changes
Newsletter Articles
Special Consumption Tax (SCT) from Past to Today
Newsletter Articles
Special Consumption Tax (SCT) from Past to Today

The 1990’s hold significant importance by means of the developments that took place in the global economy. During the transition to the second half of the 1900’s, the Federal Reserve increased interest rates, and the hot money flow changed its direction from East Asian countries to the West...

Tax Law September 2020
Taxation of Capital Decrease in Partial Spin-Off
Newsletter Articles
Recent Amendments in Relation to Tax Legislation
Newsletter Articles
Liability for Tax Debts of Limited Liability Companies
Newsletter Articles
VAT on Exchange Difference
Newsletter Articles
VAT on Exchange Difference
Tax Law February 2019
Taxation of Capital Decrease
Newsletter Articles
Taxation of Capital Decrease
Tax Law January 2019
Transfer of Real Estate through Partial Spin-Off
Newsletter Articles
Information Exchange Under Turkish Tax Law
Newsletter Articles
Latest Amendments to the Stamp Tax Law
Newsletter Articles
Dismissal Of Tax Penalties
Newsletter Articles
Dismissal Of Tax Penalties
Tax Law June 2016

For creative legal solutions, please contact us.