Taxation of Mutual Funds

From a Fund perspective: Mutual funds are exempt from corporate tax. Additionally, a 0% withholding tax rate is applied to returns generated through the management of mutual fund portfolios. The amount of withholding tax to be applied to returns generated through transactions undertaken by the Fund in the realm of Paragraphs 1, 2, 3, and 4 of the Temporary Article 67 of the Income Tax Law Number 193 (such as repo, deposit, and stock purchase-sale) is also 0%.
From a Fund Investor perspective: Limited tax-payer real persons and limited tax-payer institutions with no office premises or permanent representative offices in Turkey are subject to 0% withholding tax over the returns they generate from mutual funds. This is the ultimate tax and no additional declaration related to this gain is required.
The return of mutual fund units to the fund by full-fledged tax paying real persons is subject to 10% withholding tax. This is the ultimate tax and no additional declaration related to this gain is required. However, gains generated through returning the units of a mutual fund held for at least one year are tax exempt, provided that 51% of the mutual fund portfolio consists of stocks traded on the Istanbul Stock Exchange (ISE). Furthermore, such gains are not included in the annual declaration.
Full-fledged corporate tax payers are subject to 10% withholding tax over gains generated through returning mutual fund units to the related fund. This deduction is not the ultimate tax charge, however. Earnings generated via mutual fund units are included in corporate earnings and are thus subject to 20% corporate tax. The withholding tax charge is deducted from the calculated amount of corporate tax. The exemption cited above (pertaining to holding the units of a fund, 51% of the portfolio of which comprises ISE-listed stocks, for more than one year) is valid for corporate tax payers as well.