Turkey’s Bold Step: Taxing Cryptocurrency for the First Time

In a significant move, Turkey’s ruling AK Party has unveiled a comprehensive proposal to tax cryptocurrency transactions, marking a pivotal moment for the nation’s approach to digital assets. Introduced by 48 party members, the legislation aims to incorporate these transactions into Turkey’s tax system, setting a precedent on how the country handles digital currencies.

What Drives the New Legislation?

The primary motivation is to establish a regulatory framework for currently untaxed digital assets, focusing on transparency and accountability. Lawmakers have expressed a longstanding intention to tax cryptocurrency, addressing concerns from policymakers about revenue and regulatory oversight in the digital currency sector.

How Will Crypto Taxes Be Applied?

Parliament members Hüseyin Altınsoy and Ejder Açıkkapı lead the legislative effort, which includes various unrelated topics but focuses heavily on crypto taxation. The bill, referred to multiple parliamentary commissions, is Turkey’s first formal attempt to establish a tax regime for crypto assets. Under the new plan, all earnings from trading on authorized platforms will be subjected to a withholding tax, while off-platform activities must be self-declared.

The bill makes it possible to tax trading profits and income such as rent or interest from crypto assets on SPK-licensed platforms via withholding, while profits from transactions outside such platforms will be taxed through self-declaration.

Also, earnings from crypto sales are classified as taxable capital gains, with corporate income designated as commercial income. The draft outlines that modifications will be made to the law to align with these classifications as needed.

Key specifics of the new crypto tax regulations include:

• Crypto service providers become the taxpayers.
• A 0.03% transaction tax applies to sales and transfers.
• No deductions allowed for expenses or other taxes from the tax base.
• Monthly tax declarations and payments are due by the 15th of the following month.

Off-platform gains must be declared annually, and losses can be offset only against other crypto gains within the same tax year. Additionally, Turkish exchanges will implement a 10% withholding on crypto profits each quarter.

Implementation Timeline?

The transaction tax and 10% withholding are slated for implementation starting the second month after official publication. This bill, part of a larger legislative effort, will undergo review by the Planning and Budget Commission and other relevant bodies. Following potential amendments, it will face a vote in the General Assembly, requiring presidential approval before becoming law.

Publication by early 2026 would see tax collection begin by mid-year. The legislation promises not to affect current transactions, respecting the non-retroactivity principle in Turkish tax law, thus only new trades will incur levies post-enactment.