Will No Tax Arise If I Do Not Bring My Overseas Company's Profits to Turkey?
Overseas Companies and Compliance
Overseas Companies and Compliance
Prepared by: Constantinople
No. Not transferring the money to Turkey does not by itself provide a tax exemption. Where the statutory conditions are met together, controlled foreign company provisions may require undistributed foreign company income to be taken into account in Turkey. The first questions are who controls the company, the nature of its income and the taxes applied, rather than simply where it was incorporated.
Article 7 of Law No. 5520 sets conditions concerning control, passive income, tax burden and gross revenue. Incorporating a company abroad does not alone mean that all these conditions are met. Conversely, giving a commercial name to a structure receiving bank interest or rental income does not remove the need for review.
Subsequent profit distribution, credit for foreign tax paid and double taxation treaties are addressed separately. The existence of a treaty does not mean the same withholding rate applies to every payment. Payments made from Turkey must also be distinguished from dividends received from abroad; taxation raises different questions in those two situations.
Prepare the ownership chart, income breakdown and foreign tax records together. Undistributed income, later distributions and tax credit conditions are examined separately for the relevant year.
File review is a paid service. The scope and fee are set out in writing before work begins.
Does the fifteen per cent Turkish withholding tax apply in the same way to foreign company profits?
The fifteen per cent withholding applied when a Turkish resident company distributes profits to certain recipients is different from a dividend received by a shareholder in Turkey from a foreign company. Foreign withholding, Turkish reporting and exemption or tax credit conditions are examined separately. An automatic additional five-percentage-point cost cannot be calculated for every payment from a country without a treaty.
Nor does a treaty with Malta or Singapore create a mandatory holding company route equally advantageous for every company. Residence, beneficial ownership of the income, participation percentage, payment type and the relevant treaty provision are checked. The treaty's name alone is not a promise of a ten per cent or lower rate.
Does genuine business activity alone conclude the CFC review?
No. A controlled foreign company review assesses the control percentage, proportion of passive income, foreign tax burden and revenue conditions together. This regime should not be presented as a risk arising only in a newly starting year. An interest- and rent-earning structure's decision not to bring profits to Turkey, or to add the word ‘trading’ to its name, does not alone change the result.
Genuine activity and an appropriate organisation are important but do not automatically exclude every structure. Records must establish how the undistributed income calculation, later distributions, foreign tax credits and shareholder-level consequences affect one another.
What should be checked concerning the country list, thirty per cent withholding and a private ruling?
KVK 30/7 contains a framework for thirty per cent withholding on payments connected with countries designated by the President. The applicable decision, nature of the payment, statutory exceptions and powers to set different rates must be checked together for the particular transaction. It cannot be said that particular countries will necessarily be listed or that this has a ninety per cent probability.
If relocation of the company's registered office to another country is planned, legal continuity, agreements, bank acceptance, effective management and tax consequences are examined separately. Relocation does not automatically erase past records or obligations. For an uncertain tax issue, requesting a private ruling from the administration under VUK Art. 413 may be considered; this is not mandatory prior permission for every transaction.
For details, see official sources: Revenue Administration — 2026 Guide to Income from Movable Capital · Revenue Administration — Corporate Tax Law · Revenue Administration — Tax Procedure Law Art. 413