Dividend Distribution and Taxation in Turkey for Foreign Shareholders
When a Turkish company distributes profits to its shareholders, the distribution is subject to dividend withholding tax. For foreign shareholders, the effective tax burden depends on Turkey’s domestic rates and any applicable double taxation treaty. This guide explains how dividend distribution and taxation work in Turkey for foreign investors.
How are dividends taxed in Turkey?
A Turkish company first pays corporate income tax on its profits. When the after-tax profit is distributed to shareholders as a dividend, a dividend withholding tax is applied at the time of distribution. The company withholds this tax and declares it to the tax office. The remaining net amount is then transferred to the shareholder.
Dividend taxation rates in Turkey
The table below shows the standard treatment. The dividend withholding rate may be reduced under a double taxation treaty, so confirm the rate that applies to your country with your accountant.
| Stage | Rate | Notes |
|---|---|---|
| Corporate income tax on company profit | 25% | Applied before distribution |
| Dividend withholding tax on distribution | 15% | May be reduced under a tax treaty |
Rates change with annual legislation and vary by treaty. Confirm the current rates and any treaty reduction with your accountant before distributing profits.
The two-step tax burden explained
Because profits are taxed once at the corporate level and again when distributed, foreign shareholders should plan distributions carefully. For example, if a company earns profit, it pays corporate tax first; the dividend withholding tax then applies only to the net amount that is actually distributed, not the gross profit.
- The company calculates its taxable profit and pays corporate income tax.
- The board decides to distribute all or part of the remaining profit.
- Dividend withholding tax is deducted at distribution.
- The net dividend is paid to the shareholder, and the withholding is declared to the tax office.
Double taxation treaties for foreign shareholders
If your country has a double taxation agreement with Turkey, the dividend withholding rate is often reduced below the standard domestic rate. To claim the reduced rate, the shareholder usually needs to provide a tax residency certificate. Our team can review the relevant treaty and help structure distributions efficiently.
Frequently Asked Questions
What is the dividend withholding tax rate in Turkey?
The standard domestic dividend withholding tax rate is generally 15%, applied when profits are distributed to shareholders. This may be reduced under an applicable double taxation treaty.
Are dividends taxed twice in Turkey?
Profits are effectively taxed at two stages: corporate income tax on the company’s profit, and dividend withholding tax when the after-tax profit is distributed to shareholders.
Can foreign shareholders reduce dividend tax in Turkey?
Yes. Where a double taxation treaty applies, the dividend withholding rate may be reduced, provided the shareholder submits the required documentation such as a tax residency certificate.
Related Guides
Explore our related tax guides for foreign companies: Corporate Tax in Turkey, Withholding Tax in Turkey and How to Set Up a Company in Turkey as a Foreigner.
Planning a profit distribution from your Turkish company? Our tax compliance services and accounting services help you structure and report distributions correctly. Contact our team for a tailored review.