Taxation of Foreign Institutional Investors in Turkey: Withholding Under Income Tax Law Provisional Art. 67 and Corporate Tax Law Art. 30, Treaty Relief and Recovering Over-Withheld Tax

Every sale, redemption, dividend and recovery a foreign institution makes in Turkey passes through the Turkish withholding tax system. Gains and returns on Turkish securities held through Turkish banks and brokers are taxed by withholding under Income Tax Law Provisional Art. 67. Capital companies and funds within Corporate Tax Law Art. 2(1) have a statutory 0% rate under Provisional Art. 67. This category includes foreign companies and foreign funds similar to Turkish funds. The Ministry’s guidance treats country funds, institution and organisation funds and similar foreign institutional investors as funds of this kind. Since 5 September 2026, gains of these investors from money market fund units have been taxed at 10% under Presidential Decision 11734. Dividends paid by Turkish companies to non-resident corporations are subject to 15% withholding under Corporate Tax Law Art. 30(3). Tax treaties can reduce these rates. Under the Turkey–Norway treaty, for example, Turkish tax on dividends and interest received by Norway’s Government Pension Fund may not exceed 5%, subject to the treaty’s conditions. This also applies where they are paid to Norges Bank as the Fund’s manager and passed on to the Fund. This guide explains the rules, the documents withholding agents rely on, and the routes for recovering tax withheld in error. It reflects the legislation in force as at 26 October 2026.

Why tax matters in exits and recoveries

In a period of market stress, foreign institutions take decisions that have direct tax consequences in Turkey. They sell shares in affected issuers, redeem units in funds being wound up, move holdings from one custodian to another, receive liquidation distributions and, in some cases, receive compensation. Each of these events is handled by a Turkish bank, broker or issuer acting as withholding agent. That agent applies the rate it considers correct on the basis of the information it holds.

Errors are possible in either direction. The agent may treat an institution that qualifies for the 0% rate as an ordinary investor, lose the acquisition cost of securities transferred from another custodian, or apply the domestic dividend rate where a treaty limits it. The investor then needs to know which rule applies, what evidence the agent needs, and how tax withheld in error can be recovered. This guide addresses those questions. It is a statement of the rules, not tax advice for any particular investor, whose position depends on its legal form, residence and documentation.

The legal framework

The rules are spread across two statutes, several rate decisions and a tax treaty network. Rates are set by Presidential Decision within limits fixed by statute, and the decisions on securities income have been amended many times since 2021.

Provisional Art. 67 was introduced in 2004 as a temporary regime. Paragraph 19 originally limited it to 31 December 2025 and allowed the President to extend that date by up to five years. Presidential Decision 10680 extended it to 31 December 2030.

Limited liability and the Art. 2(1) category

Limited liability. A corporation whose legal seat and place of effective management are both outside Turkey is a limited taxpayer, taxed only on income earned in Turkey (Corporate Tax Law Art. 3(2)). Its Turkish-source income includes income from capital investments (“menkul sermaye iratları”) and other gains earned in Turkey (Art. 3(3)(d)–(e)). Whether income is earned in Turkey is determined under the Income Tax Law (Art. 3(4)).

The Art. 2(1) category. Capital companies are joint stock companies, limited companies and partnerships limited by shares, and similar foreign entities. For the purposes of the Corporate Tax Law, funds regulated and supervised by the Capital Markets Board, and foreign funds similar to them, are also treated as capital companies (Art. 2(1)). This classification matters because Provisional Art. 67(1) applies a statutory 0% rate to two groups: taxpayers within Art. 2(1), and taxpayers operating exclusively to earn returns and gains from securities that the Ministry determines to be similar to Turkish investment funds and trusts.

Income Tax General Communiqué No. 277 (Official Gazette 25 December 2010) explains the second group. It states that all foreign institutional investors operating in Turkey exclusively to earn returns and gains on securities and other capital market instruments and to exercise the related rights are to be treated as similar to Turkish investment funds and trusts. It lists limited liability partnerships, country funds, institution and organisation funds and investment institutions as examples. The same Communiqué states that income of investors outside these groups under Art. 67(1) is subject to 10% withholding.

Foreign states and foreign public bodies are mentioned separately in the Corporate Tax Law: commercial, industrial and agricultural enterprises owned by or attached to them are treated like state economic enterprises (Art. 2(4)). How a particular public investor, sovereign fund or central bank is classified for withholding purposes depends on its legal form and on what the withholding agent and the tax office accept. The treaty, where one applies, may make the classification less important for dividends and interest.

How Provisional Art. 67 withholding works

Who withholds, and on what. Banks and brokers withhold tax for each quarter of the calendar year on four types of income: the difference between purchase and sale prices of securities and other capital market instruments whose trading they intermediate; the difference between purchase price and redemption price; periodic returns they collect that are not tied to a particular instrument; and income from securities lending they intermediate (Provisional Art. 67(1)). The statutory rate is 15%, subject to the 0% rule for the categories described above and to the President’s power to set different rates.

The President’s power. The President may set the rates separately for each instrument, issuer, issue or acquisition date, account type, type of income, maturity, holding period and type of earner. For fund units, the rate may depend on the fund’s portfolio. Rates may be reduced to zero or raised to 40% (Art. 67(17)).

Calculating the base. Where the same instrument is bought on different dates and part is sold, the purchase price is determined on a first-in, first-out basis; a weighted average may be used for transactions on the same day. Commissions and the banking and insurance transactions tax paid on purchase and sale are taken into account. Several transactions in the same type of instrument within a quarter are treated as one. Losses on the same type of instrument are set off against the base of later quarters within the same calendar year. For foreign-currency-indexed instruments, Turkish lira values on the transaction dates are used. For instruments issued in a foreign currency, exchange differences are disregarded (Art. 67(1), second paragraph).

Timing. The Revenue Administration explains that the withholding base is determined from information on the trade date, while the withholding itself is made on the settlement date. The applicable rate is therefore the rate in force on the trade date (Income Tax General Communiqué No. 258, section 3.10).

Who is responsible. Banks and brokers declare the tax withheld on a special return by the 23rd day of the month after the quarter and pay it by the 26th. They are responsible for assessment on the basis of the information they hold or receive. Where tax is under-declared because information provided to them was incomplete or wrong, the assessment is made against the person who provided it (Art. 67(1)).

Status of the investor. As a rule, it does not matter for withholding under paragraphs 1–4 whether the earner is an individual or a company, resident or non-resident, exempt or taxable (Art. 67(5)). The rate depends on the category into which the investor falls under the Decision, not on whether it is otherwise exempt from tax.

What is outside the regime. The paragraph 1 rules do not apply to securities issued abroad by the Treasury and the Treasury’s asset leasing companies, or to the collection of dividends on shares on behalf of shareholders (Art. 67(1), sixth paragraph). Non-residents do not file returns for income from securities issued abroad by the Treasury, its asset leasing companies or Turkish resident companies (Art. 67(7)). Gains from derivatives contracts concluded between resident and non-resident companies are outside the article, but only where the non-resident operates through a permanent establishment or permanent representative in Turkey. For banks and similar financial institutions, that condition does not apply (Art. 67(14)).

Current withholding rates

The table summarises the rates under Provisional Art. 67(1) and Corporate Tax Law Art. 30 that are most relevant to non-resident institutions, as amended up to Presidential Decision 11734. Rates for individuals and for other types of income, such as deposit interest, are set out separately in the Decision and are not reproduced here.

Two points should be noted. First, the 10% rate on money market fund units for institutional investors is new and applies to units acquired from 5 September 2026. For units acquired earlier, it applies to the part of the gain accruing from that date (Decision 11734, Art. 2(a)). Second, the rates for investors outside the institutional categories have been amended frequently. The government bond rate, for example, depends on the acquisition date, and the end date for the 0% rate was moved from 31 December 2025 to 30 June 2026 and then to 31 December 2026 (Decisions 10706 and 11444). The rate should therefore be checked against the Decision in force on the trade date.

Dividends from Turkish companies

Turkish resident companies withhold corporate tax on dividends they distribute to non-resident corporations, and to non-residents exempt from corporate tax, unless the dividend is received through a permanent establishment or permanent representative in Turkey. Adding profit to capital is not treated as a distribution (Corporate Tax Law Art. 30(3)). The statutory rate is 15%. The President may set different rates by type of income, reduce them to zero or increase them up to double the statutory rate (Art. 30(8)).

The dividend rate has changed twice in recent years. The Corporate Tax General Communiqué No. 1 explains that Decision 2009/14593 set the rate at 15% (section 30.4.6). Presidential Decision 9286, in force from 22 December 2024, replaced the 10% figure in the relevant items of that Decision with 15%. The rate in force on 26 October 2026 is therefore 15%, subject to any lower treaty rate.

The withholding is made by the distributing company, not by the investor’s custodian, and the treaty rate must therefore be claimed before the payment date. Our guide to dividends in Turkish listed companies explains the company-law side of distributions.

Income from Turkish investment funds and investment trusts is treated as a dividend for the purposes of the Turkey–Norway treaty (Protocol, point 4). The domestic rules for Turkish funds’ portfolio income are set out in Provisional Art. 67(8) and Corporate Tax Law Art. 15(3). Our guide to Turkish investment fund rules explains the regulatory framework for those funds.

Foreign funds managed from Turkey

A foreign fund within Corporate Tax Law Art. 2(1) may use a Turkish portfolio management company holding an SPK licence. Article 5/A provides that the Turkish manager is not treated as the fund’s permanent representative, and its premises are not treated as the fund’s place of business or management, if four conditions are all met:

1. 1. The transactions carried out for the fund are among the manager’s ordinary activities.
2. 2. The relationship between manager and fund is that of independent persons dealing at arm’s length.
3. 3. The manager receives an arm’s length fee and files a transfer pricing report with the Revenue Administration within the corporate tax return period.
4. 4. The manager and its related persons are not entitled, directly or indirectly, to more than 20% of the fund’s gains after deducting fees for the service.

Where these conditions are met, the fund does not file a return for these gains, and they are not included in any return filed for other income (Art. 5/A(1)). If the transfer pricing report is not filed in time, the manager is treated as the fund’s permanent representative for that period. If the report is filed but the fee is below arm’s length, only the manager is assessed for the transfer pricing adjustment (Art. 5/A(2)). If resident individuals or companies hold more than 5% of the fund’s gains, directly or indirectly, the manager must notify the Revenue Administration of all resident founders and participants (Art. 5/A(4)).

For a foreign institution that has delegated management of its Turkish portfolio to a Turkish manager, these conditions bear directly on its tax position. Any change of manager forced by the 2026 cases, such as the transfer of mandates away from a manager under investigation, should be checked against them.

Treaty relief: the Turkey–Norway example

Turkey has a broad network of tax treaties, and treaty provisions prevail as reserved by Corporate Tax Law Art. 35(3). The terms differ from treaty to treaty, so each must be read on its own wording. The Convention between Turkey and Norway shows how much a treaty can change the domestic position for a public investor. It was signed in Ankara on 15 January 2010 together with a Protocol that forms an integral part of it. It entered into force in 2011 and, under Art. 29(1), has applied to taxes for periods beginning on or after 1 January 2012. It replaced the 1971 convention (Art. 29(2)). It was drawn up in Turkish, Norwegian and English, and the English text prevails in case of divergence.

Whether a particular Norwegian investor meets these conditions, including the requirement that dividends be exempt in Norway, is a question of fact and of Norwegian law. In Turkey, the practical question is whether the Turkish payer or withholding agent has the evidence it needs to apply the reduced rate when it pays. Whether the Multilateral Instrument modifies the Convention should be checked separately, because this guide does not address it.

Tax numbers, residence certificates and custody transfers

Tax identification number. The Revenue Administration’s February 2026 guide on Provisional Art. 67 states that non-residents need a tax identification number to invest in Turkish financial instruments, whether directly or through foreign portfolio managers, and to benefit from tax treaties. A non-resident institution obtains one by submitting a Turkish copy of its founding document valid in its home country, certified by the Turkish mission there, or a Turkish translation of its certified foreign-language founding document. Banks, brokers and custodians may obtain numbers in bulk for foreign clients using the request form attached to the Revenue Administration’s circular letter of 7 November 2003 (No. 48244), sent to the Boğaziçi Tax Office of the Istanbul Tax Directorate.

Residence certificate. The same guide states that, to benefit from a treaty, a non-resident individual must submit the original residence certificate issued by the competent authority of its country. The certificate must be accompanied by a Turkish translation certified by a notary or a Turkish consulate, and submitted through the bank or broker or directly to the Boğaziçi Tax Office. Income Tax General Communiqué No. 258 (section 3.9) states that a certificate for a calendar year is valid until the fourth month of the following year, and that non-resident institutions renew it every three years. Institutions should keep their certificates current with every Turkish custodian and paying agent. For dividends, they should confirm with the distributing company and its intermediary, before the record date, what evidence will be accepted.

Custody transfers. When an investor transfers securities to another bank or broker, the purchase price and acquisition date must be notified to the receiving institution. If the transfer is to another person or entity, the Ministry must also be notified, including where the transfer takes place within the same institution (Provisional Art. 67(1), fifth paragraph). This matters in a crisis because portfolios are often moved away from intermediaries under investigation or in liquidation. If cost information is not passed on, the next sale may be taxed on the wrong base. Our guides to MKK and book-entry securities and to insolvency of intermediaries explain how holdings are recorded and returned.

Recovering tax withheld in error

Where tax has been withheld at the wrong rate, Turkish law offers several routes. They have different conditions and time limits, and the right one depends on the nature of the error.

Optional annual return for securities gains. Non-residents may file an annual return for gains from disposals of securities and other capital market instruments that were taxed by withholding under Provisional Art. 67 and that are not otherwise required to be declared. Losses within the year on the same type of instrument can be set off in full, and the tax withheld during the year is credited. Any amount that cannot be credited is refunded under the general rules. Losses that cannot be set off are not carried forward (Art. 67(11)). The Revenue Administration’s guide states that non-residents file this return with the Boğaziçi Tax Office between the beginning and end of March of the following year. It covers only gains on sales, not interest or redemption income, and returns filed late are not processed.

Correction of tax errors. A tax error is the collection or demand of too much or too little tax because of an error in calculation or taxation (Tax Procedure Law Art. 116). Calculation errors include errors in the base, wrong application of rates and duplicate taxation (Art. 117). Taxation errors include taxing the wrong person, taxing a person who is clearly not liable or is exempt, and taxing a subject clearly outside the tax or exempt (Art. 118). A taxpayer may ask the tax office in writing to correct the error (Art. 122). The head of the tax office decides on correction. Tax overpaid is refunded, and the right to the refund lapses if it is not claimed within one year of notification of the correction (Art. 120). Errors discovered after the five-year assessment limitation period cannot be corrected, subject to the minimum periods in Art. 126 (Arts. 114 and 126).

Complaint to the Ministry. A taxpayer whose correction request is rejected after the time limit for a tax court action has passed may complain to the Ministry (Art. 124).

Tax court action. Actions before the tax courts must be brought within 30 days. For taxes collected by withholding, the period runs from the day after the payment to the income owner (Administrative Procedure Law Art. 7(1) and (2)(b)). For a non-resident receiving a dividend at the wrong rate, this means acting quickly after the payment date if litigation is to be preserved as an option.

Tax points in exits, liquidations and recoveries

Selling shares in affected issuers. Gains on BIST-traded shares (other than shares of securities investment trusts) are subject to 0% withholding for all investors under the Decision. For institutions in the Art. 2(1) and similar-fund categories, other securities gains are also at 0%. For investors outside those categories, losses on the same type of instrument can be set off within the calendar year in the withholding calculation and through the optional return. Sales at a loss in a falling market can therefore affect tax on other gains made earlier in the same year.

Fund redemptions and liquidations. Income from returning fund units to the fund is within Provisional Art. 67. For the institutional categories, the rate is 0%, except for money market fund units, which now attract 10% on the part of the gain accruing from 5 September 2026. Liquidation distributions should be checked against the withholding statements. If a fund is being liquidated after manipulation findings, the investor should keep evidence of its acquisition cost, because the gain or loss is computed from the purchase price recorded with the bank or broker.

Transfers in kind and changes of custodian. Where securities are moved to a new custodian, the cost and date notification rule applies. Where they are transferred to another person, such as a successor fund or a liquidating vehicle, the Ministry must also be notified (Provisional Art. 67(1), fifth paragraph).

Compensation and settlements. Limited taxpayers are taxed only on income earned in Turkey within the categories listed in Corporate Tax Law Art. 3(3). Whether a damages award, a settlement payment or court-ordered interest received by a non-resident institution falls within those categories depends on how it is characterised. The principal sum may be treated differently from interest. The question should be considered before settlement terms are fixed, including whether any gross-up or tax indemnity is needed. Our guide to calculating damages in Turkish securities claims explains how principal and interest are calculated.

Repatriation. Tax rules are separate from the foreign exchange rules on transferring proceeds abroad. These are explained in our guide to currency and capital movements law for foreign investors.

A working checklist

1. 1. Confirm the investor’s category. Establish whether it is a company or fund within Corporate Tax Law Art. 2(1), a foreign institutional investor treated as similar to a Turkish fund, or neither, and make sure each Turkish bank and broker records it correctly.
2. 2. Check the rate on the trade date. Rates under Provisional Art. 67 change by Presidential Decision; the rate in force on the trade date applies.
3. 3. Review money market fund holdings. Since 5 September 2026, institutional investors pay 10% on money market fund gains, with a transitional rule for units acquired earlier (Decision 11734).
4. 4. Prepare treaty documents before record dates. Keep residence certificates current, with certified translations, and agree in advance with paying companies what evidence they need for treaty rates on dividends.
5. 5. Use the treaty’s specific provisions. Public investors should check special clauses such as Turkey–Norway Art. 10(2)(b), Art. 11(2)(a), Art. 11(3) and Protocol point 3.
6. 6. Carry cost information with transfers. When moving holdings between custodians, make sure acquisition cost and date are notified (Provisional Art. 67(1)).
7. 7. Check withholding statements quarterly. Errors are easier to correct before the quarterly return is filed and paid.
8. 8. Diarise the 30-day period. For tax withheld in error, the tax court deadline runs from payment (Administrative Procedure Law Art. 7(2)(b)).
9. 9. Use the optional return where it helps. If gains have been over-withheld, the optional annual return must be filed in March of the following year (Provisional Art. 67(11)).
10. 10. Consider tax in settlements. Address the characterisation of principal and interest, and any gross-up, before agreeing terms.

Frequently asked questions

Do foreign institutional investors pay Turkish withholding tax on gains from selling BIST shares?

Gains on BIST-traded shares, other than shares of securities investment trusts, are subject to 0% withholding for all investors under the rate Decision. Other securities gains are also at 0% for companies and funds within Corporate Tax Law Art. 2(1) and for foreign institutional investors treated as similar to Turkish funds.

What changed on 5 September 2026?

Presidential Decision 11734 introduced a 10% rate on gains of those institutional investors from money market fund units and from hedge funds with “para piyasası” in their title. Other gains remain at 0%. For units acquired earlier, the 10% applies only to the part of the gain accruing from 5 September 2026.

Which foreign investors count as similar to Turkish investment funds?

Income Tax General Communiqué No. 277 states that foreign institutional investors operating in Turkey exclusively to earn returns and gains on securities, such as limited liability partnerships, country funds, institution and organisation funds and investment institutions, are treated as similar to Turkish investment funds and trusts.

What is the withholding rate on dividends paid to a non-resident corporation?

15% under Corporate Tax Law Art. 30(3), following Presidential Decision 9286 from 22 December 2024, unless a tax treaty provides a lower rate.

Does the Turkey–Norway treaty reduce dividend tax for Norway’s Government Pension Fund?

Article 10(2)(b) limits Turkish tax on dividends derived by the Government Pension Fund to 5%, provided the dividends are exempt in Norway. The Protocol extends this to payments to Norges Bank as the Fund’s manager, provided the dividends are transferred to the Fund.

Is interest paid to Norges Bank taxed in Turkey?

Interest paid to the Government or the Central Bank of Norway is exempt in Turkey under Art. 11(3). Interest paid to the Government Pension Fund, including through Norges Bank as manager, is limited to 5% (Art. 11(2)(a) and Protocol point 3).

Can Turkey tax a Norwegian resident’s gains on Turkish shares or bonds?

Under Art. 13(5) of the Turkey–Norway Convention, Turkey may tax such gains only if the shares, bonds or other financial instruments were held for no more than one year. Other gains not covered by the preceding paragraphs are taxable only in the State of residence (Art. 13(6)).

Who withholds the tax on securities gains?

The Turkish bank or broker through which the transaction is made, quarterly, on the basis of information on the trade date. It files a special return by the 23rd of the following month and pays by the 26th (Provisional Art. 67(1)).

What happens to the cost base when we move securities to another custodian?

The acquisition price and date must be notified to the receiving bank or broker. Transfers to another person must also be notified to the Ministry (Provisional Art. 67(1)). Without this information, the next sale may be taxed on the wrong base.

Do non-resident institutions need a Turkish tax number?

Yes. The Revenue Administration’s guidance states that non-residents need a tax identification number to invest in Turkish financial instruments and to use tax treaties. Banks and brokers can obtain numbers for foreign clients in bulk.

How long is a residence certificate valid?

Income Tax General Communiqué No. 258 states that a certificate for a calendar year is valid until the fourth month of the following year and that non-resident institutions renew it every three years.

How can tax withheld at the wrong rate be recovered?

Through an application for correction of a tax error to the tax office (Tax Procedure Law Arts. 116–122), a complaint to the Ministry if the application is rejected after the court deadline (Art. 124), a tax court action within 30 days of payment (Administrative Procedure Law Art. 7), or, for securities gains, the optional annual return (Provisional Art. 67(11)).

When must a tax court action against withholding be filed?

Within 30 days, counted from the day after payment to the income owner (Administrative Procedure Law Art. 7(1) and (2)(b)).

Does a foreign fund become taxable in Turkey because it uses a Turkish portfolio manager?

Not if the conditions of Corporate Tax Law Art. 5/A are met: ordinary business of the manager, arm’s length relationship and fee, a transfer pricing report filed in time, and the manager and related persons holding no more than 20% of the fund’s gains.

Is compensation received from a Turkish defendant taxable?

It depends on how the payment is characterised under Corporate Tax Law Art. 3(3) and the Income Tax Law; principal and interest may be treated differently. This should be considered before settlement terms are agreed.

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