A friend of mine is looking to invest 10k in a turkish bank, for the sole reason for using the interest to fund her annual holiday spenders - She is already in the process and her branch of HSBC is liasing with HSBC in Ankara to complete the transfer.
However she has been contacted by her local branch today and they have said that she would be taxed 20% on any interest gained(interest on TL account currently stands at 22%) ?? She was quite shocked at this and called me to see if i knew anything about this tax - Im in no way a financial buff and said i would post to see if i could get clarification for her. She is not sure if the tax is from the UK or turkey side of things?!? She has an appointment on monday with HSBC where she will hopefully get further info?
Can anyone confirm the tax position in this situation??
BTW - I dont really want to get into the pros/cons of turkish banking - know its a minefield
Don't forget that interest in the UK is taxed at source and so quite often you do not realise that you are paying it.
What you have to remember is that the interest rate is only high because the TL is not a strong currency and historically has had large falls on the world currency market.
I do not know anyone who would recommend this as a good investment.
Most Turks would rather keep their money in euros, sterling or dollars.
Tax is charged at 18% on a monthly account and 16% on a yearly. You are exempt from this tax in Turkey if you declare it in the UK as income.
thats ok if you live in Turkey and keep an eye on everything,
this, I think, is supposed to be a holiday fund and not actively watched.
Read up on it a little more last night after i posted - I will confirm to her that the bank are correct about the interest charge and she then can make up her own mind
Again thanks guys
As she is not resident in Turkey the tax being deducted there will be classified as a non-repayable witholding tax in the UK, which is fine if she is a UK taxpayer but not fine if she does not pay income tax. This is because if the money is held in a UK bank by a UK resident non-taxpayer, they can register to have the interest paid gross, or claim a repayment of the tax deducted.
So what does she have to pay in the UK - Surely the UK Taxman wont know about her money so she will not have to pay tax?? Or are YOU the taxman ??lol
If tax is deducted in Turkey and she remains a non-taxpayer in the UK, she will not be able to reclaim the foreign tax deducted.
Does that clear up the situation?
Post a Reply
Please sign in or register an account to reply to this post.