Turkey

Withholding tax (WHT) rate on dividends increased

The WHT rate applicable on dividend payments has been increased to 15% effective from 22 December 2024. Accordingly, any dividends paid to a resident or non-resident individual, or a non-resident company, on or after 22 December 2024 will be subject to 15% WHT, unless the rate is reduced under a tax treaty.

No WHT is imposed on dividends paid to a resident company, so the recent amendment does not have impact on profit distributions from a resident company to another resident company.

The law implementing Pillar Two rules enters into effect

The law number 7524 introducing implementation of the Pillar Two rules appeared in the Official Gazette of 2 August 2024. Similar to the Organisation for Economic Co-operation and Development (OECD) Model Rules and the Pillar Two Directive, the Turkish Pillar Two legislation will apply to constituent entities that are members of a multinational enterprise (MNE) group that has annual revenue of Turkish equivalent of 750 million euros (EUR) or more in the consolidated financial statements of the ultimate parent company in at least two of the four fiscal years immediately preceding the tested fiscal year.

In general, the Turkish Pillar Two provisions do not differ significantly from the European Union (EU) Minimum Tax Directive. Very briefly, the Turkish Pillar Two regulations introduce the global minimum top-up taxation rules by providing for the main interlocking measures, i.e. the Income Inclusion Rule (IIR) and the Undertaxed Payment Rule (UTPR) as well as a Qualifying Domestic Minimum Top-Up Tax (QDMTT) under the safe-harbour OECD standards. The new rules are effective for fiscal years starting from 1 January 2024, except for the UTPR provisions, which apply to fiscal years starting from 1 January 2025.

Implementation of a domestic minimum corporate tax regime

Law number 7524, published in the Official Gazette on 2 August 2024, introduces a domestic minimum tax regime that aims to ensure the corporate tax is not less than 10% of corporate income before certain exemptions and deductions. Under the new rule, the corporate taxpayers will compute their tax liability under both the standard regime (i.e. 25% tax on taxable income after deductions and exemptions) and under a parallel regime (i.e. 10% tax on taxable income before certain deductions and exemptions). The larger amount is then payable. The domestic minimum tax regime will apply to fiscal years starting from 1 January 2025.