New Development
According to Presidential Decree No. 9286 (“Decree“), published in the Official Gazette on 22 December 2024, the rate of withholding tax, applicable under the Income Tax Law and Corporate Income Tax Law, on the dividends distributed by resident entities and on the amounts transferred to the head office by non-resident entities, has been increased back to 15%.
What Has Been Introduced By the Decree?
Within the scope of the Decree, the withholding tax rate applicable on the following as per Article 94 of the Income Tax Law and Articles 15 and 30 of the Corporate Income Tax Law has been determined at 15%:
- Dividends distributed by resident entities to non-resident individuals, non-resident entities that are exempt from income or corporate income tax, and non-resident entities except for those who earn dividends through a permanent establishment or permanent representative in Türkiye
- Dividends distributed by resident entities to resident individuals, those who are not subject to income and corporate income tax, and those who are exempt from income tax
- Dividends distributed to the entities that are exempt from taxes (except for the income subject to withholding tax under the third paragraph of Article 15 of the Corporate Income Tax Law).
This rate had been applied at 10% since the amendment made on 22 December 2021.
In addition, the Decree increased the withholding tax rate back to 15%, applied on the amount that non-resident taxpayers that file annual or special returns transfer to their headquarters after deducting the calculated corporate income tax from the business profits, before the application of the deductions and exemptions.
The Decree came into effect on its publication date, which is 22 December 2024.
Conclusion
The withholding tax rate applied to dividend distributions has been increased back to 15% after exactly three years. Thus, resident entities distributing dividends and non-resident entities transferring profits to their head offices will consider the withholding tax rate at 15% instead of 10%, starting from 22 December 2024. Indeed, a lower rate would apply if provided for dividends in the double tax treaties between Türkiye and the country where the recipient of the dividend is resident.
