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Türkiye’s Treasury and Finance Ministry is preparing to impose a 10% withholding tax on institutional investors’ gains from money market funds, among the stronger-performing investment vehicles during the period of tight monetary policy.
The proposal targets both Turkish and foreign institutional investors. It is part of a broader effort to make capital flowing into the country more lasting rather than concentrated in short-term financial instruments, according to information Bloomberg HT obtained from sources.
The ministry has finished its preliminary work on the measure, the report says. The plan can still change before it is formally introduced.
Under the planned system, gains from money market funds would be subject to a 10% withholding tax for institutional investors regardless of whether the company is fully or limited liable for tax in Türkiye.
For domestic companies, the new withholding would not create an additional final tax burden. They would be able to subtract the amount withheld from their provisional tax payments declared every three months.
Foreign corporate investors would be treated differently. The 10% amount withheld at source is planned to settle their tax liability on those gains.
The proposal will introduce a new tax burden for institutional investors, as they have not faced withholding tax on gains from money market funds so far.
The government is not planning to change the current treatment of individual investors. Their money market fund gains are expected to continue facing a 17.5% withholding rate.
The proposed rule would not reach back to gains generated before the measure takes effect. Instead, it would cover the portion of earnings accumulated after the decision is published.
That means an institutional investor entering a money market fund before the announcement would have its gain divided between the period before and after the new rule takes effect. Only the part generated after publication would be subject to the 10% withholding.
The move comes as money market funds have grown into a major destination for short-term funds in Türkiye. The rise followed the government’s shift toward disinflation and tighter monetary conditions from mid-2023, which lifted the appeal of short-term, interest-bearing assets.
The central bank’s policy rate eventually reached 50%, boosting returns available through highly liquid instruments. Money market funds attracted investors looking to benefit from higher domestic interest rates without giving up relatively quick access to their capital.
Their total capitalization climbed from ₺77.5 billion in May 2023 to ₺1.8 trillion ($37.4 billion) in July 2026, marking an increase of about 2,269%.
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