What is Banking and Insurance Transactions Tax (BITT)? How is BITT Calculated?

How is Banking and Insurance Transactions Tax Calculated?

BSMV is calculated based on the income subject to tax, using the applicable rate depending on the type of transaction.

The basic calculation formula is as follows:

BSMV = Taxable Income × Applicable BSMV Rate

Calculation Example:

If a bank generates TRY 10,000 in interest income from a loan transaction amounting to TRY 100,000, the applicable BSMV rate depends on the nature of the transaction.

For example, in a case where the applicable rate is 5%, the calculation would be:

• Interest Income: TRY 10,000
• Banking and Insurance Transactions Tax Amount: 10,000 TRY x 5% = 500 TRY

This amount is calculated on the interest income collected by the bank and declared to the tax authorities.

What is the Banking and Insurance Transactions Tax Rate?

BSMV rates vary depending on the type and nature of the transaction. While a standard rate of 5% is commonly applied to many transactions, certain transactions are subject to different rates or exemptions.

For instance, interest income from consumer loans may be subject to a 15% rate, whereas foreign exchange transactions are generally taxed at 0.2% (0.002).

Therefore, determining the correct rate based on the specific transaction type is critical for accurate tax calculation. BSMV rates may be updated in line with economic conditions and fiscal policies through relevant legislation and Presidential decrees.

Banking and Insurance Transactions Tax Rates Applicable to Different Transactions

Note: Rates may vary depending on the nature of the transaction and applicable legislation.

Which Transactions Are Subject to Banking and Insurance Transactions Tax?

BSMV is levied on income generated from various banking and insurance transactions. The tax base typically includes interest, commissions, service fees, and similar financial revenues.

These transactions can be broadly categorized as follows:

1. Banking Transactions
• Loan Transactions: BSMV is calculated on interest income derived from loans. The applicable rate varies depending on the loan type. For example, consumer loans may be subject to a 15% rate, while other loan types are generally subject to 5%.
• Money Transfers: Fees charged for transactions such as wire transfers (EFT), remittances, and SWIFT transfers are subject to BSMV, typically at a rate of 5%.
• Credit Card Transactions: Interest, late payment charges, and annual fees arising from credit card usage are subject to BSMV, generally at 5%.
2. Insurance Transactions
• Insurance Premiums: BSMV is applied to premiums collected by insurance companies. While the general rate is 5%, certain insurance products—such as pension plans and specific life insurance policies—may fall under exemptions.
• Insurance Claims: Banking and Insurance Transactions Tax may also be deducted from the compensations paid by insurance companies.
3. Foreign Exchange and Investment Transactions
• Foreign Exchange Buying/Selling Transactions: Foreign currency sales conducted through banks and authorized financial institutions are subject to BSMV at a rate of 0.2%, calculated on the sale amount.
• Capital Market Transactions: In equity, bond, and bill transactions, BSMV is not applied directly to the transaction amount but rather to intermediary institutions’ commission income. The applicable rate is generally 5%.

Which Transactions Are Exempt from Banking and Insurance Transactions Tax?

Although BSMV applies to a wide range of financial transactions, certain transactions and institutions are exempt under the legislation.

1. Banking and Finance Transactions
• Transactions between a bank's own branches and agencies
• Transactions between the Turkish branches of banks whose headquarters are located outside Türkiye
• Service fees paid by banks on behalf of their customers and paid directly to third parties
• Profits obtained from industrial enterprises that are subsidiaries of banks, insurance companies, and financial institutions
• Income obtained from lease certificates and liquidity securities issued by asset leasing companies established under public financing
• Investment loans offered by banks that do not accept deposits
• Income obtained from arbitrage transactions and futures/options contracts by banks established in Türkiye
2. Loan and Financing Transactions
• Export credits (credits provided to promote exports)
• Credits provided from abroad
• Credits provided within the scope of housing financing
• Credits provided through Guarantee Cooperatives for Tradesmen and Artisans
• Credits for machinery and equipment purchases for manufacturing industry enterprises with a certificate of industrial registry
• Housing credits provided through the Housing Development Administration of Türkiye and cooperatives
3. Insurance Transactions
• Transactions conducted within the scope of pension contracts, life insurances, and health insurances
• Transportation insurances for exports
• Reinsurance transactions and retrocession agreements
• Nuclear insurances covering large-scale risks
• Agricultural insurances for farm animals and unharvested agricultural products
4. Transactions for Public Institutions and Public Benefit
• Financing transactions provided by state banks for certain public projects
• Financial transactions related to healthcare services conducted by blood banks
• Transactions of pension investment funds, securities investment funds, and venture capital investment funds
• Financing transactions of state-supported investment and development projects

For detailed information on exemptions, you may refer to the Expense Taxes Law No. 6802 (In Turkish).

Should you have any queries or need further details, please contact us.