Paying Royalties, Licence and Service Fees Abroad from Turkey 2026 — 20% Withholding under Corporate Tax Law Art. 30, 10% Treaty Rates, Certificate of Tax Residence, Reverse-Charge VAT, Gross-Up, Software, Transfer Pricing and Stamp Duty

Turkish version (Türkçe sürüm): Yurt Dışına Royalty, Lisans ve Hizmet Bedeli Ödemesi

Royalties, licence fees, software fees and service fees that a company in Turkey pays to its parent company abroad or to a foreign provider raise four separate tax questions: will Turkish withholding tax apply, will a double tax treaty reduce the rate, must the Turkish company pay VAT under the reverse charge, and can the payment be deducted from the Turkish company’s income? Under domestic law, corporate withholding tax of 20% applies to fees for the use of trademarks, patents, know-how and similar rights and to fees for services that qualify as independent professional services (Corporate Tax Law Art. 30(1); Council of Ministers Decision No. 2009/14593). Treaties cap royalty withholding at 10% for most countries, and for services performed abroad a treaty often removes Turkey’s taxing right altogether. Both require the foreign provider’s certificate of tax residence. In addition, VAT at 20% on services and licences used in Turkey is declared and paid by the Turkish company under the reverse charge on VAT Return No. 2 (VAT Law Arts. 6(b), 9(1)). Intra-group payments must be at arm’s length; any excess is treated as a disguised profit distribution (Corporate Tax Law Art. 13). This guide explains, from a foreign investor’s perspective, withholding by type of payment, treaty rates, the certificate of tax residence, VAT, the gross-up calculation, transfer pricing, stamp duty and the transfer guarantee.

Taxes by type of payment: summary table

The first step for any payment abroad is to determine its legal nature correctly. The same amount may be called a “service fee” in the contract and a “licence fee” on the invoice; the tax authority looks at the real nature of the payment. The table below shows how the main payments to a foreign company with no place of business or permanent representative in Turkey are treated under domestic law.

When is income earned in Turkey?

A foreign company is a limited (non-resident) taxpayer in Turkey and is taxed only on income earned in Turkey. The items making up corporate income in limited tax liability are listed in Corporate Tax Law Art. 3(3): independent professional income earned in Turkey (Art. 3(3)(c)), income from renting movable and immovable property and rights in Turkey (Art. 3(3)(ç)), and other income earned in Turkey (Art. 3(3)(e)). Whether income is earned in Turkey is determined under Article 7 of the Income Tax Law.

The concept of “utilisation” (değerlendirme) is decisive in practice. Under Income Tax Law Art. 7, utilisation means that the payment is made in Turkey or, if made abroad, is recorded in the accounts of the payer in Turkey, or of the person on whose behalf and account the payment is made, or is set aside from its profits. So even if a service is performed abroad, if the company in Turkey pays for it and records it as an expense, the independent professional income may be treated under domestic law as utilised in Turkey. This broad rule is largely limited by treaty provisions (see the services section below). The general rules of limited tax liability are explained in our guide Dar Mükellefiyet (in Turkish).

Royalties and licence fees

Fees paid for the right to use rights such as trademarks, patents, know-how, copyrights and trade names are, for tax purposes, income from immovable capital (gayrimenkul sermaye iradı) arising from the rental of rights. The Revenue Administration’s February 2026 “Rental Income Guide for Non-Residents (Limited Taxpayers)”, relying on Income Tax Law Art. 70, also lists in this category copyrights; exploration, operating and concession rights; patents; trademarks and brands; trade names; and the right to use a secret formula or manufacturing process (know-how). Withholding applies to such payments to non-resident companies under Corporate Tax Law Art. 30(1)(c). The rate in the Law is 15%, but Council of Ministers Decision No. 2009/14593 set it at 20%.

If the ownership of the right, rather than permission to use it, is sold, Corporate Tax Law Art. 30(2) applies: 20% withholding also applies to payments made to non-resident companies for the sale, transfer and assignment of copyrights, concessions, patents, operating rights, trade names, trademarks and similar intangible rights, whether or not the income forms part of business or agricultural income. Withholding is made at the time of payment in cash or on account, or of accrual, and is calculated on the gross amount (Corporate Tax Law Arts. 30(1), 30(11)). This means the withholding obligation arises when the Turkish company accrues the expense in its accounts, even if it has not yet paid.

The royalty article of double tax treaties caps this rate. If the treaty rate is lower than the domestic 20% and its conditions are met, the treaty rate applies.

For the treaty rate to apply, the recipient must be the beneficial owner of the payment and the certificate of tax residence must be obtained before payment. For example, under Article 12 of the treaty with the United Kingdom, if the beneficial owner is a resident of the other contracting state, royalty withholding may not exceed 10% of the gross amount; in a ruling of the Bursa Tax Office Directorate dated 26 March 2014 (No. 17192610-125[ÖZG-13-13]-70), the royalty, marketing and reservation fees in a hotel franchise payment were assessed within this scope. How treaties work in general is explained in our article Yurt Dışı Kazançlar ve Çifte Vergilendirmeyi Önleme (in Turkish), and the legal protection of know-how in Ticari Sır, Know-How ve Gizlilik Sözleşmeleri (in Turkish).

Management, technical support and consultancy services

Fees for services such as management, technical support, consultancy, engineering and calibration are the most disputed item in practice. Under domestic law, the Revenue Administration treats these services as independent professional income: if the service is performed in Turkey or utilised in Turkey, 20% withholding applies to the payment to the non-resident company (Corporate Tax Law Art. 30(1)(b); Council of Ministers Decision No. 2009/14593). By contrast, if the foreign company has no place of business or permanent representative in Turkey, payments qualifying as business profits are not taxed in Turkey, since they are not listed in Corporate Tax Law Art. 30.

Treaties change this picture considerably. The General Communiqué on Double Tax Treaties (Serial No. 4, Official Gazette of 26 September 2017) states that, for services performed in the country of residence without coming to Turkey, the taxing right under the treaty is left only to the other state (the state of residence). The Communiqué explains that, in some treaties, services provided by companies are assessed under Article 14 (independent personal services); in some (Germany, Australia, Switzerland) under Articles 5 and 7 on permanent establishment and business profits; and in others (e.g. China, Indonesia, Croatia, Israel, Singapore) under both Article 5 and Article 14. In a ruling of the Ankara Tax Office Directorate dated 8 March 2023 (No. E-38418978-125[30-21/15-İ]-113926), concerning calibration services obtained by sending measuring devices to firms in Germany, Czechia, Greece and Finland, it was stated that the domestic rate is 20%, but that no withholding should be made on payments to firms that have no place of business in Turkey and meet the treaty conditions, provided a certificate of tax residence is submitted.

If the foreign firm’s employees come to Turkey to provide the service, the treaty’s time thresholds (183 days in most treaties) and the permanent establishment rule should be examined separately. In that case, the Communiqué requires the foreign firm to give a form to the payer within thirty days of starting the service, and the payer to submit a form to the tax office before payment; if it is unclear whether Turkey’s taxing right has been removed, withholding is mandatory. Where there is no treaty, the Revenue Administration tends to treat a service paid for or expensed from Turkey as earned in Turkey because of the “utilisation” criterion in Income Tax Law Art. 7; where the service is performed entirely abroad, this approach is disputed in legal writing. The contract should therefore state clearly where and by whom the service will be performed, and reports showing that the service was actually provided should be kept.

Software, cloud services and online advertising

For software payments, the Revenue Administration has developed a distinction through its tax rulings. According to its rulings of 1 June 2012 and 10 March 2017:

Where treaty provisions apply, these rates are reduced or eliminated under the treaty. For cloud and subscription (SaaS) services, however, there is no single settled administrative position on withholding. In a ruling of the Istanbul Tax Office Directorate dated 23 March 2023 (No. 62030549-125-351802), a fee for file storage (cloud backup) services obtained from a company resident in Ireland was characterised as a payment for an intangible right, and it was stated that withholding may not exceed 10% under Article 12 of the treaty. By contrast, in a ruling of the Bursa Tax Office Directorate dated 22 April 2024, a fee for software use (video conferencing) services obtained from a foreign firm was treated as business profits, and it was stated that no withholding would be made. Cloud and SaaS payments should therefore be assessed separately according to the content of the contract, and an advance tax ruling should be obtained where necessary. There is a separate rule for online advertising services: from 1 January 2019, 15% withholding applies to payments for online advertising services made to non-resident companies (Corporate Tax Law Art. 30(1)(d); Tax Procedure Law Art. 11(7); Presidential Decision No. 476).

The certificate of tax residence and treaty relief

Applying the treaty rate depends on the Turkish company holding the foreign company’s certificate of tax residence. Under Double Tax Treaties Circular No. 3, the certificate is obtained from the competent authority of the other country; the original, together with a Turkish translation certified by a notary or by the Turkish consulate in that country, is given to the payer or to the tax office, and is kept by the payer for presentation to the competent authorities when required. If the certificate is not presented, domestic law applies instead of the treaty provisions.

The withholding tax is declared and paid on the Withholding and Social Security Premium Return (Muhtasar ve Prim Hizmet Beyannamesi) by the 26th of the month following the month of payment or accrual; the statutory deadline is the 23rd (Income Tax Law Art. 98), but it was extended to the 26th from 1 April 2019 by Tax Procedure Law Circular No. 115. If the certificate is obtained after payment, a refund of the excess tax withheld can be requested from the tax office under the correction procedure; for independent professional service payments, this application is made with Form No. 3 annexed to the General Communiqué on Double Tax Treaties (Serial No. 4) and the certificate of tax residence. Even so, the most common mistake in practice is requesting the certificate months after payment. The certificate should be obtained before payment and renewed when the calendar year changes.

VAT under the reverse charge

Services obtained from abroad are subject to VAT if they are used in Turkey. Under VAT Law Art. 6(b), a service is performed in Turkey if it is performed in Turkey or used (benefited from) in Turkey. Since the foreign provider has no residence, place of business, legal seat or business centre in Turkey, the tax is declared and paid under VAT Law Art. 9(1) by the Turkish company benefiting from the service, in its capacity as the person liable (reverse charge). Licence and royalty payments also fall within this scope.

Since the 2024 amendment, deduction of VAT declared under the reverse charge depends on its having been paid; VAT declared and paid on time can be deducted in the same period. VAT paid on a fee found to be non-arm’s-length in a transfer pricing audit may lose its deductibility under Art. 30(d). Details on VAT withholding and liability are explained in our guide KDV Tevkifatı 2026 (in Turkish).

Net payments and the gross-up calculation

In licence and service contracts, the foreign party often stipulates that “taxes are for the account of the Turkish party, and we receive the net amount”. In that case, withholding is calculated not on the net amount paid to the foreign company but on the gross amount that includes the withholding, because income is taken into account at its gross amount for withholding purposes (Corporate Tax Law Art. 30(11)). The gross amount is found with this formula: gross amount = net amount ÷ (1 − withholding rate). VAT is also calculated on the gross price including the withholding. This follows from VAT Law Arts. 20(1) and 24(b), which provide that the tax base is the consideration for the transaction and that items such as taxes, duties and fees are included in the base; indeed, in a ruling of the Istanbul Tax Office Directorate dated 8 February 2012 (No. B.07.1.GİB.4.34.17.01-KDV-1-492), it was stated on the basis of these provisions that VAT must be calculated on the total price including the withholding amount.

The example clearly shows the value of the certificate of tax residence: for the same net payment, applying the treaty rate reduces withholding from EUR 25,000 to EUR 11,111.11. VAT, on the other hand, is not a permanent cost since it can be deducted if the conditions are met, but it must be paid in cash first. Foreign-currency amounts are converted into Turkish lira in the returns.

Deductibility and transfer pricing

Royalties and service fees paid abroad may be deducted from the Turkish company’s corporate income provided they relate to earning and maintaining income. However, if the payment is made to the parent company or a group company abroad, the transfer pricing rules come into play. Under Corporate Tax Law Art. 13(1), if a company buys or sells goods or services with related persons at a price or value determined contrary to the arm’s length principle, its income is deemed to have been distributed, wholly or partly, in disguise through transfer pricing.

The most common issue in practice is the “management fee” that the parent company allocates to all group companies. If the content of the service, a breakdown of hours or costs, the allocation key, and the benefit the Turkish company derives from the service are not documented, the payment may not be accepted as an expense and a disguised profit distribution dispute may arise. Since income distributed in disguise is treated as a distributed dividend, the 15% withholding on dividends distributed to a foreign shareholder (Corporate Tax Law Art. 30(3); from 22 December 2024 under Presidential Decision No. 9286; any lower dividend rate under the applicable treaty still applies) may come into play. There are also transfer pricing form and report obligations for transactions with related persons. Details are in our articles Transfer Fiyatlandırması ve Belgelendirme (in Turkish) and Vergi Cennetlerine Yapılan Ödemelerde Stopaj (in Turkish).

Stamp duty and customs value

Licence and service contracts are subject to stamp duty if they contain a specific monetary amount: the rate for agreements containing a specific amount of money is 0.948% (9.48 per mille) (Stamp Duty Law, Table (1), I/A-1). In 2026, the upper limit of stamp duty for a single document is TRY 29,115,961.10 (Stamp Duty General Communiqué Serial No. 71, Official Gazette of 31 December 2025). The duty is paid by those who sign the document (Art. 3); only one copy of documents subject to proportional duty is taxed (Art. 5).

If the contract is signed abroad, documents executed in foreign countries become subject to stamp duty when presented to official offices in Turkey, transferred or endorsed in Turkey, or when their provisions are relied on in any way (Art. 1). The approach of “let us sign the contract abroad” therefore does not always eliminate stamp duty. The general rules of stamp duty are explained on our page Damga Vergisi: Sözleşmelerde Yükümlülük, İstisna ve Cezalar (in Turkish).

For royalties and licence fees connected with imported goods, the customs side should also be considered. Customs Law Art. 27(1)(c) provides that, under certain conditions, royalties and licence fees relating to the goods are added to the customs value; VAT on royalties that must be included in the customs value is declared to the customs administration at the import stage, and paying this amount only through VAT Return No. 2 without declaring it to customs may lead to customs penalties and a double VAT dispute. For importing companies, this link should be reviewed with a customs broker when the contract is drafted.

Sending the money abroad

Article 3(c) of Foreign Direct Investment Law No. 4875 guarantees that, in addition to net profits, dividends, and proceeds from sales, liquidation and compensation arising from foreign investors’ activities and transactions in Turkey, amounts payable under licence, management and similar agreements may be freely transferred abroad through banks or special finance institutions. Under Article 10 of Decree No. 32 on the Protection of the Value of the Turkish Currency, payments relating to services obtained from abroad and other invisible transactions are made by banks within the procedures, principles and limits set by the Central Bank.

A note is also needed on the currency of the contract: the ban on foreign-currency contracts covers only contracts between persons resident in Turkey. In a contract between the Turkish company and a parent company or foreign licensor resident abroad, the price may be set in foreign currency. Details are in our guide Turkey’s Ban on Foreign-Currency Contracts and the Foreign-Owned Company Exception, and the documents banks request for transfers in Yurt Dışına Para Transferi (in Turkish).

Tax clauses to include in licence and service contracts

Most tax consequences depend on how the contract is drafted. Standard group contracts prepared by the foreign parent often do not take Turkish tax rules into account, and these gaps are where the risk lies for the Turkish company. The clauses below should be reviewed before the contract is signed.

These clauses become especially important in acquisitions and restructurings. When taking over an existing company in Turkey, a foreign investor should examine whether withholding tax and VAT returns were filed for the royalty and service payments the target made to its parent or group companies in previous years, whether the certificates of tax residence are on file, and the transfer pricing documentation; any gaps mean inherited tax risk for the buyer.

Pre-payment checklist

Common mistakes

• Invoicing every payment as a “service”: The tax nature of a payment is determined by the content of the contract, not by the name on the invoice. A fee paid for the use of a trademark may be treated as a royalty even if called a “service”.
• Requesting the certificate of tax residence afterwards: If there is no certificate at the time of payment, withholding is made at the domestic rate; although the excess can later be reclaimed through a refund, the process is long, so the certificate should be obtained in advance.
• Forgetting to gross up net payments: If the Turkish party bears the tax, withholding and VAT are calculated on the gross amount.
• Skipping reverse-charge VAT: If VAT Return No. 2 is not filed for services and licences used in Turkey, the unpaid VAT cannot be deducted either.
• Paying intra-group management fees without documentation: If the benefit test is not met, there is a risk of the expense being disallowed and of a disguised profit distribution.
• Confusing standard software with custom software: A payment for off-the-shelf software is taxed differently from a fee for reproduction rights or custom development.
• Assuming stamp duty disappears if the contract is signed abroad: A contract whose provisions are relied on in Turkey may become subject to stamp duty (Stamp Duty Law Art. 1).

Frequently asked questions

What is the withholding tax rate on royalties paid abroad from Turkey?

Withholding applies under Corporate Tax Law Art. 30(1)(c) to fees paid to non-resident companies for the use of trademarks, patents, know-how, copyrights and similar rights; the rate is 20% under Council of Ministers Decision No. 2009/14593. If there is a double tax treaty and the certificate of tax residence was obtained before payment, the treaty rate (10% for most countries) applies.

Is withholding due on the sale of a trademark or patent?

Yes. 20% withholding also applies to payments made to non-resident companies for the sale, transfer and assignment of copyrights, concessions, patents, operating rights, trade names, trademarks and similar intangible rights (Corporate Tax Law Art. 30(2)).

Is withholding due on consultancy services obtained from abroad?

Under domestic law, if the service is performed in Turkey or utilised in Turkey, 20% withholding applies as independent professional income (Corporate Tax Law Art. 30(1)(b)). If there is a treaty, for services performed abroad without coming to Turkey the taxing right usually remains only with the provider’s country; this requires a certificate of tax residence (General Communiqué on Double Tax Treaties, Serial No. 4).

What does “earned in Turkey” mean?

Under Income Tax Law Art. 7, for independent professional income the activity must be performed or utilised in Turkey, and for the rental of rights the right must be used or utilised in Turkey. Utilisation means that the payment is made in Turkey or, if made abroad, is recorded in the accounts of the payer in Turkey or set aside from its profits.

What should a certificate of tax residence look like?

It must be issued by the competent authority of the country where the foreign company is resident; the original, together with a Turkish translation certified by a notary or a Turkish consulate, must be given to the payer and kept (Double Tax Treaties Circular No. 3). A certificate for a calendar year is valid until the fourth month of the following year (General Communiqué on Double Tax Treaties, Serial No. 4).

What happens if there is no certificate of tax residence?

Domestic law applies instead of the treaty provisions; 20% withholding applies to royalty and independent professional service payments (Double Tax Treaties Circular No. 3; Corporate Tax Law Art. 30).

Is VAT payable on services obtained from abroad?

Yes, if the service is used in Turkey. The service is treated as performed in Turkey (VAT Law Art. 6(b)), and 20% VAT is declared and paid by the Turkish company benefiting from the service under the reverse charge on VAT Return No. 2 by the end of the 25th of the following month (VAT Law Art. 9(1)).

Can reverse-charge VAT be deducted?

Yes. VAT declared and paid under the reverse charge can be deducted on VAT Return No. 1 for the period in which it is paid (VAT Law Art. 29). VAT relating to expenses that are not deductible in computing taxable income cannot be deducted (VAT Law Art. 30(d)).

How is withholding calculated if the Turkish company bears the tax?

If a net payment is agreed, withholding is calculated on the gross amount (Corporate Tax Law Art. 30(11)): gross amount = net amount ÷ (1 − withholding rate). For example, for a net royalty of EUR 100,000 at 20%, the gross amount is EUR 125,000 and the withholding EUR 25,000; at the 10% treaty rate, the gross amount is EUR 111,111.11.

Is withholding due on purchases of off-the-shelf software?

According to Revenue Administration rulings, using or reselling standard (off-the-shelf) software without modification is business profits and no withholding applies. Custom software development, maintenance and support are independent professional services, and buying reproduction or distribution rights is a payment for an intangible right; both are subject to 20% withholding.

Is withholding due on payments abroad for online advertising?

Yes. From 1 January 2019, 15% withholding applies to payments for online advertising services made to non-resident companies (Corporate Tax Law Art. 30(1)(d); Tax Procedure Law Art. 11(7); Presidential Decision No. 476).

Can a management fee paid to the parent company be deducted?

Yes, provided it relates to earning income, the service was actually received and the fee is at arm’s length. The amount above arm’s length is a non-deductible expense and a disguised profit distribution (Corporate Tax Law Arts. 11(1)(c), 13); the benefit test is set out in the General Communiqué on Transfer Pricing, Serial No. 1.

Is the 30% withholding on payments to tax havens applied?

The 30% withholding in Corporate Tax Law Art. 30(7) depends on a list of countries to be announced; since the list has not been announced, this withholding is not applied.

Is a licence agreement subject to stamp duty?

Agreements containing a specific amount of money are subject to stamp duty at 0.948%; in 2026 the upper limit for a single document is TRY 29,115,961.10. A contract signed abroad becomes taxable if it is presented to official offices in Turkey or its provisions are relied on (Stamp Duty Law Art. 1).

Can royalties be freely sent abroad?

Yes. Foreign investors with a direct investment in Turkey may freely transfer amounts payable under licence, management and similar agreements abroad through banks or special finance institutions (Law No. 4875, Art. 3(c)); payments to foreign licensors that are not investors are also made through banks (Decree No. 32, Art. 10).

Can the contract with a foreign licensor be in foreign currency?

Yes. The ban on foreign-currency contracts covers only contracts between persons resident in Turkey (Decree No. 32, Art. 4(g)); in a contract with a licensor or parent company resident abroad, the price may be set in foreign currency.

Related guides

• Legal Guide for Foreign Investors in Turkey — company, stock exchange, mining, energy, real estate, tax and arbitration
• Dividend Repatriation from Turkey for Foreign Shareholders — dividend withholding and certificate of residence
• Can a Foreign Company Open a Branch in Turkey? — branch payments to the head office and Corporate Tax Law Art. 22(3)
• Turkey’s Ban on Foreign-Currency Contracts — which contracts may be in foreign currency
• Company Formation in Turkey for Foreigners — setting up the Turkish company
• Dar Mükellefiyet — taxation of non-residents in Turkey (in Turkish)
• Transfer Fiyatlandırması ve Belgelendirme — intra-group services and the arm’s length principle (in Turkish)
• KDV Tevkifatı 2026 — reverse-charge VAT (in Turkish)
• Doğrudan Yabancı Yatırımlar Kanunu (4875) — the transfer guarantee (in Turkish)
• Shareholders’ Agreements in Turkey — licence and management fees in a joint venture and shareholder veto rights
• Can a Turkish Company Borrow from Abroad or from Its Foreign Shareholder? — 0% and 10% withholding tax and reverse-charge VAT on loan interest paid abroad
• Yurt Dışına Royalty, Lisans ve Hizmet Bedeli Ödemesi — Turkish version of this article