Corporate tax in Turkey

Summary*

Corporate Income Tax Rate (%) 20
Capital Gains Tax Rate (%) 20
Branch Tax Rate (%) 20
Withholding Tax (%)
Dividends 15
Interest
From Repurchase (REPO) Agreements 15
From Deposit Accounts 10/12/13/15/18
From Loans 0 / 10
From Turkish Government Bonds and Bills
and Private Sector Bonds
0 / 10
From Private Sector Bonds
Issued in Turkey 0 / 10
Issued Abroad 0/3/7/10
Royalties from Patents, Know-how, etc. 20
Professional Fees
Petroleum-Exploration Activities 5
Other Activities 20
Progress Billings on Long-Term
Construction and Repair Contracts
3
Payments on Financial Leases 1
Real Estate Rental Payments 20
Branch Remittance Tax 15
Net Operating Losses (Years)
Carryback 0
Carryforward 5

* The rates in the table are for illustrative purposes only. For detailed information, please contact EY in Turkey.

Taxes on corporate income and gains

Corporate income tax. Companies whose legal or business head­quarters (as stated in their articles of association) are located in Turkey or whose operations are centered and managed in Turkey are subject to corporation tax on their worldwide income. In Turk­ish tax legislation, they are described as full liability taxpayers; they are also known as resident companies.

Taxable income of limited liability taxpayers (nonresident compa­nies or taxpayers other than full liability taxpayers) is comprised of the following:

  • Professional fees obtained in Turkey
  • Profits from commercial, agricultural and industrial enterprises in Turkey (if they have an establishment or a permanent repre­sentative in Turkey)
  • Income arising from rental of real estate, rights and movable property in Turkey
  • Income obtained in Turkey from various types of securities
  • Other income and revenue obtained in Turkey

Rates of corporate tax. The effective corporate tax rate is 20%. However, incentive programs provide for reduced corporate tax rates for income from the investments supported (see Tax incen­tives).

Tax incentives. Incentive regulations provide for a wide range of in centive and support elements for certain investments with in­centive certificates, including reduced corporate tax rates, gov­ernment support for interest on loans, government support for employees’ and employers’ shares of social security premiums, government support for income tax for wages, value-added tax (VAT) and customs duty exemptions, VAT refund support and allocation of treasury-owned lots.

The incentive and support elements vary according to the type, sector, subject, size and place of the investment.

Fifty percent of the following types of income with respect to in­ventions resulting from research, development, innovation and software development activities performed in Turkey are exempt from corporate tax under certain conditions:

  • Income derived from leasing.
  • Income derived from transfers or sales.
  • Income derived from marketing through mass production in Turkey. Based on the Communiqué for the incentive, this refers to the sales of an item that is mass produced in Turkey and that has a license or beneficial model certificate. The Turk ish Patent Institute grants a license under an examination system. It grants a beneficial model certificate as a result of a research report.
  • Income pertaining to a license or beneficial model certificate for an invention that is included in the income obtained from the sale of the products produced in Turkey through the use of this invention in the production process.

In addition, the leasing, transfer and sale of intangible assets per­taining to a license or beneficial model certificate for an inven­tion is exempt from VAT if the invention is produced as a result of research and development (R&D), innovation and software activities.

Participation exemption

Dividend income derived from Turkish (resident) participations. Turkish tax law provides a participation exemption for dividends derived by companies from Turkish (resident) participations. Div­idends qualifying for the participation exemption are fully ex­empt from corporate tax.

To qualify for the participation exemption, a Turkish resident company need only hold a participation in another Turkish resi­dent company.

Dividend income derived from foreign (nonresident) participa­tions. The Turkish tax law also provides a participation exemption for dividends derived by companies from foreign participations. Dividends qualifying for the participation exemption are fully ex­empt from corporate tax.

To qualify for the participation exemption for dividends derived from foreign participations, all of the following conditions must be satisfied:

  • The Turkish company must have owned at least 10% of the paid-in capital of the foreign company for an uninterrupted period of at least one year as of the date of receiving the dividend.
  • The foreign company must be a limited or joint stock company.
  • The foreign company must be subject to corporate tax at an effective rate of at least 15% (for corporations whose principal activity is the procurement of finance, including financial leas­ing, insurance or investment in marketable securities, the rate must be at least the rate of corporation tax in Turkey, which is 20%).
  • The dividends must be transferred to Turkey by the due date of filing of the annual corporate tax return (25 April).

The effective corporate tax is determined in accordance with the following formula:

Effective corporate tax rate= Corporate tax
Distributable corporate income + corporate tax

 

Special participation exemption rules apply to companies estab­lished in foreign countries whose principal purpose is construc­tion, repair, assembly and technical services. If, under the laws of a foreign country, the establishment of a corporation is necessary to undertake these activities, dividends repatriated by the foreign subsidiary to the Turkish parent company qualify for the partici­pation exemption, regardless of whether the conditions described above for the participation exemption are satisfied.

The participation exemption also applies to income derived from permanent establishments (PEs) and permanent representative resident abroad if the following conditions are met:

  • The PE or permanent representative is subject to corporate tax at an effective rate of at least 15% in the country where the PE or permanent representative is located. For PEs whose principal activities are the procurement of finance, including financial leasing, or investment in marketable securities and insurance, the rate must be at least the rate of corporation tax in Turkey, which is 20%.
  • Income derived from foreign PEs must be transferred to Turkey by the due date of filing of the annual corporate tax return (25 April).

A participation exemption also applies to capital gains. For details, see General in Section C.

International holding companies. A special regime applies to inter­national holding companies.

International holding companies may benefit from the participa­tion exemption with respect to dividends derived from foreign participations if they satisfy the conditions applicable to other entities (see Participation exemption). They also may benefit from the participation exemption with respect to capital gains, but dif­ferent conditions apply. Turkish international holding companies benefit from the participation exemption with respect to capital gains if foreign participations account for at least 75% of the non-cash assets of the international holding company and if the inter­national holding company has held a shareholding of 10% or more in the foreign limited or joint stock company for at least two years.

Dividends distributed by international holding companies to non­resident companies out of profits derived from their foreign par­ticipations are subject to a withholding tax rate equal to one-half of the general withholding tax rate on dividends. As a result, the withholding tax rate is 7.5%.

Capital gains. Capital gains derived by all companies, including branches of foreign companies, are included in ordinary income and are subject to corporation tax. Capital gains are generally computed by subtracting the cost of the asset, including the re lated ex penses paid by the seller, from the selling price.

Capital gains derived from sales of depreciable fixed assets are not taxable to the extent the gains are reinvested in new fixed assets. However, the amount of gains used to acquire new assets is subtracted from the depreciable cost of the new asset. Capital gains that will be used for reinvestment are transferred to a special reserve account. If the special reserve is not used to finance the purchase of similar new assets in the following three years, the balance in the reserve is included in taxable income.

Capital gains derived from sales of resident companies’ shares by nonresident com panies without a permanent establishment in Turkey are subject to corporation tax. In computing these gains, changes in exchange rates are not taken into account.

Seventy-five percent of capital gains derived by corporate taxpay­ers from the disposal of shares owned for at least two years qualify for corporate tax exemption if the gains for which exemp­tion is claimed are recorded as a special fund under the share-holder’s equity account in the balance sheet until the end of the fifth year following the year of sale.

Administration. Companies file tax returns based on their finan­cial accounting year.

Tax returns must be submitted to the relevant tax office by the 25th day of the 4th month after the end of the accounting period. The return must be accompanied by the balance sheet, income statement and other required documents.

Corporation tax due must be paid by the end of the fourth month following the end of the accounting period.

Companies must make quarterly payments of ad vance corporation tax during the tax year. These payments are each equal to 20% of the taxable income for the quarter. The advance tax may be offset against the tax shown on the annual corporation tax return.

If advance corporation tax exceeds the final tax payable, the ex – cess amount can be offset against the company’s other tax liabil­ities or it can be refunded.

Dividends. Dividends received by resident companies from other resident companies are not subject to corporation tax.

Dividends received from foreign companies are included in taxable income. However, certain dividends received from foreign com­panies may qualify for exemption from corporation tax under the participation exemption or the international holding regime (see Participation exemption and International holding companies).

Withholding tax at a rate of 15% is imposed on dividends paid by resident corporations to the following recipients:

  • Resident individuals
  • Resident recipients who are not subject to corporation tax and income tax, or are exempt from such taxes
  • Nonresident individuals
  • Nonresident corporations (excluding those receiving dividends through a PE or permanent representative in Turkey)
  • Nonresident recipients who are exempt from corporation tax and income tax

A branch remittance tax is imposed at a rate of 15% on profits remitted by nonresident corporations that have a PE or permanent representative in Turkey to their headquarters.

Foreign tax relief. Corporation tax and similar taxes paid abroad on income that is derived abroad and that is included in the Turk­ish accounts may be offset against the corporation tax that is assessed on such income in Turkey.

In cases in which the controlled foreign company (CFC) rules are applied, the taxes similar to income and corporation taxes that the foreign affiliate has paid can be set off against the corporation tax that is calculated on the basis of the earnings of the foreign com­pany.

Resident companies that have a direct or indirect participation in shares or voting rights of 25% or more in foreign subsidiaries can claim a tax credit for the corporate or income tax paid by foreign subsidiaries in their jurisdictions on profits out of which dividend distributions were paid to the resident companies. The credit is limited to the tax in Turkey that is attributable to the dividend dis­tributions. As a result, the credit applies only to dividends that do not qualify for the participation exemption.

Amounts that are set off against the taxes that are assessed in Turkey on the income derived from the foreign countries may not exceed the tax amount that would be calculated by applying the local corporation tax rate (20%) to such earnings.

Foreign taxes that cannot be offset against the corporate tax in Turkey because of insufficient corporate income may be carried forward for a period of three years. The tax credit can also be off­set against advance tax payments.

Determination of trading income

General. The corporate tax base is determined by deducting ex – penses from the revenue of an enterprise. However, the following items are not subject to corporation tax:

  • Revenue derived by corporations, including nonresident com­panies, from participations in the capital of other corporations that are subject to full corporate taxation, excluding shares of profits from participation certificates of investment funds and stocks in investment partnerships
  • Proceeds derived by corporations from the sale of their pre­ferred shares, and profits derived by joint stock companies from the sale of their shares at the time of the establishment of the company and from the sale of their shares at a price exceeding the par value of the shares when they are increasing their capital
  • Seventy-five percent of profits derived from disposals of shares, preferred shares, preemptive rights, bonus shares or real estate owned for at least two years if the profit is placed in a reserve account and not distributed for five years

Corporation tax exemptions are available under the participation exemption and the international holding regime (see Section B). In addition, the following corporate tax exemptions apply to Turk­ish and foreign investment funds and companies:

  • Profits derived by mutual funds (excluding foreign-exchange funds) and trusts from transactions involving their operating portfolio
  • Profits derived by risk capital investment funds or companies from transactions involving their operating portfolio
  • Profits derived by real estate investment funds or companies from transactions involving their operating portfolio
  • Profits derived by designated private pension investment funds

All business-related expenses are deductible, with the following exceptions:

  • Interest on shareholder’s equity or on advances from shareholders.
  • Reserves set aside from profits (except technical re serves of insurance companies and doubtful debts from debtors against whom legal proceedings have been instituted).
  • Corporation tax and all monetary and tax penalties and interest imposed on such tax.
  • Discounts or other losses arising from selling the corporation’s own securities for less than par value.
  • For nonresident companies, commissions, interest and other charges paid to headquarters or other offices outside Turkey on purchases or sales made on their behalf, as well as allocated charges to contribute to losses or expenses of headquarters or branches outside Turkey. However, charges are deductible if they are made in accordance with allocations keys that are in com­pliance with the arm’s-length principle and if they are related to the generation and maintenance of business income in Turkey.
  • Interest, foreign-exchange differences or comparable expenses that are calculated or paid on disguised capital (see Debt-to-equity rules in Section E).
  • Disguised profit distribution through improper transfer pricing.

For enterprises (except loan institutions, financial organizations, financial leasing, factoring and financing companies) whose cur­rent liabilities exceed their equities, the portion determined by the Council of Ministers that does not exceed 10% of the total ex­penses and costs incurred as interest, commissions, maturity dif­ferences, delay interest, dividends, exchange-rate differences and similar items relating to liabilities (except financing expenses added to investment costs) used within the enterprise may not be de duct ed from corporate profit. However, the amount exceeding this percentage is deductible.

Provisions. Tax-deductible provisions include provisions for bad debts, for abandoned claims and for insurance technical reserves.

Tax depreciation. Assets that are used in a company for more than one year and that are subject to wear and tear are depreciated.

The useful life concept is used for the depreciation of fixed assets. The Ministry of Finance has issued Communiqués, which set forth the useful lives of different types of fixed assets. The following are examples of the useful lives for various fixed assets.

Asset Useful life (years)
Buildings 50
Office furniture, office equipment and automobiles 5
Computers 4
Computer software and cellular phones 3

The taxpayers may select the straight-line method or the declining-balance method to calculate depreciation. A company may change from the declining-balance method to the straight-line method (but the reverse change is not permitted) at any time during the useful life of a fixed asset. A company may exercise this option on an asset-by-asset basis.

Fixed assets can be depreciated beginning in the year of capital­ization (the year in which an asset becomes ready to use). For fixed assets that are purchased as ready to use, the depreciation begins in the year of the acquisition of the fixed asset. For fixed assets that need to be constructed or assembled, the depreciation begins in the year in which the construction or assembly is com­pleted and the assets become ready to use.

In general, an asset qualifies for full-year depreciation in the year of capitalization, regardless of the date of capitalization. For ex­ample, even if a fixed asset is capitalized in the last month of the accounting year, full-year depreciation is calculated. The only exception to this general rule is for passenger cars. Depreciation for passenger cars begins in the month in which the cars are pur­chased. For example, if a passenger car that was purchased for TRY1,000 is depreciated using a straight-line depreciation rate of 20%, the regular depreciation for a full year is TRY200. Under the applicable rules, if such an automobile is acquired in Novem­ber, tax-deductible depreciation for the year of acquisition is calculated as follows:

2 months  x TRY200 = TRY33.33 12 months

The balance of the regular depreciation for the year of acquisition is deductible in the last year of depreciation of the asset, together with the regular depreciation for the last year.

Investment allowance. Effective from 1 January 2006, the invest­ment allowance was abolished. However, companies can carry forward investment allowance amounts due on or before 31 De – cember 2005.

Research and development expenditures. One hundred percent of R&D expenditures may be deducted from the tax base if certain conditions are fulfilled. This is an incentive that is granted in ad­dition to the ordinary depreciation expense recognition of capi­talized R&D expenditures. The incentive covers the following expenses:

  • Raw materials and supplies’ expenses
  • Personnel expenses
  • General expenses
  • Payments for benefits and services provided by outsourcing companies
  • Taxes, duties and fees
  • Depreciation and depletion
  • Financial expenses

Companies that are not able to deduct R&D expenditures because of insufficient taxable income may deduct the unused amount in the following years.

In addition, to support R&D activities, the Turkish Scientific and Technological Research Institution (TUBITAK) may provide monetary aid to companies with respect to their R&D activities under certain conditions. A new law regulating R&D took effect on 1 April 2008. This law provides various types of incentives such as R&D deductions, wage income withholding exemptions, social security premium support, stamp duty exemption and cap ital aid for technological enterprises.

Relief for losses. In general, losses may be carried forward for five years. Losses cannot be carried back. An order of priority applies for the use of losses and exemptions to offset taxable income for the year. Past years’ losses are used after exemptions that apply even in the event of a loss. After the losses are used, the other exemptions that apply in profitable years are administered (in­vestment allowance, R&D deduction, tax-deductible donations and others).

Resident companies may deduct the losses incurred in business activities performed abroad if the foreign losses are approved by auditors authorized under the laws of the relevant jurisdiction. Foreign losses from foreign activities cannot be deducted if income arising from such activities is exempt from corporation tax in Turkey.

Other significant taxes

The following table summarizes other significant taxes.

Nature of tax Rate (%)
Value-added tax; imposed on goods delivered
and services rendered, including imported
goods and services, communications,
conveyances by pipeline and certain leases;
exports are exempt
General rate 18
Rates on other items 1 / 8
Local withholding taxes, on amounts paid
to nonresident corporations
Various
Banking and insurance transactions tax;
imposed on all types of payments received
by banking and insurance companies with
respect to all types of transactions, except
financial leasing transactions
Interbank deposit accounts 1
REPO transactions 1
Sale of government bonds and treasury bills 1
Cambio transactions 0
Other payments 1 / 5
Special consumption tax; imposed on the
delivery, importation or the initial acquisition
of certain goods
Petroleum products, solvents and similar
goods (fixed amount per measurement unit
depending on the type of goods)
Various
Cars 10 to 145
Buses 1
Midibuses and minibuses 4 / 9
Planes 0.5
Sailboats 6.7 / 8
Beverages (minimum fixed amount per
measurement unit depending on the kind
of goods)
0 to 63
Tobacco products; tax equals fixed amount plus
variable amount; variable amount cannot be less
than minimum fixed amount per measurement
unit, which depends on the kind of goods
65.25
Luxury goods 3 / 6.7 / 20 / 25
Social security contributions; imposed on
salaries of Turkish citizens; premiums are
paid within monthly upper and lower limits
and are calculated as a percentage of gross
salary; from 1 July 2015 through 31 December
2015, the monthly lower limit is TRY1,273.50
and the upper limit is TRY8,277.90
Employer 20.5
Employee 14
Unemployment insurance contributions; paid on same base as social security contributions
Employer 2
Employee 1

Miscellaneous matters

Foreign-exchange controls. Turkey has a liberal foreign-exchange regime, which allows local foreign-exchange accounts.

Law No. 4875 guarantees the remittance of profits. The com pany’s bank may transfer profits, provided the company subsequently sub mits to the bank its approved tax statement and its tax accrual and payment slips. This law also guarantees the remittance of the proceeds from the liquidation of an investment.

Fees and royalties from management agreements, technical ser­vices agreements and license contracts may be remitted abroad, and applicable withholding tax must be paid.

Foreign investment partnerships and funds may invest in Turkish securities and freely remit dividends, interest, profits and capital.

Turkish resident companies may grant loans to related parties re­siding abroad.

Transfer pricing. The Turkish Corporate Tax Code contains transfer-pricing regulations, which include the arm’s-length principle and the requirement for documentation of all related-party transac­tions. The arm’s-length principle applies to all transactions carried out by taxpayers with related parties. Under Turkish transfer-pricing rules, the traditional transfer-pricing methods recommend­ed in the Organisation for Economic Co-operation and Develop­ment (OECD) model guidelines are acceptable. The main methods that can be applied by the taxpayers in the determination of the arm’s-length price are the comparable uncontrolled price method, the cost-plus method and the resale price method.

However, taxpayers may select other transfer-pricing methods if they can establish that the traditional methods are not suitable for their transactions. It is possible to enter into advance-pricing agreements with the tax authorities.

Transfer-pricing rules apply to both domestic and foreign related-party transactions. Commercial transactions conducted by compa­nies resident in low-tax jurisdictions (tax havens) are considered to be related-party transactions.

The Ministry of Finance has issued Communiqués clarifying the transfer-pricing rules and documentation requirements. Under these Communiqués, taxpayers must prepare annual transfer pric­ing forms, reports and other documentation.

Debt-to-equity rules. Under the new thin-capitalization rules, a “related party” is a person holding, directly or indirectly, at least 10% of the shares or voting rights of the other party.

Borrowings from related parties that exceed a debt-to-equity ratio of 3:1 are considered to be disguised capital. For borrowings from related parties that are banks or financial institutions, half of the borrowings are taken into consideration in performing the calcu­lation for disguised capital. Total borrowings from all related par­ties are treated collectively.

The equity at the beginning of the taxpayer’s fiscal year applies for thin-capitalization purposes. Interest paid or accounted for and foreign-exchange differences related to disguised capital are regarded as nondeductible expenses in determining the corporate tax base. Interest related to disguised capital is treated as a divi­dend distribution and is subject to dividend withholding tax.

Controlled foreign companies. The controlled foreign company (CFC) rules apply if resident individuals and corporate taxpayers jointly or severally have a direct or indirect participation of 50% or more in the shares, dividend rights or voting rights in a foreign company that meets all of the following conditions:

  • Twenty-five percent or more of the foreign company’s gross in come is of a passive nature (portfolio investment income). If the business activities of the company are not commensurate with the capital, organization or the work force of the company, in come derived from commercial, agricultural or independent personal services may be regarded to be of a passive nature.
  • The foreign company is subject to effective corporate taxation at a rate of less than 10%.
  • The gross revenue of the foreign company exceeds TRY100,000 (approximately USD35,000).

If the foreign company falls within the scope of the Turkish CFC measures, Turkish resident taxpayers declare corporate income of the foreign company attributable to them. In the event of a dividend distribution by the foreign company, the recipient of the div idend is taxed only to the extent that the amount has not been taxed in accordance with the CFC rules.

Anti-avoidance measures. Turkish resident taxpayers are subject to a 30% withholding tax on all payments made in cash or on ac count that relate to transactions with companies resident in countries that the Council of Ministers considers to be in harm ful tax competition. The Council of Ministers has not yet identified these countries. The principal, interest or profit contributions corresponding to debts to financial institutions established outside Turkey and payments to insurance and reinsurance companies established outside Turkey are not subject to the 30% withhold­ing tax. The Council of Ministers has the authority to reduce the withholding tax rate to 0% for transactions that are considered to be performed at arm’s length.

The payments taxed in accordance with the rules described in the preceding paragraph are not subject to further corporate tax or income tax.

The Turkish tax law includes anti-abuse rules. The principal rule is the substance-over-form rule, which is contained in Article 3 of the Tax Procedural Law.

Mergers and acquisitions. Mergers, acquisitions and demergers may be tax-free if the transaction involves two resident compa­nies and if the assets are transferred at book value.

Treaty withholding tax rates

The table below shows the maximum withholding rates for divi­dends, interest and royalties provided under Turkey’s double tax treaties.

To benefit from the advantageous rates under the double tax trea­ties, additional conditions may be required (for example, the re­cipient is required to be the beneficial owner of the related gain). Readers should obtain detailed information regarding the treaties before engaging in transactions.

  Dividends

%

Interest

%

Royalties

%

Albania 5/15 (a) 10 (oo) 10
Algeria 12 10 (oo) 10
Australia 5/15 (mm) 10 (oo) 10
Austria 5/15 (a) 5/10/15 (oo) 10
Azerbaijan 12 10 (oo) 10
Bahrain 10/15 (c) 10 10
Bangladesh 10 10 (oo) 10
Belarus 10/15 (c) 10 10
Belgium 5/10 (d) 15 (oo) 10
Bosnia and      
Herzegovina 5/15 (a) 10 (oo) 10
Brazil 10/15 (c) 15 (gg) 10/15 (hh)
Bulgaria 10/15 (c) 10 (oo) 10
Canada 15/20 (g) 15 (oo) 10
China 10 10 (oo) 10
Croatia 10 10 10
Czech Republic 10 10 (oo) 10

 

     
Denmark 15/20 (e) 15 (oo) 10
Egypt 5/15 (a) 10 (oo) 10
Estonia 10 10 (oo) 5/10 (f)
Ethiopia 10 10 (oo) 10
Finland (ee) 5/15 (a) 5/10/15 (ii)(oo) 10
France 15/20 (g) 15 (oo) 10
Georgia 10 10 10
Germany (ff) 5/15 (a) 10 (oo) 10
Greece 15 12 (oo) 10
Hungary 10/15 (c) 10 (oo) 10
India 15 10/15 (h)(oo) 15
Indonesia 10/15 (c) 10 (oo) 10
Iran 15/20 (e) 10 (oo) 10
Ireland 5/10/15 (aa) 10/15 (bb) 10
Israel 10 10 (oo) 10
Italy 15 15 10
Japan 10/15 (c) 10/15 (i)(oo) 10
Jordan 10/15 (c) 10 (oo) 12
Kazakhstan 10 10 (oo) 10
Korea (South) (nn) 15/20 (e) 10/15 (j)(oo) 10
Kuwait 10 10 10
Kyrgyzstan 10 10 (oo) 10
Latvia 10 10 (oo) 5/10 (f)
Lebanon 10/15 (o) 10 (oo) 10
Lithuania 10 10 (oo) 5/10 (f)
Luxembourg 10/20 (l) 10/15 (m) 10
Macedonia 5/10 (n) 10 (oo) 10
Malaysia 10/15 (c) 15 (oo) 10
Malta 10/15 (c) 10 (oo) 10
Mexico (qq) 5/15 (a) 10/15 (oo) 10
Moldova 10/15 (c) 10 (oo) 10
Mongolia 10 10 (oo) 10
Morocco 7/10 (k) 10 (oo) 10
Netherlands 5/10 (p) 10/15 (m)(oo) 10
New Zealand 5/15 (a) 10/15 (t)(oo) 10
Northern Cyprus 15/20 (e) 10 (oo) 10
Norway 5/15 (q) 5/10/15 (jj) 10
Oman 10/15 (o) 10 (cc) 10
Pakistan 10/15 (c) 10 (oo) 10
Poland 10/15 (c) 10 (oo) 10
Portugal 5/15 (z) 10/15 (m) 10
Qatar 10/15 (c) 10 (oo) 10
Romania 15 10 (oo) 10
Russian Federation 10 10 (oo) 10
Saudi Arabia 5/10 (b) 10 10
Serbia and      
Montenegro 5/15 (a) 10 (oo) 10
Singapore 10/15 (c) 7.5/10 (r) 10
Slovak Republic 5/10 (n) 10 (oo) 10
Slovenia 10 10 (oo) 10
South Africa 10/15 (c) 10 10
Spain 5/15 (s) 10/15 (t) 10
Sudan 10 10 (oo) 10
Sweden 15/20 (e) 15 (oo) 10
Switzerland 5/15 (kk) 5/10 (ll) 10

 

Syria 10 10 (oo) 10/15 (u)
Tajikistan 10 10 (oo) 10
Thailand 10/15 (c) 10/15 (v) 15
Tunisia 12/15 (w) 10 (oo) 10
Turkmenistan 10 10 (oo) 10
Ukraine 10/15 (c) 10 (oo) 10
United Arab Emirates 5/10/12 (x) 10 (oo) 10
United Kingdom 15/20 (e) 15 10
United States 15/20 (g) 10/15 (y) 5/10 (f)
Uzbekistan 10 10 (oo) 10
Yemen 10 10 (cc) 10
Non-treaty countries 15 — (pp) 20

 

a) The 5% rate applies if the recipient owns more than 25% of the payer of the dividends. The 15% rate applies to other dividends.

b) The 5% rate applies if the recipient owns more than 20% of the payer of the dividends or if the recipient is the central bank or an entity that is wholly owned by the government. The 10% rate applies to other dividends.

c) The 10% rate applies if the recipient owns more than 25% of the payer of the dividends. The 15% rate applies to other dividends.

d) The 5% rate applies to dividends distributed by Belgian companies. The 10% rate applies to dividends distributed by Turkish companies.

e) The 15% rate applies if the recipient owns more than 25% of the payer of the dividends. The 20% rate applies to other dividends.

f) The 5% rate applies to royalties paid for the use of industrial, commercial or scientific equipment. The 10% rate applies to other royalties.

g) The 15% rate applies if the recipient owns more than 10% of the payer of the dividends. The 20% rate applies to other dividends.

h) The 10% rate applies to interest on loans granted by banks and financial institutions. The 15% rate applies to other interest payments.

i) The 10% rate applies to interest on loans granted by financial institutions. The 15% rate applies to other interest payments.

j) The 10% rate applies to interest paid with respect to a loan or other debt claim with a term exceeding two years. The 15% rate applies to other interest payments.

k) The 7% rate applies if the recipient owns more than 25% of the payer of the dividends. The 10% rate applies to other dividends.

l) For Luxembourg recipients, the 10% rate applies if the recipient owns more than 25% of the payer of the dividends and the 20% rate applies to other dividends. For Turkish recipients, these rates are applied as 5% and 20%, respectively.

m) The 10% rate applies to interest on loans with a term exceeding two years. The 15% rate applies to other interest payments.

n) The 5% rate applies if the recipient owns more than 25% of the payer of the dividends. The 10% rate applies to other dividends.

o) The 10% rate applies if the recipient owns more than 15% of the payer of the dividends. The 15% rate applies to other dividends.

p) The 5% rate applies to dividends distributed by Dutch companies. The 10% rate applies to dividends distributed by Turkish companies if dividends received by Dutch resident companies from Turkish resident companies are not subject to tax in the Netherlands.

q) The rate is 5% of the gross amount of the dividends if either of the following circumstances exists:

  • The beneficial owner of the dividends is a company (other than a partner­ship) that holds directly at least 20% of the capital of the company paying the dividends and the dividends are exempt from tax in the other state.
  • The dividends are derived by the government pension fund in the case of Norway or by the government social security fund in the case of Turkey.

r) The 7.5% rate applies to interest on loans paid by financial institutions. The 10% rate applies to other interest payments.

s) The 5% rate applies to dividends to the extent they are paid out of profits that have been subject to tax as specified in the tax treaty and if the recipient owns more than 25% of the payer of the dividends. The 15% rate applies to other dividends.

t) The 10% rate applies to interest on loans granted by banks. The 15% rate applies to other interest payments.

u) The 10% rate applies to royalties paid for the use of, or the right to use, copyrights of literary, artistic or scientific works, including cinematographic films and recordings for radio and television. The 15% rate applies to royal­ties paid for patents, trademarks, designs or models, plans, secret formulas or processes, or for information concerning industrial, commercial or scientific experience.

v) The 10% rate applies to interest on loans granted by banks, financial insti­tutions and insurance companies. The 15% rate applies to other interest payments.

w) The 12% rate applies if the recipient owns more than 25% of the payer of the dividends. The 15% rate applies to other dividends.

x) The 5% rate applies if the recipient of the dividends is the government, a public institution wholly owned by the government or a political subdivision or local authority of the other contracting state. The 10% rate applies if the recipient owns more than 25% of the payer of the dividends. The 12% rate applies to other dividends.

y) The 10% rate applies to interest derived from loans granted by financial institutions, such as banks, savings institutions or insurance companies. The 15% rate applies to other interest payments.

z) The 5% rate applies if the recipient owns more than 25% of the payer of the dividends for an uninterrupted period of at least two years. The 15% rate applies to other dividends.

(aa) For Irish recipients, the 5% rate applies if the dividends are paid out of the profits that have been subject to tax in Turkey and if the recipient owns more than 25% of the voting rights of the payer of the dividends. The 10% rate applies if the recipient owns more than 25% of the voting rights of the payer of the dividends, and the 15% rate applies to other dividends. For Turkish recipients, these rates are applied as 5%, 5% and 15%, respectively.

(bb) The 10% rate applies to interest received by financial institutions or paid with respect to loans or other debt claims with a term exceeding two years. The 15% rate applies to other interest payments.

(cc) Interest paid to the government and central bank is exempt.

(dd) A new treaty between Turkey and Norway was signed on 15 January 2010. This new treaty is effective from 1 January 2012. Under the new treaty, the dividend withholding tax rate may be reduced to 5%. The withholding tax rate for interest ranges from 5% to 10%. The withholding tax on royalties is 10% if certain conditions are satisfied.

(ee) A new treaty between Turkey and Finland, which was signed on 6 October 2009, is effective from 1 January 2013.

(ff) A treaty between Turkey and Germany, which was re-signed by the countries on 19 September 2011, is effective retroactively from 1 January 2011.

(gg) Interest paid from Turkey to the government of Brazil, the Central Bank of Brazil or the National Bank for Economic and Social Development (BNDES) is exempt from Turkish tax. Interest paid from Brazil to the government of Turkey, the Central Bank of Turkey (Turkiye Cumhuriyet Merkez Bankasi) or the Turkish Export/Import Bank (Eximbank) is exempt from tax.

(hh) The tax rate is 15% of the gross amount of the royalties arising from the use of, or the right to use, trademarks. The rate is 10% of the gross amount of royalties in all other cases

(ii) The rate is 5% of the gross amount of interest with respect to a loan or credit made, guaranteed or insured for the purpose of promoting exports by the Finnish Export Credit (FINNVERA) or similar Turkish public entities that have the objective of promoting exports. The rate is 10% of the gross amount of interest derived by banks. The rate is 15% of the gross amount of interest in all other cases.

(jj) The rate is 5% of the gross amount of the following types of interest:

  • Interest paid to the government pension fund or the Norwegian Guarantee Institute for Export Credits (Eksportfinans ASA) if the interest is wholly or mainly passed on to the government of Norway under the 108 Agreement between Eksportfinans ASA and the government of Norway
  • Interest paid to the Turkish social security fund or the Turkish Eximbank The rate is 10 % for interest paid to banks. The rate is 15% in all other cases.

(kk) For Swiss recipients, the rate is 5% if the beneficial owner of the dividends is a company (other than a partnership) that holds directly at least 20% of the capital of the company paying the dividends and if relief from Swiss tax is granted for such dividends through an abatement of the profits tax in a pro­portion corresponding to the ratio between the earnings from participations and total profits or through equivalent relief. The rate is 15% in all other cases for Swiss recipients. For Turkish recipients, the rate is 5% if the benefi­cial owner of the dividends is a company (other than a partnership) that holds directly at least 20% of the capital of the company paying the dividends. The rate is 15% in all other cases for Turkish recipients.

(ll)  The rate is 5% for interest paid with respect to a loan or credit made, guar‑

anteed or insured for the purpose of promoting exports by an Eximbank or a similar institution that has the objective of promoting exports. The rate is 10% in all other cases.

(mm) For Australian recipients, the 5% rate applies if the beneficial owner of the dividends is a company that owns directly more than 25% of the capital of the company and if the dividends are paid out of profits that have been subject to corporation tax in Turkey. The 15% rate applies to other dividends paid to Australian recipients. For Turkish recipients, the 5% rate applies if the beneficial owner of the dividends is a company that owns directly more than 10% of the voting power of the company. The 15% rate applies to other dividends paid to Turkish recipients.

(nn) A new treaty between Turkey and Korea (South) is under negotiation.

(oo) Please consult the treaty for further details because exemptions may be pro‑

vided for interest on loans obtained from certain institutions, such as cen‑

tral banks and governments of the contracting states or their subdivisions. (pp) Various rates apply.

(qq) The treaty entered into force on 23 July 2015 and is effective from 1 Janu­ary 2016.

Turkey has initialed tax treaties with Cameroon (11 July 2014), Côte d’Ivoire (20 May 2015), Gabon (3 September 2015), the Palestinian Authority (15 November 2012) and Senegal (10 July 2015).

Turkey is negotiating tax treaties with Ghana and Kenya.

Turkey is engaged in the second round of negotiations with Korea (South) for a new income tax treaty, which would replace the 1986 treaty between the countries.

On 11 February 2014, Gambia and Turkey signed an income tax treaty, which was ratified by Gambia on 23 June 2015. The text of the treaty has been published.

The Turkish Council of Ministers ratified the income tax treaty and protocol between Turkey and the Philippines, signed on 18 March 2009, through Decree No. 2011/1467, which was pub­lished in the Official Gazette of 10 April 2011. The treaty will enter into force after the exchange of instruments of ratification is completed. The Turkish Council of Ministers ratified the income tax treaty and protocol between Turkey and Kosovo, signed on 10 September 2012, through Decree No. 2015/8056, which was published in the Official Gazette of 28 August 2015. The treaty will enter into force after the exchange of instruments of ratifica­tion is completed.

Turkey has signed the Exchange of Information Agreements Relating to Tax Matters with Bermuda, Gibraltar, Guernsey, the Isle of Man and Jersey. The Exchange of Information Agreement Relating to Tax Matters with Bermuda and Jersey entered into force as of September 2013. Negotiations are continuing with the Bahamas and Barbados.