Executive summary

Presidential Decision No. 11257, published in the Official Gazette on 30 April 2026, has amended certain exemptions and deductions provided under the Income Tax Code and the Corporate Tax Code. The amendments mainly relate to dividend income derived from foreign participations and income derived from certain services provided to nonresidents and utilized abroad.

The changes apply to income and earnings generated in tax periods starting on or after 1 January 2026 and entered into force as of the publication date.

Amendments under the Income Tax Code

Income tax exemption for dividends received from foreign participations

As previously introduced by Law No. 7491, Article 22 of the Income Tax Code was amended to grant a new partial exemption for dividends received by individuals from foreign participations. (For details, see EY Global Tax Alert, Turkiye proposes a draft law amending various tax laws affecting corporations and individuals doing business abroad, dated 8 December 2023.)

Accordingly, 50% of the dividends received by individuals from joint stock or limited liability companies with legal and business centers located outside Turkiye were partially exempt from income tax, provided that:

• The individual owned at least 50% of the paid-in capital of the foreign company
• The dividend was transferred to Turkiye by the due date of filing the annual income tax return for the year in which the income is obtained

With Presidential Decision No. 11257, the minimum shareholding requirement has been reduced from 50% to 20%, while the 50% exemption ratio remains unchanged.

Increased deduction rate for foreign income obtained from certain services

Under a previous amendment to Article 89 of the Income Tax Code, taxpayers were able to deduct 80% of income obtained from services that:

• Were provided in Turkiye to nonresidents or to persons whose workplace, legal and business centers are located abroad
• Exclusively benefited those outside Turkiye

The scope of services includes:

• Architecture, engineering, design, software development
• Medical reporting, bookkeeping, call centers
• Product testing, certification, data storage, processing and analysis
• Professional training services approved by the Ministry of Treasury and Finance
• Education and healthcare services subject to authorization and supervision by relevant ministries

To benefit from the deduction, the following conditions must be met:

• Invoicing must be issued in the name of the foreign customer.
• The full amount of the relevant income must be transferred to Turkiye by the deadline for filing the annual income tax return.

With Presidential Decision No. 11257, the deduction rate has been increased from 80% to 100%.

Amendments under the Corporate Tax Code

Corporate tax exemption for dividends received from foreign subsidiaries

Law No. 7491 amended Article 5/1-(b) of the Corporate Tax Code to introduce a partial exemption for dividends received by corporate taxpayers from foreign subsidiaries.

Previously, if a Turkish corporate taxpayer owned at least 50% of the paid-in capital of a foreign subsidiary and the dividend income was transferred to Turkiye by the deadline for filing the corporate tax return, 50% of the dividend income was exempt from corporate tax. No other conditions under the same article (such as minimum holding period or minimum foreign tax burden) were required.

With Presidential Decision No. 11257, the shareholding percentage requirement has been reduced from 50% to 20% for the exemption to be applied.

Increased deduction rate for foreign income obtained from certain services

Under Article 10/1-(g) of the Corporate Tax Code, corporate taxpayers were able to deduct 80% of income obtained from certain services provided in Turkiye to nonresidents and utilized exclusively abroad. The scope of qualifying services mirrors the scope provided under the Income Tax Code.

The application of the deduction is subject to the following conditions:

• Invoices must be issued to foreign customers.
• The income must be fully transferred to Turkiye by the deadline for filing the corporate tax return for the relevant accounting period.

With Presidential Decision No. 11257, the deduction rate has been increased from 80% to 100%.

The above amendments entered into force as of the publication date and apply to income and earnings derived in tax periods starting on or after 1 January 2026.

Implications

As the amendments apply to income and earnings from tax periods starting on or after 1 January 2026, multinational groups will need to reassess ownership structures, service models and cash repatriation strategies to evaluate their Turkish tax position.