I have just spoken to a Garanti employee and she told me that interest on Turkish Government Bonds are subject to a 10% withholding tax. On the ISE website http:\www,ise.org/ I see nothing about this tax. Can anyone here confirm ?

Should it be true the whole spread between TRY Eurobonds and domestic bonds disappears....

As far as I know, foreign investors are exempt from this tax. It only applies to Turkish citizens..

The bonds I have already invested in are eurobonds issued by non turkish entities (KFW,BEI,Austria) and are tax exempt if you hold them in a tax heaven.
Now I was thinking of buying domestic turkish bonds using a turkish bank or broker(foreign banks seem unable to buy on Istanbul Stock Exchange) , asked Garanti and they told me there is this 10% tax. If it is true domestic turkish bonds lose most of their appeal, as I prefered them hoping to save on trading and custodian commissions and because they yeld about 2% more compared to eurobonds. These advantages get almost completely wiped out if I have to pay the 10% withholding tax.

Nice pun on Tax Haven

The interest on bonds is usually taxable at your current tax bracket. The 10% withholding just helps offset what you might owe at the end of the year.