Economy in Turkey: Not good news for those with money in TL deposits

After the share of Turkish lira (TL) deposits in total deposits reached its highest level in recent years, the economy management has moved to raise the withholding tax (stopaj) rate on deposit interest by 5 percentage points. If the regulation is implemented, the stopaj rate on Turkish lira deposits will increase by 5% as of January 31.

Due to tight monetary policies and interventions by the Central Bank of Turkey (CBRT) on the exchange rate, investors have shifted their interest towards Turkish lira deposits. As a result, the share of TL deposits in total deposits has reached its highest levels in years, prompting the economic authorities to act.

According to Şebnem Turhan’s report from Ekonomim, the plan is to increase the withholding tax rates on TL deposits as of January 31.

BAD NEWS FOR THOSE WITH DEPOSIT INTEREST

A regulation published on November 1 had already increased the withholding tax on deposit interest by 2.5 percentage points, effective until January 31, 2025. According to this decision, the stopaj rate for 6-month deposits was increased from 7.5% to 10%, for deposits with a maturity of up to 1 year from 5% to 7.5%, and for deposits with a maturity of over 1 year from 2.5% to 5%. The measure was set to apply until January 31, 2025.

According to sources close to the economic management, the current 10% stopaj rate for up to 6-month deposits is expected to rise by 5 percentage points to 15% on January 31. Sources also noted that a decision to maintain the current rates has not yet been signed, signaling that there could be changes.

IMPACT ON TL DEPOSIT INTEREST

Banking sector sources expect this change to have no significant effect on credit and deposit interest rates since it won’t alter banks’ costs, and it will increase state tax revenues. However, they believe this could slightly reduce interest in TL deposits.