The withholding tax (WHT) rate on dividends distributed by Turkish-resident taxpayer corporations, within the scope of Article 94 of the Income Tax Code and Articles 15 and 30 of the Corporation Tax Code, has been increased from 10% to 15% upon the publication of Presidential Decree No. 9286 (the Decree) in the Official Gazette dated 22 December 2024. The WHT applies whether the dividends are distributed to Turkish residents or nonresidents. The Decree entered into force and became effective on the date of its publication.

Note that the dividend WHT rate had been reduced from 15% to 10% on 22 December 2021. (For background, see EY Global Tax Alert, Turkey reduces withholding tax rate on dividend distributions to 10%, dated 22 December 2021.)

According to Article 94 of the Income Tax Code and Articles 15 and 30 of the Corporation Tax Code, 10% WHT used to be applied on the dividends that Turkish resident entities (fully liable corporate taxpayers) distributed to:

• Turkish resident individuals
• Turkish residents who do not have any tax liability or are exempt from income and corporation taxes
• Nonresident (limited liability) entities, excluding those who receive dividends through a permanent establishment or representative in Turkiye
• Nonresident individuals
• Nonresidents who are exempt from income and corporation taxes

Publication of the Decree in the Official Gazette dated 22 December 2024 means that local 15% WHT rate will now apply on the aforementioned dividends.

Additionally, the branch remittance tax that is applied to the amount transferred to the headquarters by the nonresident entities who declare annual and special tax return in Turkiye has also been increased from 10% to 15%.

Implications

The increase in the withholding tax rate on dividends means that nonresidents receiving dividend income from Turkish entities may face higher tax costs if there is no relevant Double Tax Treaty between Turkiye and the dividend recipient's country that provides a dividend withholding tax rate lower than 15%. Considering most of the Double Tax Treaties with Turkiye provide a lower dividend withholding tax rate when compared to local rate (15%), it would be crucial for nonresidents deriving dividend income from Turkish entities to meet the requirements to be eligible to benefit from the relevant Double Tax Treaty.