Akkas CPA & Turkish Accounting Firm is a globally recognized Turkish Accounting Firm with a long record of excellence and professional leadership in Istanbul, Turkey. Our tax department is prepared to handle your company’s Turkish dividend tax law issues in Turkey. Turkey has one of the most competitive corporate tax rates in the OECD region. The Corporate Tax Law No. 5520 that was enacted on June 21, 2006 made some important amendments to the current applications and also included new concepts in the tax legislation. With the new Corporate Tax Law in place, Turkish corporate tax legislation now has noticeably clearer, more objective and better harmonized provisions which are in line with international standards.
The rate for dividend tax in Turkey is 15% for residents and non-residents (natural persons and legal entities) that receive dividends from companies incorporated in Turkey. The legal entities can be limited or full taxpayers according to the part of the income subject to taxation in Turkey. The limited ones will pay taxes, including dividend tax, for their income obtained in Turkey, while the full taxpayers are subject to taxation for their income gained all over the world.
Companies that have their main/registered office in Turkey are considered full taxpayers and this rule applies also for Turkish subsidiaries of foreign companies and the branches are limited taxpayers. The foreign companies that have economic activities in Turkey are limited taxpayers and they have to pay taxes on their income (dividends) obtained in Turkey.
Transfer of Dividends
The foreign companies are allowed to repatriate their profits and some limitations exist only for the companies monitored by entities such as Capital Market Board or the Banking Regulatory and Supervisory Board that approve the transfer of the dividends. The dividends can be transferred from Turkey to other countries according to the Foreign Direct Investment Law and the new Turkish Commercial Code.
Foreign companies pay a dividend tax lower than 15% if there are double taxation treaties already signed between their country of residence and Turkey. Until now, Turkey has signed over 70 double tax treaties. The dividend tax must be paid before the profits are repatriated. Therefore if the DTT dividend withholding tax rate is lower than the generic 15% rate, the DTT rate may apply.
There is no limitation for repatriation of profits unless the company is monitored by an upper supervisory body (such as the Capital Market Board or the Banking Regulatory and Supervisory Board), whose approval is required. After paying a 20% corporate tax, there is a 15% dividend withholding tax if the profit is distributed to local natural persons or foreign natural/legal persons.
Under the Turkish tax system, all taxable entities are subject to the same dividend withholding tax rate, which is 15% and is applied to profits after taxation. Favorable dividend withholding tax rates exist due to Turkey’s Double Taxation Treaties.
Foreign investors are free to transfer dividends to abroad in accordance with the Foreign Direct Investment Law. However, the Turkish Commercial Code legal reserve requirements must also be met. There are no restrictions with respect to dividend payments under the Foreign Exchange legislation, but the dividend withholding tax has to be paid before repatriation. This will be checked by the banks used for the transfer.
Reach us for Turkish Dividend Tax Law
Since its foundation, Akkas CPA & Turkish Accounting Firm has been the choice of numerous clients in Turkey. Thanks to its nationally recognized accounting and legal services, our accounting firm is now one of the leading accounting firms in Istanbul, Turkey. You may reach our accountants and lawyers for Turkish dividend tax law by sending an email to firstname.lastname@example.org or fill in Contact Form in Contact page.