06 Şubat 2025
What is Banking and Insurance Transactions Tax (BITT)? How is BITT Calculated?
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In Türkiye, one of the most important taxes in the financial sector, the Banking and Insurance Transactions Tax (BITT), is an indirect tax levied on the revenues obtained from banking and insurance services as well as on certain transactions. Playing a regulatory role in the economy, Banking and Insurance Transactions Tax contributes to public revenues by recording financial transactions. The manner of application, rates, and exceptions of the tax are determined by Expense Taxes Law No. 6802.
This type of tax, which everyone who engages in financial transactions may encounter, can create costs for institutions and individuals if not calculated correctly. Therefore, it is very important to know the scope, calculation method, and exceptions of Banking and Insurance Transactions Tax.
What is Banking and Insurance Transactions Tax?
Banking and Insurance Transactions Tax is levied on the revenues generated from the services provided by banks, insurance companies, and financial institutions. Earnings obtained from transactions such as loan interest, insurance premiums, foreign exchange buying and selling, and leasing services fall within the scope of Banking and Insurance Transactions Tax.
BITT is not a tax that is passed on to the end consumer, like the Value Added Tax (VAT). The tax is collected by the institution providing the service and is paid directly to the state. Therefore, banks and insurance companies indirectly pass on Banking and Insurance Transactions Tax to the consumer by including it in the transaction cost during financial operations.
How is Banking and Insurance Transactions Tax Calculated?
Banking and Insurance Transactions Tax is calculated on the basis of a percentage applied to the determined transaction amount. The basic calculation formula is as follows:
Banking and Insurance Transactions Tax = Taxable Revenue x Banking and Insurance Transactions Tax Rate
Calculation Example:
When a bank obtains 10,000 TRY in interest income in exchange for a 100,000 TL loan, the Banking and Insurance Transactions Tax rate is applied at 5%:
- Interest Income: 10,000 TRY
- Banking and Insurance Transactions Tax Amount: 10,000 TRY x 5% = 500 TRY
This amount is calculated based on the interest income collected by the bank and declared to the tax office.
What is the Banking and Insurance Transactions Tax Rate?
The Bank and Insurance Transactions Tax rates vary depending on the type and nature of the transaction. While a general rate of 5% is applied in most transactions, lower rates or exemptions may apply to certain types of transactions. The rates can be updated based on economic conditions and the government's fiscal policies.
Banking and Insurance Transactions Tax Rates Applicable to Different Transactions
| Transaction | Rate |
|---|---|
| Foreign Exchange Buying/Selling Transactions | 0.2% |
| Credit Card Interest and Commission Revenues | 5% |
| Insurance Policies | 5% |
| Deposit Interest Revenues | 5% |
| Leasing Transactions | 5% |
| Housing Loans | 0% (Exemption) |
| Stock and Bond Transactions | Varies depending on the type of transaction. In most cases, 5% is applied on interest revenues. |
| Bond and Treasury Bond Interest Revenues | 5% |
Which Transactions Are Subject to Banking and Insurance Transactions Tax?
The Bank and Insurance Transactions Tax is a type of tax levied on the revenues obtained from banking and insurance transactions. Banking and Insurance Transactions Tax is calculated on the basis of fees, commissions, and interest revenues applied to various services and products during financial transactions.
What are the Transactions Subject to Banking and Insurance Transactions Tax?
Banking and Insurance Transactions Tax is levied on many services and transactions provided by banks and insurance companies. These transactions can generally be classified as follows:
- Banking Transactions
- Loan Transactions: Banking and Insurance Transactions Tax collects the interest revenues from types of loans such as consumer, vehicle, and personal loans. For example, when a loan is used, Banking and Insurance Transactions Tax is calculated at a rate of 5% on the interest amount in the monthly installments.
- Money Transfers: Banking and Insurance Transactions Tax is deducted from the fees charged for money transfer transactions such as wire transfers, EFT, and SWIFT. For example, during an EFT transaction, Banking and Insurance Transactions Tax is applied at a rate of 5% on the service fee charged.
- Credit Card Transactions: Banking and Insurance Transactions Tax is collected on interest, late fees, and annual charges incurred during the use of credit cards. This rate is generally 5%.
- Insurance Transactions
- Insurance Premiums: Banking and Insurance Transactions Tax is levied at a rate of 5% on premiums paid for life, health, vehicle, and other types of insurance.
- Insurance Claims: Banking and Insurance Transactions Tax may also be deducted from the compensations paid by insurance companies.
- Foreign Exchange and Investment Transactions
- Foreign Exchange Buying/Selling Transactions: In foreign exchange transactions conducted through banks and authorized financial institutions, Banking and Insurance Transactions Tax is applied at a rate of 0.2% on the sale amount.
- Stock and Bond Transactions: In stock, bond, and promissory note buying and selling transactions conducted through brokerage firms, Banking and Insurance Transactions Tax is collected on the commission revenues. This rate may vary depending on the type of transaction.
Which Transactions Are Exempt from Banking and Insurance Transactions Tax?
Although the Bank and Insurance Transactions Tax is a tax levied on the revenues obtained from banking and insurance transactions, exemptions are applied for certain transactions and institutions.
- 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
- 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
- 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
- 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.
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