Wednesday, April 8, 2022
In subparagraph (b) of the first paragraph of Article 5 of the Turkish KVK (Corporate Tax Law), the participation earnings of corporations from abroad are exempted from corporate tax under certain conditions.
In order to benefit from the exception;
– The participating institution is a joint stock or limited liability company,
– The legal and business center of the participating institution is not located in Turkey,
– The institution holding the subsidiary share must have at least 10% of the paid-in capital of the foreign subsidiary,
– Keeping the participation share uninterruptedly for at least one year as of the date of earning the participation income,
– At a rate of at least 15% of the profits of the affiliate (including the taxes paid on the profits arising from the dividend distribution) in accordance with the tax laws of the country in which the company is operating; In case the main field of activity of the foreign institution is to provide financing or to provide insurance services or to invest in securities, the total tax burden, such as income and corporate tax, at least at the rate of corporate tax applied in Turkey in accordance with the tax laws of the country in which the participating institution operates. to carry,
– Transfer of affiliate earnings to Turkey until the date when the corporate tax return for the accounting period in which it was obtained should be submitted,
required.
In order to benefit from the exemption for foreign participation earnings, the above-mentioned conditions must be fulfilled collectively. Even if the participation rate is more than 10%, it is not possible to benefit from the exemption in case the time condition is not met or in cases where all conditions are met but the tax burden condition is not met.
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