A bill containing significant regulations regarding the taxation of crypto assets will begin being debated in the Grand Assembly of the Turkish Parliament (TBMM) tomorrow. If the bill is passed, a comprehensive system for taxing gains made in the crypto market will come into effect.
According to the proposal, a new article titled “Taxation of Crypto Assets” will be added to the Income Tax Law. Under this regulation, a 10% withholding tax will be applied to gains and income derived from crypto asset transactions conducted through platforms subject to the Capital Markets Law. This withholding will be carried out by the platforms in three-month periods.
The crypto asset transaction tax will be applied at a rate of 0.0003% of the crypto asset sale amount or the market value of the crypto asset at the time of transfer. No deductions can be made from the tax base for expenses or taxes.
Another notable aspect of the regulation is the broad scope of the tax withholding. Whether the income recipient is a natural or legal person, whether they are a full or limited taxpayer, whether they are a taxpayer at all, or whether the income earned falls within an exemption category will not affect the withholding to be applied.
The “first-in, first-out” (FIFO) method will be used in tax calculations. Accordingly, if some of the same cryptocurrency purchased on different dates are sold, the cost of the assets sold will be determined using this method. Furthermore, commissions and transaction taxes paid during buying and selling transactions will also be taken into account when calculating the tax base.
Multiple transactions in the same type of crypto asset within the same period will be considered as a single transaction for withholding tax purposes. Furthermore, losses arising from the buying and selling of crypto assets will be allowed to be offset against gains earned in subsequent periods, provided this does not exceed the calendar year.
The proposal also includes provisions regarding cross-platform asset transfers. Accordingly, when a cryptocurrency asset is transferred to another platform, the purchase price and date must be reported to the new platform. For assets transferred to a platform for the first time, the investor’s declaration will be accepted as the basis, provided it is supported by documentation.
Under this regulation, individual investors will not be required to file separate annual or individual tax returns for earnings subject to withholding tax. These incomes will also not be included in the annual tax return along with other income sources. However, cryptocurrency income earned within the scope of commercial activities will be assessed under the provisions for commercial income.
Income derived from transactions on platforms not subject to the Capital Markets Law must be declared in the annual income tax return. Losses arising from these transactions can only be offset against cryptocurrency gains.
Furthermore, individuals and institutions facilitating the buying and selling of crypto assets will be held responsible for tax assessments based on the information and documents they possess. In case of incomplete or erroneous reporting, the necessary tax procedures will be carried out in the name of the person who submitted the report.
Platforms will report the taxes they have collected to their respective tax offices by the evening of the 26th day of the following month, using a declaration form determined by the Ministry of Treasury and Finance, and will pay the taxes within the same period.
Furthermore, the President will have the authority to reduce the withholding tax rate, currently set at 10 percent, to zero or increase it up to double the original rate. The Ministry of Treasury and Finance will determine the procedures and principles for its implementation.
*This is not investment advice.