Corporate Tax in Türkiye: A Guide for Foreign Companies

Türkiye taxes the profits of companies under the Corporate Tax Law No. 5520 (Kurumlar Vergisi Kanunu). A company that is resident in Türkiye is a full taxpayer (tam mükellef), taxed on its worldwide profit; a company resident abroad is a limited taxpayer (dar mükellef), taxed only on the profit it earns from Turkish sources. For a foreign business the practical question is almost always the same: will you operate through a Turkish subsidiary, a branch, or simply earn income from afar — because that choice decides how, and on what, Türkiye taxes you. This guide explains residence, what is taxed, branch versus subsidiary, the advance-tax cycle, the withholding tax on repatriating profit, and the participation exemption, in plain terms for foreign companies.

The legal framework for corporate tax in Türkiye

Corporate tax in Türkiye is governed mainly by the Corporate Tax Law No. 5520 (Kurumlar Vergisi Kanunu, KVK). This is the statute that says which entities are taxed, whether on worldwide or only Turkish-source profit, how the profit is measured, and which items are exempt. It applies to capital companies (such as the joint-stock company, anonim şirket, and the limited liability company, limited şirket), cooperatives, and certain other bodies.

Several other statutes sit alongside it and you will meet them constantly. The Income Tax Law No. 193 (Gelir Vergisi Kanunu, GVK) supplies the withholding-tax machinery that applies, for example, when profit is paid out as a dividend. The Tax Procedure Law No. 213 (Vergi Usul Kanunu, VUK) governs registration, bookkeeping, declarations, assessment, penalties and time limits. Value Added Tax Law No. 3065 (Katma Değer Vergisi Kanunu) is a separate transaction tax on supplies — not the same thing as corporate tax, though both can apply to the same business. And if a tax dispute ever reaches the tax courts, procedure there runs under the Administrative Procedure Law No. 2577 (İdari Yargılama Usulü Kanunu, İYUK).

Full taxpayer vs. limited taxpayer: how residence is decided

This single distinction controls the scope of what Türkiye may tax. Corporate Tax Law No. 5520 divides companies into full taxpayers (tam mükellef), taxed on worldwide profit wherever earned, and limited taxpayers (dar mükellef), taxed only on profit sourced in Türkiye.

Full taxpayers (tam mükellef)

A company is a full taxpayer if it is resident in Türkiye. Residence turns on two connecting factors under Law No. 5520:

• its legal seat (kanuni merkez) — the registered office named in its articles of association — is in Türkiye; or
• its place of effective management (iş merkezi) — where the business is actually run and central decisions are taken — is in Türkiye.

If either is in Türkiye, the company is a full taxpayer and its global profit is within Turkish corporate tax. A Turkish subsidiary of a foreign group is the classic full taxpayer: it is a Turkish company in its own right.

Limited taxpayers (dar mükellef)

A company whose seat and place of management are both abroad is a limited taxpayer. Türkiye then taxes only its Turkish-source income — for example, profit attributable to a branch operating in Türkiye, or certain payments arising in Türkiye such as royalties or service fees, which are frequently collected through withholding at source.

What is taxed, and at what rate

Corporate tax is a tax on net profit (kurum kazancı) — broadly, the company's commercial profit for the period, adjusted by the rules in Law No. 5520 and the Tax Procedure Law No. 213. You start from the accounting result, then add back items the law does not allow as deductions (non-deductible expenses) and subtract items the law exempts or treats specially.

Two practical points matter most for foreign-owned companies:

• Deductibility. Genuine, documented business expenses are generally deductible; certain payments are restricted or disallowed. Charges between related companies — for example, a management fee or interest paid to a parent abroad — are scrutinised under transfer-pricing rules in Law No. 5520, which require related-party dealings to be at arm's length, and under thin-capitalisation rules that limit deductions on excessive related-party debt.
• Exempt income. Some receipts are taken out of the base entirely, the most important being qualifying dividends under the participation exemption (covered below).

For a full taxpayer the base is worldwide profit; for a limited taxpayer it is only the Turkish-source slice.

The rate

Corporate tax is charged on net profit at a single headline rate set by Law No. 5520, with a higher rate for certain financial-sector companies (such as banks and some other financial institutions). Because corporate tax rates are revised from time to time — and have moved more than once in recent years — this guide deliberately does not state a percentage as settled fact. Confirm the current rate, and whether any sector-specific or incentivised rate applies to your business, for the relevant year before you budget or file. The tax year is normally the calendar year, though a company can apply for a special accounting period, and the rate applies to adjusted profit, not turnover.

Branch vs. subsidiary: two different tax footprints

Most foreign companies entering Türkiye choose between two forms, and the corporate-tax consequences differ.

The subsidiary (a Turkish company)

A subsidiary is a separate Turkish company — usually an anonim şirket or limited şirket — owned by the foreign parent. Because its seat is in Türkiye, it is a full taxpayer on its worldwide profit. It is legally distinct from the parent, which generally limits the parent's exposure to the subsidiary's liabilities, and it files and is taxed in its own name under Law No. 5520. When it later pays its after-tax profit up to the foreign parent as a dividend, that distribution can attract dividend withholding tax (see below).

The branch (an extension of the foreign company)

A branch (şube) is not a separate company; it is the foreign company itself operating in Türkiye. The foreign company is therefore a limited taxpayer, and Türkiye taxes only the profit attributable to the branch — the Turkish-source result — not the foreign head office's global profit. After corporate tax, remitting the branch's profit to the head office abroad is generally treated similarly to a dividend for withholding purposes.

Advance (provisional) corporate tax during the year

Türkiye does not wait until year-end to collect corporate tax. Companies pay advance, or provisional, corporate tax (geçici vergi) in instalments through the year, based on the profit of successive periods, under Law No. 5520. Each instalment is a payment on account.

The key features to plan around:

• Advance tax is calculated on the profit of defined periods within the year and declared and paid on a recurring cycle.
• It is applied at the advance-tax rate set in law for the year.
• The advance tax you have paid is credited against your final annual corporate tax. If you have overpaid, the excess is refunded or offset against other tax debts.

The annual corporate tax return is then filed after year-end, with the final tax due after credit for the advance instalments already paid. Because both the number and timing of instalments and the filing date are set by law and adjusted from time to time, treat the specific dates as items to confirm each year rather than fixed points.

Repatriating profit: dividend withholding tax

Earning profit in a Turkish company is only half the story for a foreign investor; getting it home is the other half. When a Turkish company distributes profit as a dividend to its shareholders — or when a branch remits its profit to the foreign head office — Türkiye generally applies a dividend withholding tax (kâr payı stopajı) at the point of distribution, under the Income Tax Law No. 193 together with Law No. 5520.

How this works in outline:

• The withholding is taken at source by the distributing company when the dividend is paid, so the foreign shareholder receives the net amount.
• It is a separate layer from the corporate tax already paid on the underlying profit — first the company is taxed on its profit, then a further withholding applies on distribution.
• For a branch, remitting the after-tax branch profit abroad is generally treated comparably to a dividend for withholding purposes.

The withholding rate is set by law and is frequently reduced by a double-taxation treaty between Türkiye and the shareholder's country of residence. Many treaties cap the dividend rate, sometimes at a lower figure for substantial corporate shareholdings. Claiming the treaty rate usually requires a certificate of tax residency from the shareholder's country and the right paperwork at the time of distribution.

Key exemptions: the participation exemption

Türkiye, like most systems, tries to avoid taxing the same corporate profit again and again as it moves up a group. The main tool is the participation exemption (iştirak kazançları istisnası) in Law No. 5520, which can take certain dividends a resident company receives from another company out of the corporate tax base.

In broad terms, the exemption is designed so that when one Turkish company holds shares in another and receives a dividend from it, that dividend is not taxed again in the recipient's hands — the profit was already taxed at the level of the company that earned it. There is also a related exemption that can apply to certain dividends and gains from foreign participations, subject to its own conditions (such as minimum shareholding, holding period and the foreign company having borne a comparable tax burden).

The detail matters. Each of these exemptions has technical conditions — on the type of holding, how long it is held, and the nature of the income — and they do not apply automatically to every intra-group payment. There are also exemptions outside dividends, for example a partial exemption for gains on the sale of qualifying participations or real estate held for a set period, again subject to conditions.

How Lexin Legal helps foreign companies with Turkish corporate tax

Corporate tax in Türkiye is rarely just a rate applied to a number. It turns on residence, on whether you operate through a subsidiary or a branch, on how related-party dealings are priced, on the advance-tax cycle, and on the withholding and treaty rules that decide how much profit actually reaches you abroad. Getting the structure right at the start is far cheaper than unwinding it later.

We help foreign companies choose between a subsidiary and a branch and set the vehicle up, determine full- or limited-taxpayer status, plan the corporate-tax and advance-tax position, structure profit repatriation and apply the right treaty withholding rate, assess whether the participation exemption is available, and handle declarations and any dispute with the tax authorities under İYUK No. 2577. Where related taxes interact — VAT under Law No. 3065, or personal income tax under Law No. 193 for individuals behind the company — we keep the whole picture in view.

If you are investing into or operating in Türkiye and want clarity on how your profit will be taxed and repatriated, contact Lexin Legal for advice tailored to your facts. You may also find our guide to income tax in Türkiye for individuals useful for the people behind the company.

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