A Turkish company's profit reaches its foreign owner through three layers of tax, and the middle one moved in December 2024. The company pays corporate tax at twenty-five per cent. When it distributes what is left, it withholds tax on the dividend, at ten per cent from December 2021 and at fifteen per cent since Presidential Decision 9286 took effect on 22 December 2024. The owner's own country then taxes the dividend or exempts it, under its law and the treaty. In my files the foreign owner who is surprised in 2026 is the one whose distribution model was built in 2022 and never revisited: the ten per cent is gone, the treaty with the United States or the United Kingdom does not bring it back, and the shareholder loan that was meant to be a cheaper route is a deemed dividend once it exceeds three times the company's equity. This page sets out the withholding as the statute and the decisions now state it, who bears it and at what rate, what the treaties actually cap, the holding and branch alternatives, the thin capitalisation and transfer pricing rules that recharacterise other payments as dividends, and the Commercial Code's reserve rules that decide how much may be distributed at all.
Sources, checked 9 September 2026. Income Tax Law No. 193, Articles 22(3), 75, 86(2), 94(6)(b), 98 and 119; Corporate Tax Law No. 5520, Articles 5(1)(a), 11, 12, 13, 15(2), 30(3), (6), (8), (9), (11) and 32; Presidential Decisions 4936 (Official Gazette 31697, 22 December 2021) and 9286 (Official Gazette 32760, 22 December 2024); Turkish Commercial Code No. 6102, Articles 376, 509, 519, 523 and 608; Foreign Direct Investment Law No. 4875, Article 3(c); the Turkey–United States, Turkey–United Kingdom and Turkey–Germany income tax treaties, Article 10 of each.
The three layers between the company's profit and your account
Article 32 of the Corporate Tax Law sets the rate at twenty-five per cent of corporate income, higher for banks and the other financial institutions the article lists. What remains after corporate tax and the reserves described below is distributable. On distribution, Article 94(6)(b) of the Income Tax Law and Article 30(3) of the Corporate Tax Law require the distributing company to withhold tax on the dividend; the withheld tax is the company's liability to declare and pay, and it is calculated on the gross dividend, or grossed up if the company bears it, under Article 30(11). The third layer is the owner's home tax, which the treaty limits and coordinates but does not remove. On a distribution of one hundred lira of pre-tax profit, seventy-five lira remain after corporate tax, and sixty-three lira and seventy-five kuruş reach the owner after the fifteen per cent withholding, before home tax and before any treaty reduction.
The withholding: statute, decision, and to whom it applies
The statutory rate in both Article 94 of the Income Tax Law and Articles 15 and 30 of the Corporate Tax Law is fifteen per cent, and Article 30(8) authorises the President to set the rate separately by type of income, to reduce it to zero or to double it. That authority has been used twice in the last five years. Decision 4936 of 22 December 2021 reduced the dividend withholding to ten per cent; Decision 9286 of 22 December 2024 restored fifteen per cent from the date of its publication, for dividends distributed to resident individuals, to persons and entities exempt from income and corporate tax, to non-resident individuals and to non-resident companies other than those receiving the dividend through a Turkish permanent establishment. The same decision raised to fifteen per cent the withholding under Article 30(6) on the profits a Turkish branch of a foreign company transfers to its head office. The rate applies by the date of distribution, not by the year in which the profit was earned.
Two features of the provisions matter to structuring. First, both articles say that adding profit to capital is not a distribution: a capital increase from retained earnings carries no withholding, and the tax is deferred until the capital is reduced or the company liquidated. Second, dividends paid by a Turkish company to another Turkish company are not within Article 94(6)(b) at all, and the recipient company's dividend income is exempt from corporate tax under Article 5(1)(a) as participation income; the withholding falls only when the Turkish holding company distributes to its own individual or foreign shareholders.
For a non-resident owner the withholding is in practice the final Turkish tax. Under Article 30(9) of the Corporate Tax Law a non-resident company may, but need not, file a Turkish return for income taxed by withholding, and under Article 86(2) of the Income Tax Law a non-resident individual files no return for investment income taxed in full by withholding. A resident individual is treated differently: under Article 22(3) of the Income Tax Law half of the dividend received from a resident company is exempt, the other half is declared if it exceeds the declaration threshold, and the whole of the tax withheld, including the part on the exempt half, is credited against the tax assessed on the return. That is why a founder who has become Turkish tax resident and draws dividends often pays less overall than the fifteen per cent suggests, and why a founder who has not become resident pays exactly fifteen per cent.
The company declares the withholding on its withholding return for the month of distribution under Article 98 of the Income Tax Law and Article 31 of the Corporate Tax Law, and pays it by the twenty-sixth of the month in which the return is due under Article 119.
What the treaties cap, and for whom
Every Turkish treaty allows the source state to tax dividends and caps the rate. The cap is a ceiling, not a rate: where the domestic rate is already at or below the ceiling, the treaty changes nothing. Article 10 of the Turkey–United States treaty caps the Turkish tax at fifteen per cent where the beneficial owner is a company holding at least ten per cent of the voting stock, and at twenty per cent in all other cases. The Turkey–United Kingdom treaty caps it at fifteen per cent for a company controlling at least twenty-five per cent of the voting power, and twenty per cent otherwise; its Article 10(4) also caps at fifteen per cent the branch profits tax on a UK company's Turkish permanent establishment. Since the domestic rate returned to fifteen per cent, neither treaty reduces the withholding for an American or British owner, whether the owner is an individual or a company. The Turkey–Germany treaty, by contrast, caps the tax at five per cent where the beneficial owner is a company, other than a partnership, holding directly at least twenty-five per cent of the capital, and at fifteen per cent otherwise; a German corporate parent with a quarter of the shares therefore pays five per cent, not fifteen, on presenting the residence certificate the Turkish administration requires for treaty relief. Other treaties in Turkey's network carry their own thresholds and rates, and the corporate parent's holding percentage, its legal form and its beneficial ownership are what decide the cap. The wider treaty positions of American and British owners are on the US treaty page and the UK treaty page.
The alternatives to a straight dividend
A Turkish holding company. Dividends from the operating company to a Turkish holding company carry no withholding and are exempt in the holding company's hands under Article 5(1)(a). The holding company can reinvest, lend within the group or hold the proceeds of a later sale, and the withholding arises only when it distributes abroad. The cost is a second company with its own filings, and the reserve rules apply twice.
A branch. A foreign company that operates through a Turkish branch rather than a subsidiary pays corporate tax on the branch's profit and, under Article 30(6), withholding at fifteen per cent on the amount it transfers to head office after that tax, calculated on the profit before deductions and exemptions less the corporate tax. The branch avoids the Commercial Code's distribution formalities but not the second layer.
A shareholder loan. Interest paid to a foreign shareholder is deductible for the company and taxed to the lender by withholding under Article 30(1) at the rate the President sets for the lender's type, which is where the thin capitalisation rule intervenes.
A salary. A working shareholder may be paid a salary, which is deductible and taxed as employment income, subject to the work permit rules on the founder work permit page and to the wage floors the Ministry of Labour sets for a foreign manager.
Thin capitalisation and transfer pricing: when a payment becomes a dividend
Article 12 of the Corporate Tax Law treats as disguised capital the part of the company's borrowings from its shareholders, or from persons related to them, that at any time in the accounting period exceeds three times the company's equity, equity being measured at the start of the period. A related person is one in which the shareholder holds, directly or indirectly, at least ten per cent of the capital, votes or profit rights, or which holds at least ten per cent of the shareholder. Borrowings from a bank or similar credit institution that is a related person are counted at half, so the effective ceiling for related-bank debt is six times equity, and borrowings from third parties against non-cash security given by a shareholder, and funds a shareholder raised from banks or the capital markets and passed on at the same terms, are excluded altogether. The consequence is in Article 12(7): interest and similar payments on the disguised capital, other than exchange differences, are treated at the end of the period as a distributed dividend, taxed to the foreign lender by withholding as a dividend, and disallowed as an expense to the company under Article 11(1)(b). The excess loan is not illegal; it is simply taxed as equity.
Article 13 does the same for prices. A company that buys from or sells to a related person at other than an arm's length price has distributed its profit in disguise, and the disguised amount is treated as a dividend at the end of the period; the article covers management fees, royalties, loans, rent and salaries as well as goods. A foreign parent charging its Turkish subsidiary a management fee that the administration finds excessive has, in the administration's analysis, received a dividend on which withholding was due, and the subsidiary has lost the deduction.
The Commercial Code: what may be distributed at all
Tax follows the distribution, but the Commercial Code decides whether there is one. Article 509(2) allows dividends only from the net profit for the period and from free reserves, and Article 509(3) allows interim dividends in unlisted companies under the Ministry's communiqué, on interim accounts and with the general assembly's authorisation. Article 519 requires five per cent of the annual profit to be set aside as the general legal reserve until it reaches twenty per cent of paid-in capital, and after that, under Article 519(2)(c), ten per cent of any amount distributed to persons entitled to a share of profit beyond a five per cent dividend to shareholders; a holding company whose main purpose is participation in other companies is exempt from that second reserve under Article 519(4). Article 523 adds that the dividend cannot be fixed until the optional reserves the articles of association require have been set aside, and allows the general assembly to set aside more where the company's continuity and a steady dividend justify it. Article 608 applies the same logic to the limited company, whose dividend is calculated on the nominal value of the shares unless the articles provide otherwise. Article 376 closes the door when losses have consumed half of capital and legal reserves, which obliges the board to convene the general assembly with remedial measures, and two thirds, which dissolves the company unless the general assembly resolves to continue with the remaining third or to make up the capital. The distribution itself is a general assembly resolution, and for a limited company the same body's decision, recorded in the company's books and, where the articles require, registered.
Repatriation and the founder's own position
Article 3(c) of the Foreign Direct Investment Law provides for the free transfer abroad of net profits, dividends, sale proceeds, liquidation proceeds and licence fees, and the transfer is made through a Turkish bank on presentation of the distribution resolution and evidence that the withholding has been paid, under the account rules on the bank account page. A founder who has moved to Turkey and relies on the twenty-year exemption for foreign income described on the Law 7582 page should note that a Turkish dividend is Turkish-source investment income, taxed under the ordinary rules above, and that receiving it does not close the exemption, whereas a Turkish salary does. A company under an incentive certificate pays corporate tax at the reduced rate described on the investment incentives page, which enlarges the distributable profit but leaves the withholding on distribution unchanged.
The routes compared
| Route | Turkish tax on the way out | Rule | Notes |
|---|---|---|---|
| Dividend to a non-resident individual | 15% withholding, final | GVK Art. 94(6)(b)(ii); Decision 9286 | Treaty caps of 15% to 20% do not reduce it |
| Dividend to a foreign parent company | 15% withholding, final | KVK Art. 30(3); Decision 9286 | Treaty may reduce: Germany 5% at 25% or more of capital; US and UK 15% |
| Dividend to a Turkish holding company | None; exempt in the holding | KVK Art. 5(1)(a); GVK Art. 94(6)(b) | Withholding deferred until the holding distributes |
| Dividend to a resident individual | 15% withholding, credited | GVK Art. 94(6)(b)(i), 22(3) | Half exempt; full withholding credited on the return |
| Capitalisation of profit | None | GVK Art. 94(6)(b); KVK Art. 30(3) | Not a distribution; deferred to capital reduction or liquidation |
| Branch remittance to head office | 15% withholding | KVK Art. 30(6); Decision 9286 | UK treaty Art. 10(4) caps at 15% |
| Interest on a shareholder loan | Withholding at the decision rate; deductible | KVK Art. 30(1); Art. 12 | Interest on debt over 3× equity is a deemed dividend |
| Management fees and royalties | Withholding under Art. 30; arm's length required | KVK Art. 13 | Excess is a deemed dividend |
Whose side we are on, and how we are paid
The accountant who books the distribution is paid whichever route you take. The bank that transfers it is paid on the transfer. The adviser abroad who designed the shareholder loan in 2022 is not the one who will answer the Turkish assessment in 2027. None of them is paid to tell you that the ten per cent rate is gone, that the treaty you are relying on caps at fifteen, or that the loan has crossed three times equity.
We take no commission or referral fee from accountants, banks or corporate service providers, in any form, on any file. The fee you pay us is our only income from your matter, and it does not depend on the route you choose or the amount you extract. Because our position does not move with the distribution, telling you to leave the profit in the company this year, or to capitalise it, costs us nothing to say.
One boundary, stated plainly. We are lawyers, not licensed investment advisers and not your home-country tax preparers. We do not tell you what your own country will charge on the dividend or whether to invest in Turkey at all. What we protect is the Turkish legal position: the rate that applies on the date of distribution, the treaty cap that actually fits your holding, the structure between the company and you, the loan and pricing arrangements that survive Articles 12 and 13, and the resolutions and reserves that make the distribution lawful.
Before you distribute
Send us the company's last balance sheet, its shareholder structure with each holder's residence and legal form, any loans or fees between the company and its owners, and what you intend to pay out. We will tell you the withholding that applies, whether a treaty reduces it and what the bank and the tax office will require to apply the reduction, whether the reserves permit the amount, and whether any existing arrangement is already a deemed dividend. Our company work is described on the company formation page.
What this page does not settle
The home-country treatment of the dividend, including foreign tax credits and participation exemptions abroad, the withholding rates on interest and royalties by category of payer and lender, the financing expense restriction in Article 11(1)(i), the transfer pricing documentation thresholds, and liquidation and capital reduction taxation are separate subjects. Withholding rates are set by Presidential decision and change; the rate above is the one in force on the date checked.
