Dividend Repatriation from Turkey for Foreign Shareholders 2026 — Law No. 4875 Transfer Guarantee, 15% Withholding Tax, Tax Treaty Rates, Certificate of Residence and Interim Dividends

Türkçe sürüm: Yabancı Ortağa Kâr Payı Transferi

A foreign investor who sets up a company in Turkey or becomes a shareholder in a Turkish company can freely transfer its share of the profits abroad. Article 3/c of Foreign Direct Investment Law No. 4875 guarantees that a foreign investor’s net profits and dividends may be freely transferred abroad through banks or special finance institutions (today’s participation banks, i.e., interest-free banks); no separate permit is required. Before the money reaches the bank, however, two hurdles must be cleared. The first is company law: dividends may be distributed only out of net profit for the period and free reserves, after the statutory reserves have been set aside, and by a resolution of the general assembly. The second is tax: the company’s profit is subject to 25% corporate income tax, and since 22 December 2024, dividends distributed to a shareholder abroad have been subject to 15% withholding tax. If the tax treaty between Turkey and the shareholder’s country provides for a lower rate, that rate can be applied on the basis of the shareholder’s certificate of residence. This guide explains the process with references to the legislation, from calculating the dividend to the general assembly resolution, from reporting the withholding tax to the bank transfer, and from interim dividends to the rights of a foreign minority shareholder when no dividend is distributed.

Can a foreign shareholder send dividends abroad? The transfer guarantee

The legal basis for transferring profits abroad is Foreign Direct Investment Law No. 4875. Under Article 3/c, net profits, dividends, sale, liquidation and compensation proceeds, amounts payable under license, management and similar agreements, and principal and interest payments on foreign loans arising from foreign investors’ activities and transactions in Turkey may be freely transferred abroad through banks or special finance institutions. The provision is a guarantee, not a permit regime: once a dividend has been properly distributed and the tax has been withheld, no separate approval from the authorities is needed for the transfer.

The guarantee belongs to the foreign investor. The Law defines a foreign investor as a natural person holding the citizenship of a foreign country, a Turkish citizen residing abroad, a legal entity incorporated under the laws of a foreign country or an international organization, in each case making foreign direct investment in Turkey (Law No. 4875, Art. 2/a). A Turkish citizen residing abroad who, for example, established or bought into a Turkish company with capital brought from abroad therefore also benefits from the guarantee for dividends received from that company, provided the shareholding qualifies as foreign direct investment; the tax position is determined separately under the rules on limited tax liability (see our article, in Turkish, Yurt Dışında Yaşayanların Türkiye’deki Vergisi, on the Turkish taxation of people living abroad).

Foreign direct investment covers setting up a new company or opening a branch, acquiring shares off the exchange, and becoming a shareholder in an existing company through acquisitions on the exchange that give at least 10% of the shares or the same proportion of voting rights (Law No. 4875, Art. 2/b). An investor who buys less than 10% on the exchange is a portfolio investor; their dividends and sale proceeds are transferred through banks under Article 15(4)(i) of Decree No. 32 on the Protection of the Value of the Turkish Currency (cited as Article 15/d-i before the paragraphs were renumbered by Presidential Decision No. 9595 of 15 March 2025). For this distinction, see our guide Can Foreign Investors Buy Shares on Borsa Istanbul?. For the Law’s four core guarantees and its reporting regime, see our article (in Turkish) Doğrudan Yabancı Yatırımlar Kanunu (4875) (the Foreign Direct Investment Law).

Bilateral investment treaties to which Turkey is a party also usually contain a separate clause on free transfers. If a profit transfer is blocked by a state measure, the investor may, in addition to domestic remedies, rely on the dispute settlement and arbitration provisions of the relevant investment treaty; on this route, see Investment Arbitration Against Turkey and ICSID.

Company law conditions for distributing dividends

A dividend is a distribution to shareholders out of the company’s profits and is subject to the rules of the TCC that protect capital and creditors. For a foreign shareholder these rules are no different from those for a Turkish shareholder; the difference lies in the tax and transfer stage. Every shareholder has the right to share, in proportion to its shareholding, in the net profit for the period whose distribution has been resolved under the law and the articles of association (TCC, Art. 507). Unless the articles of association provide otherwise, the dividend is calculated in proportion to the payments the shareholder has made to the company for its shares (TCC, Art. 508). A foreign shareholder that has not yet fully paid its capital commitment receives dividends in proportion to the amount paid, so making capital payments on time and with documentation also affects the dividend calculation.

Source limit. Dividends may be distributed only out of net profit for the period and free reserves (TCC, Art. 509/2). No payment may be made to a shareholder out of capital or the statutory reserves. Sending money to a foreign shareholder as a “dividend” when the company has no distributable profit has separate consequences under both company law and tax law; a shareholder borrowing from the company may run into the prohibition on borrowing in TCC Art. 358 and into tax rules (see our article, in Turkish, Ortaklar Cari Hesabı ve Şirket–Ortak Para Hareketleri, on shareholder current accounts).

Reserves. Five percent of the annual profit is allocated to the general statutory reserve until it reaches twenty percent of the paid-in capital (TCC, Art. 519/1). In addition, after a dividend of five percent has been paid to shareholders, ten percent of the total amount to be distributed to those entitled to a share of the profit is added to the general statutory reserve (TCC, Art. 519/2-c). The dividend payable to shareholders cannot be determined until the reserves required by law and by the articles of association have been set aside (TCC, Art. 523/1). The “company’s profit” and the “amount distributable to shareholders” are therefore not the same figure.

Competent body and timing. In a joint stock company, the general assembly decides how the annual profit is to be used and determines dividends and profit shares; this power cannot be delegated (TCC, Art. 408/2-d). The ordinary general assembly meets within three months of the end of each financial year (TCC, Art. 409/1). In a limited liability company, too, the use of the net profit for the period and the determination of dividends are among the non-delegable powers of the general assembly (TCC, Art. 616), and the ordinary meeting is likewise held within three months (TCC, Art. 617). In a limited liability company, dividends may be paid only out of net profit for the period and reserves set aside for this purpose, and no profit may be distributed before the reserves required by law and the articles of association have been set aside (TCC, Art. 608).

The foreign shareholder does not need to attend the general assembly in person. In a joint stock company, a shareholder may exercise the rights arising from its shares through a representative who may or may not be a shareholder (TCC, Art. 425). A power of attorney issued abroad must carry an apostille and be accompanied by a notarized Turkish translation; for the document set, see our guide Company Formation in Turkey for Foreigners.

Step by step: from the dividend resolution to the transfer abroad

In a company that uses the calendar year as its financial year, a dividend reaches a shareholder abroad in the order below. Departing from this order, especially receiving the certificate of residence after payment or transferring the money before the withholding tax has been reported, creates problems that are hard to fix afterwards.

Stating the payment date clearly in the general assembly resolution, in addition to the dividend amount, makes it clear in which month the withholding obligation arises. Because a “payment by book entry” (hesaben ödeme) is deemed to occur as soon as the dividend is credited to the shareholder’s account in the company’s books, the withholding and reporting obligation is not postponed even if the transfer is delayed because of the company’s cash position.

Tax: corporate income tax and the 15% dividend withholding tax

A dividend that reaches a shareholder abroad faces two layers of tax: first corporate income tax at company level, then withholding tax on distribution. The two taxes do not replace each other; corporate income tax is levied on the company’s profit, withholding tax on the dividend distributed to the shareholder.

Company level. A Turkish company is a resident taxpayer (tam mükellef, subject to unlimited tax liability) regardless of whether its shareholders are foreign, and pays 25% corporate income tax on its profit; the rate is 30% for banks and certain financial institutions (Corporate Tax Law, Art. 32). A company using the calendar year as its financial year files its corporate income tax return by the end of April of the following year; for the 2025 financial year the deadline was 30 April 2026.

Shareholder level. Withholding on dividends that resident companies distribute to non-resident individuals is made under Income Tax Law Art. 94/6-b-i, and on dividends distributed to non-resident companies, other than those receiving dividends through a permanent establishment or permanent representative in Turkey, under Corporate Tax Law Art. 30/3. The rate was raised from 10% to 15% by Presidential Decision No. 9286, published in Official Gazette No. 32760 of 22 December 2024, and applies to dividends distributed from the date of publication. The previous 10% rate had been set by Presidential Decision No. 4936 of 22 December 2021. The rate can change every few years, so the rate in force on the distribution date should always be checked.

Who withholds, and when does the obligation arise? The Turkish company distributing the dividend withholds the tax and is the party liable to the tax office. The withholding obligation arises when the dividend is paid in cash or credited to the shareholder’s account in the company’s books (payment by book entry, hesaben ödeme). The withheld tax is declared and paid with the withholding and social security premium return in the month following the payment (Income Tax Law, Art. 98). A company that withholds too little or nothing at all risks being assessed for the unpaid tax plus a tax-loss penalty (vergi ziyaı cezası, the penalty for underpaid tax) and late-payment interest; this risk falls on the company and its directors and managers, not on the foreign shareholder.

Does the shareholder file a return in Turkey? For a non-resident individual, no annual return is filed for investment income (menkul sermaye iradı) that has been taxed in Turkey entirely by withholding (Income Tax Law, Art. 86/2). Dividends are investment income of this kind, so the company’s withholding is, as a rule, a final tax in Turkey for an individual shareholder abroad. How this income is taxed in the shareholder’s own country, and whether the tax withheld in Turkey can be credited there, depends on that country’s legislation and the tax treaty (see our article, in Turkish, Yurt Dışı Kazançlar ve Çifte Vergilendirmeyi Önleme, on foreign income and double taxation relief).

Capitalizing profits. Capitalizing profits (adding them to share capital) is not treated as a profit distribution and therefore does not trigger withholding tax. A foreign shareholder who wants to keep profits in the company to finance growth in Turkey defers the withholding tax through a capital increase. However, paying the capitalized amount back to the shareholder later through a capital reduction requires a separate tax assessment; on this, see our article (in Turkish) Sermaye İşlemleri ve Pay Devrinde Vergilendirme (taxation of capital transactions and share transfers). For the general framework of the taxation of foreigners in Turkey, see our guide (in Turkish) Dar Mükellefiyet (limited tax liability).

Worked example: how much of TRY 1,000,000 of profit reaches the shareholder abroad?

The example below is simplified to show how the tax burden builds up: it assumes that commercial profit and the corporate tax base are the same, that there are no prior-year losses and that no reserves need to be set aside. In a real distribution, reserves, non-deductible expenses, exemptions and deductions will change the result.

As the example shows, providing the certificate of residence on time can make a difference of up to TRY 75,000 on one million lira of profit. The difference grows in proportion to the profit, which is why multinational groups should schedule the certificate of residence in their dividend calendar as a task to complete before the general assembly date.

Tax treaties and the certificate of residence

In the tax treaties Turkey has concluded with many countries, dividends are generally dealt with in Article 10. These treaties do not impose any new tax in Turkey; they cap the tax that Turkey, as the source country, may levy on dividends. Two rates are therefore compared: if the treaty rate is lower than the domestic rate of 15%, the treaty rate applies; if it is higher or equal, the domestic 15% applies. For example, the treaties with the United States, the United Kingdom and Canada provide for 15% or 20%, which is equal to or above the domestic rate, so 15% is withheld in practice for shareholders in those countries.

In most treaties the reduced rates are subject to additional conditions: the beneficial owner of the dividend must be a resident of the treaty country, the shareholder must be a company other than a partnership, it must directly hold a certain percentage of the Turkish company’s capital, and in some treaties the profits must have been subject to corporate income tax in Turkey at the full rate. Whether the shareholding threshold is met on the date the dividend is paid should also be checked.

The table summarizes the treaty texts. Under the treaties with some countries, such as the Netherlands, Belgium and Austria, the rate may vary depending on protocol provisions or on taxation in the shareholder’s country. Before applying a rate, the current treaty text and any protocol published by the Turkish Revenue Administration should be checked.

How is the certificate of residence provided? A shareholder wishing to benefit from a treaty obtains a certificate of residence from the competent authority of its country of residence. The original, together with a copy of its Turkish translation certified by a notary or by a Turkish consulate in that country, is given to the Turkish company that will withhold the tax. If the certificate of residence cannot be produced, domestic law applies instead of the treaty (Revenue Administration Circular on Tax Treaties ÇVÖA/2013-1, 20 December 2013). The company should check that the certificate covers the period of the payment date and keep it on file; it is the first document requested in a tax audit.

If the certificate arrives after payment, a separate application must be made to the tax office to recover the excess tax withheld; this takes time and adds a documentary burden. The practical solution is to obtain the certificate before the general assembly meeting and set the payment date in the resolution accordingly.

Intermediate holding structures. Receiving dividends through an intermediate company with no economic substance in order to benefit from a lower treaty rate may cause the loss of treaty benefits because of the “beneficial owner” requirement. The law also provides for a 30% withholding on payments to tax havens (Corporate Tax Law, Art. 30/7); for that withholding to apply, the countries must first be designated. For details, see our article (in Turkish) Vergi Cennetlerine Yapılan Ödemelerde Stopaj (withholding on payments to tax havens).

Branch profit remittances to head office

Instead of setting up a separate company, a foreign company may also operate in Turkey through a branch; opening a branch is also foreign direct investment (Law No. 4875, Art. 2/b). A branch has no separate legal personality; the foreign company is taxed as a non-resident corporate taxpayer with a permanent establishment in Turkey. Branch profits are also subject to 25% corporate income tax. A further withholding, often called a branch remittance tax, is made on the amount remitted to head office out of the profit remaining after corporate income tax (Corporate Tax Law, Art. 30/4); this rate was also raised to 15% by Presidential Decision No. 9286.

Interim dividends: sending profits before the year ends

For a foreign shareholder who wants to draw profits without waiting for the year-end and the ordinary general assembly, the legally regulated route is the interim dividend (kâr payı avansı). The Turkish Commercial Code allows interim dividends in joint stock companies; the implementing rules are set out in the Communiqué on the Distribution of Interim Dividends published in the Official Gazette of 9 August 2012. The Communiqué applies to joint stock companies not subject to the Capital Markets Law, to limited liability companies and to partnerships limited by shares. In publicly held companies, interim dividends are governed by capital markets legislation.

An interim dividend may be distributed only if the general assembly has authorized interim dividends and the 3-, 6- or 9-month interim financial statements show a profit. The amount to be distributed may not exceed half of the interim profit remaining after deducting prior-year losses, taxes, funds and financial provisions, the reserves required by law and the articles of association, and the amounts to be allocated to preferred shareholders and other persons sharing in the profit. Interim dividends paid are offset against the net profit for the year to which they relate. Any interim dividend in excess of the year-end net profit is first offset against the free reserves in the previous year’s balance sheet; if these are insufficient, the excess must be repaid to the company by the shareholders, and the general assembly resolution must state these points (Communiqué, Art. 6). Setting the interim dividend conservatively therefore reduces the risk of having to reclaim money already sent abroad.

For tax purposes, an interim dividend is also a dividend. As with a regular dividend, 15% or the lower treaty rate is withheld from an interim dividend paid to a shareholder abroad; the certificate of residence must have been given to the company before this payment.

Other channels for moving money abroad and their risks

Law No. 4875, Art. 3/c lists not only dividends but also license, management and similar fees and foreign loan payments among the payments that may be freely transferred. Multinational groups therefore use several channels to take money out of a Turkish company. Each channel is legally possible, but each has its own withholding tax and arm’s length requirement. The tax authorities may recharacterize payments they consider to have been set up to avoid dividend withholding tax.

Thin capitalization. The part of the debt that a company obtains directly or indirectly from its shareholders or persons related to them which, at any time during the financial year, exceeds three times the equity at the start of the period is treated as thin capital (örtülü sermaye, literally “disguised capital”) (Corporate Tax Law, Art. 12). Interest and foreign exchange differences attributable to this part cannot be deducted from corporate income, and the interest paid on the thin capital is also treated as a distributed dividend. Financing a Turkish company heavily with shareholder loans from a foreign parent is therefore limited. For details, see our article (in Turkish) Ortaklar Cari Hesabı, Kasa Fazlası ve Örtülü Sermaye (shareholder accounts and thin capitalization).

Transfer pricing. Buying or selling goods or services with related parties at prices or fees that do not comply with the arm’s length principle results in a disguised distribution of profit, in effect a constructive dividend (Corporate Tax Law, Art. 13). Profit distributed in disguise through transfer pricing is treated as a distributed dividend for resident companies (Corporate Tax Law, Art. 13/6); an inflated license fee can therefore lead both to the disallowance of the expense and to dividend withholding tax. On documentation requirements, see our article (in Turkish) Transfer Fiyatlandırması ve Belgelendirme (transfer pricing documentation); on how banks monitor intra-group cash movements, see (in Turkish) Holding ve Grup İçi Transferlerde MASAK (MASAK and intra-group transfers).

Making the transfer through a bank: documents, currency and MASAK

Law No. 4875, Art. 3/c provides for transfers through banks or special finance institutions (today called participation banks). The bank examines a dividend transfer like any commercial payment: it wants to see documents showing that the money being sent really is a dividend, that the recipient is a shareholder of the company and that the tax has been withheld. As part of their obligations under Law No. 5549 on the Prevention of Laundering Proceeds of Crime, banks may question the purpose of the transaction and the identity of the parties. In practice, the following documents are usually prepared:

• the minutes and resolution of the general assembly on the profit distribution,
• the financial statements on which the distribution is based,
• the withholding tax return and the assessment and payment documents showing that the withheld tax has been declared and paid,
• the entry in the share register (joint stock company) or shareholders’ register (limited liability company) and trade registry documents showing the shareholding structure,
• information showing that the recipient bank account abroad is in the shareholder’s own name,
• if a treaty rate has been applied, the certificate of residence and its translation.

The dividend is determined on the basis of the company’s financial statements and, in most companies, is calculated in Turkish lira; if it is sent to the foreign shareholder in foreign currency, the exchange rate on the transfer date applies. Exchange rate movements between the general assembly date and the transfer date change the foreign currency amount the shareholder receives; this affects the currency equivalent, not the amount of the dividend.

A transfer may be stopped by a correspondent bank or sanctions screening in the recipient country; MASAK, Turkey’s financial intelligence unit, also has the power to postpone transactions. For what a company should do in the first days after a transfer is stopped, see (in Turkish) MASAK İşleminizi Askıya Aldı veya Yurt Dışı Transferinizi Durdurdu (MASAK suspended your transaction); if the money is held at a correspondent bank, see (in Turkish) Şirketin Yurt Dışı Transferi Muhabir Bankada Durduruldu (transfer stopped at a correspondent bank); and for banks’ general document requests, see (in Turkish) Yurt Dışına Para Transferi (transfers abroad).

What can a foreign shareholder do if the company does not pay dividends?

If the foreign shareholder does not hold the majority, the majority in the general assembly decides whether dividends are distributed. Profits can be kept in the company for years on the grounds of “investment needs”. The law gives the general assembly wide discretion to set aside reserves, but that discretion has limits. The general assembly may set aside reserves not provided for in the articles of association only if this is necessary for replacement purposes, or if it is justified, having regard to the interests of the company and all shareholders, for the company’s sustained development and for distributing dividends as steadily as possible (TCC, Art. 523/2). Persistently refusing to distribute profits without a justified reason may, under this standard, be challenged in an action for annulment.

The order of these steps matters: first, the reason for not distributing should be requested in writing using the right to information; then the shareholder should vote against the resolution at the general assembly and have its dissent recorded in the minutes; and finally, the shareholder should decide whether to sue before the three-month annulment deadline expires. For a shareholder abroad, sending a representative to the general assembly and having the dissent recorded through that representative is therefore a critical step. For details, see our articles (in Turkish) Genel Kurul Kararlarının İptali ve Butlan (annulment of general assembly resolutions), Genel Kurulda Bilgi Alma ve Özel Denetim Talebi Dilekçesi (petition for information and special audit) and Limited Şirkette Ortaklıktan Çıkma ve Çıkarma (exit and exclusion in limited liability companies).

Reporting and record-keeping

A profit transfer is not a one-time bank transaction but part of an annual compliance calendar. Companies with foreign capital and branches submit the Foreign Direct Investment Activity Information Form through E-TUYS by the end of May each year (Law No. 4875 and its Implementing Regulation). The withholding appears in the withholding tax return, the distribution in the general assembly resolution and the transfer in the bank records; consistency between these three records protects the company’s position both in a tax audit and when the bank asks questions.

It is advisable to keep the documents relating to each dividend distribution, namely the general assembly resolution, the tax return and the bank receipt, together, by shareholder and by year. When the company is closed or its shares are transferred, past dividend distributions may be questioned again; for that stage, see our guide (in Turkish) Yabancı Ortaklı Şirket Kapatma (closing a company with foreign shareholders).

Common mistakes

• Sending money to the shareholder as a “dividend” without a general assembly resolution or before reserves have been set aside.
• Obtaining the certificate of residence after payment, so that 15% is withheld instead of the treaty rate.
• Crediting the dividend to the shareholder’s account in the company’s books but not reporting the withholding tax because the transfer was delayed.
• Continuing to withhold at the 10% rate that applied before 22 December 2024.
• Paying license or service fees above arm’s length instead of dividends and ignoring the risk of a disguised profit distribution.
• Sending the money to an account abroad belonging to a third party or a group company rather than to the shareholder.
• Failing, as a shareholder abroad, to send a representative to the general assembly and to have dissent from a no-dividend resolution recorded.
• Failing to submit the annual activity information form by the end of May.

Frequently Asked Questions

Can a foreign shareholder transfer dividends out of Turkey?

Yes. Net profits and dividends arising from a foreign investor’s activities and transactions in Turkey may be freely transferred abroad through banks or special finance institutions (Law No. 4875, Art. 3/c). No separate permit is required; it is enough that the dividend has been properly distributed and the tax withheld.

Is Central Bank approval needed to transfer dividends?

No. Law No. 4875 makes transfers free rather than subject to a permit. When carrying out the transfer, the bank may ask for documents such as the general assembly resolution, tax documents and the shareholding structure; this is the bank’s own review obligation, not a permit.

How much tax is withheld from dividends paid to a shareholder abroad?

15%. Income Tax Law Art. 94/6-b-i applies to an individual shareholder and Corporate Tax Law Art. 30/3 to a corporate shareholder; the rate was raised from 10% to 15% by Presidential Decision No. 9286 published in the Official Gazette of 22 December 2024. If a tax treaty provides for a lower rate, that rate applies on the basis of a certificate of residence.

When does the dividend withholding obligation arise?

When the dividend is paid in cash or credited to the shareholder’s account in the company’s books (payment by book entry, hesaben ödeme). Even if no money has yet been sent abroad, the obligation arises when the dividend is booked as a payable to the shareholder, and the tax is reported with the withholding tax return in the following month.

Who pays the withholding tax, the foreign shareholder or the company?

The Turkish company distributing the dividend withholds the tax and declares and pays it with the withholding and social security premium return. If too little is withheld, the risk of a tax-loss penalty (the penalty for underpaid tax) and late-payment interest falls on the company.

Does the foreign shareholder have to file a tax return in Turkey?

For a non-resident individual, no annual return is filed for investment income that has been taxed in Turkey entirely by withholding (Income Tax Law, Art. 86/2). Dividends fall into this category; the company’s withholding is, as a rule, a final tax in Turkey.

How is the certificate of residence provided?

The shareholder obtains a certificate of residence from the competent authority of its country of residence. The original, with a copy of its Turkish translation certified by a notary or by a Turkish consulate in that country, is given to the Turkish company before payment. Without it, the domestic rate of 15% applies instead of the treaty rate (Circular ÇVÖA/2013-1).

What is the rate on dividends paid to a German parent company?

Under the Turkey–Germany treaty, the rate is 5% for a company (other than a partnership) that is the beneficial owner of the dividend and directly holds at least 25% of the capital of the paying company, and 15% in other cases. For the 5% rate, the certificate of residence must be provided before payment.

Does the treaty rate help a shareholder in the US or the UK?

Generally not. Under these treaties, the dividend rate is 15% or 20% depending on the size of the holding. Since the domestic rate is 15% and treaties only limit Turkey’s taxing right, 15% is withheld in practice.

Must a company distribute dividends every year?

No. The general assembly decides how profits are used (TCC, Art. 408/2-d; Art. 616 for limited liability companies). However, it may set aside reserves not provided for in the articles only on the justified grounds in TCC Art. 523/2; persistently refusing to distribute profits without justification may be challenged in an action for annulment.

From what sources may dividends be distributed?

In a joint stock company, only out of net profit for the period and free reserves (TCC, Art. 509/2); in a limited liability company, out of net profit for the period and reserves set aside for this purpose (TCC, Art. 608). Five percent of annual profit is allocated to the general statutory reserve until it reaches twenty percent of paid-in capital (TCC, Art. 519/1).

Can dividends be paid before the year ends?

Yes, as an interim dividend. The general assembly must authorize it and the 3-, 6- or 9-month interim financial statements must show a profit; the amount may not exceed half of the interim profit after deducting prior-year losses, taxes, funds and financial provisions, reserves required by law and the articles, and amounts for preferred shareholders and others sharing in the profit (Communiqué on the Distribution of Interim Dividends, Official Gazette 9 August 2012). Any interim dividend exceeding the year-end profit is first offset against the previous year’s free reserves and otherwise repaid by the shareholders.

Is tax withheld if profits are capitalized?

No. Capitalizing profits (adding them to share capital) is not treated as a profit distribution and does not trigger withholding tax. However, paying the capitalized amount back to the shareholder later through a capital reduction should be assessed separately.

Is branch profit remitted to head office taxed?

Yes. The profit of a foreign company operating through a branch in Turkey is subject to 25% corporate income tax, and a further 15% is withheld on the amount remitted to head office out of the after-tax profit (Corporate Tax Law, Art. 30/4; Presidential Decision No. 9286).

Can interest on a shareholder loan be used instead of dividends?

Only to a limited extent. The part of debt from shareholders or related persons exceeding three times the equity at the start of the period is treated as thin capital; the interest attributable to it is non-deductible and treated as a distributed dividend (Corporate Tax Law, Art. 12). License or service fees that are not at arm’s length may also be treated as a disguised profit distribution (Corporate Tax Law, Art. 13).

What can a foreign minority shareholder do if the company does not distribute dividends?

It should first exercise its right to information (TCC, Art. 437; Art. 614 for limited liability companies) and have its dissent recorded at the general assembly, and may then file an action for annulment within three months of the resolution (TCC, Arts. 445-446). As a last resort, shareholders holding at least one tenth of the capital of a joint stock company may sue for dissolution for just cause (TCC, Art. 531), and any shareholder of a limited liability company may sue to withdraw for just cause (TCC, Art. 638/2).

What documents does the bank ask for to transfer a dividend?

In practice, usually the general assembly resolution, the financial statements, the withholding tax return and payment documents showing that the tax has been declared and paid, the share register entry showing the shareholding structure, and information showing that the recipient account is in the shareholder’s name. If a treaty rate was applied, the certificate of residence should also be on file.

Is there annual reporting for companies with foreign capital?

Companies with foreign capital and branches submit the Foreign Direct Investment Activity Information Form through E-TUYS by the end of May each year. Keeping the profit distribution, tax return and bank transfer records consistent is recommended.

Related guides

• Legal Guide for Foreign Investors in Turkey — company, stock exchange, mining, tax and arbitration
• Company Formation in Turkey for Foreigners — from incorporation to tax, the company route for direct investment
• Can Foreign Investors Buy Shares on Borsa Istanbul? — portfolio investment, disclosure thresholds and tax
• Can a Foreign Company Get a Mining License in Turkey? — foreign shareholders in mining companies
• Investment Arbitration Against Turkey and ICSID — treaties, preconditions and enforcement of awards
• Yabancı Ortağa Kâr Payı Transferi — Turkish version of this article