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Clearstream Banking Customers Must Comply with Turkish Tax Requirements

A recent update affects Clearstream Banking customers who are considered non-resident mutual funds in Turkey. The new regulations require these entities to comply with specific tax requirements, which apply not only to individual investors but also to corporate investors.

Qualification as a Type-A Investment Fund

To qualify as a Type-A investment fund, companies must meet certain criteria:

  • Be registered as a taxpayer in Turkey
  • Have appointed a permanent tax representative
  • Maintain at least 25% of their Turkish securities portfolio in equities on a monthly average basis throughout the year
  • Qualify for Turkish tax purposes as a mutual fund under local law

Holding Assets and Tax Requirements

Clearstream Banking customers that qualify as non-resident mutual funds can hold assets either for themselves or on behalf of individual investors. However, all underlying corporate investors must also qualify as mutual funds and have their own Turkish Tax IDs.

The permanent representative is responsible for:

  • Bookkeeping the investment fund’s portfolio
  • Preparing the legal tax declaration on behalf of the beneficial owner

Local brokers and custodians must be aware of who has been appointed as the permanent representative.

Unrepresented Beneficial Owners

For unrepresented beneficial owners, a 15% withholding tax applies to dividends from Turkish equities. However, relief at source is available if the beneficial owner is eligible under the provisions of a Double Taxation Treaty (DTT), provided the required certification is provided.

Residents of a Double Taxation Treaty Country

Beneficial owners holding a Tax ID or national ID number in Turkey are obliged to inform the Turkish Tax Office via Clearstream Banking of any changes, including:

  • Name changes
  • Changes in legal status
  • Incorrect tax rates applied
  • Windups/liquidations

This applies not only to corporate taxpayers but also to individual taxpayers.

Notification Requirements

Beneficial owners who have undergone a change must notify Clearstream Banking of the change. Clearstream will then forward the notification to its depository, which will notify the Tax Office accordingly.

The following documents may be required:

  • Instruction by SWIFT MT599 free-format message
  • Official apostilled Certificate of Name Change
  • NRIF name change letter (applicable only to NRIF status accounts)

Clearstream’s depository will take care of any translation requirements. Beneficial owners are advised to notify Clearstream Banking in a timely manner to ensure compliance with Turkish tax regulations.

Important Deadline

The deadline for declaring underwithholding on past income or capital gains is within five years of the date on which the income was paid or the capital gain occurred. Clearstream’s depository will assist in declaring the underwithholding upon request from the beneficial owner.