With the Law on the Amendment of Some Tax Laws and Other Laws Numbered 7061 published in the Official Gazette dated 5 December 2017 and numbered 30261 (the "Amending Law"), the wording "performed in the stock exchanges established in Turkey" is removed from the Article 29(p) of the Expenditures Tax Law dated 13 July 1956 and numbered 6802 (the "Expenditures Tax Law") concerning exemptions.

In accordance with Article 28 of the Expenditures Tax Law, the money received in cash or in account, in favour of banks and insurance companies, regardless of on whose behalf it may be, arising out of all transactions in any way, except for the transactions of banks and insurance companies within the scope of the Financial Leasing Law dated 10 June 1985 and numbered 1985, is subject to banking and insurance transactions tax (the "BITT").

The former version of Article 29(p) of the Expenditure Tax Law was as follows:

Arbitrage transactions and futures and options contracts performed in stock exchanges established in Turkey and the money acquired as a results of such transactions are exempt from banking and insurance transactions tax.

Thus, with the Amending Law, futures and option contracts will be exempt from the BITT regardless of where they are performed.

Previously, the taxation of derivative transactions that were not included in the scope of the exception, such as over-the-counter instruments, were subject to the General Communiqué on Expenditure Tax Numbered 89. According to such Communiqué, currency futures and options that were deliverable (settled by physical exchange of relevant currencies) was treated as an exchange transaction and was subject to 0% BITT whereas, conversely, non-deliverable (or cash settled) instruments were not treated as exchange contracts and were subject to BITT at 5% of amounts received.

With the Amending Law which shall take effect as of 1 January 2018, the transaction costs are aimed to be lowered by way of extending the exemption from BITT to futures transactions and option contracts more generally and without regard to whether they are deliverable/non-deliverable (i.e. result in physical delivery or cash settlement) or whether they are traded in an organised exchange in Turkey.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.