As of October 2026, a Turkish company can transfer its profit to a shareholder in mainland China or Hong Kong freely through a bank, but first it must set aside the legal reserve, pass a shareholder resolution and withhold Turkish tax. The domestic withholding rate on dividends is 15%. The China–Türkiye treaty caps it at 10%, and the Hong Kong–Türkiye treaty caps it at 5% or 10% for dividends paid or credited on or after 1 January 2027.
Service fees, royalties and interest paid to a group company abroad follow their own rules: Turkish withholding (20% on professional service fees and royalties, 10% on most loans from a parent), treaty relief with a residence certificate, and, for services and royalties, VAT that the Turkish company pays itself under the reverse charge.
Rate tables are in our overview of Turkish taxes for foreign-owned companies and our article on the Hong Kong–Türkiye tax treaty; this article sets out the steps. It is general information, not tax or legal advice.
At a glance
| Payment by the Turkish company | Turkish domestic withholding | Mainland China treaty | Hong Kong treaty (paid from 1 January 2027) | Reverse-charge VAT |
|---|---|---|---|---|
| Dividends | 15% | Up to 10% | Up to 5% (company holding at least 25% directly for 365 days) or 10% | Not applicable |
| Professional service fees | 20% | Usually none for work done outside Türkiye | Usually none for work done outside Türkiye | Yes |
| Royalties | 20% | Up to 10% | Up to 7.5% (equipment) or 10% | Yes |
| Interest on a loan from a group company | 10% | Up to 10% | Up to 7.5% (financial institution, term over two years) or 10% | Check each loan |
Treaty limits apply only if the recipient’s residence certificate has been given to the Turkish company; otherwise the domestic rate applies.
Can profits be sent from Türkiye to China or Hong Kong freely?
Yes. Article 3(c) of the Foreign Direct Investment Law No. 4875 lets foreign investors transfer net profit, dividends, proceeds of a sale or liquidation, amounts paid under licence, management and similar agreements, and foreign loan principal and interest abroad freely through banks or special finance institutions.
Ask your bank in advance which documents it wants for the transfer.
How do you pay a dividend from a Turkish company, step by step?
1. Close the year. Annual profit is determined from the annual balance sheet, and a dividend can be paid only out of the net profit for the period and free reserves (Turkish Commercial Code, Articles 508 and 509); in a limited company, out of net profit and reserves set aside for that purpose (Article 608).
2. Set aside the legal reserve. 5% of the annual profit goes to the general legal reserve until the reserve reaches 20% of paid-in capital (Article 519(1)). After shareholders have received a first dividend of 5%, 10% of any further distribution is also added (Article 519(2)(c)). No dividend can be fixed until the reserves required by law and the articles of association are set aside (Articles 523(1) and 608(1)); limited companies follow the same reserve rules (Article 610).
3. Pass the shareholder resolution. The general assembly decides on the use of profit and on dividends (Article 408(2)(d) for a joint-stock company, Article 616(1)(e) for a limited company). The ordinary meeting is held within three months of the end of the financial year (Articles 409(1) and 617(1)), so by 31 March for a calendar-year company. A sole shareholder of a joint-stock company decides in writing (Article 408(3)); in a limited company, all partners can approve a written proposal unless one asks for an oral discussion (Article 617(4)). Advance dividends are governed by a Ministry of Trade communiqué (Article 509(3)).
4. Collect the residence certificate. To apply a treaty rate, the Turkish company needs the original residence certificate issued by the shareholder’s tax authority, with a Turkish translation certified by a notary or a Turkish consulate. The company keeps it on file. Without it, domestic law applies instead of the treaty (Revenue Administration, Double Taxation Agreements Circular No. 3, 20 December 2013).
- Mainland China: the China Tax Resident Certificate (中国税收居民身份证明). Since 1 April 2025 it is issued under State Taxation Administration Announcement No. 4 of 2025, which replaced Announcement No. 40 of 2016. A company applies to its tax authority for any calendar year in which it is a Chinese tax resident; where the authority can decide residence itself, it issues the certificate or a written refusal within 7 working days.
- Hong Kong: the Certificate of Resident Status issued by the Inland Revenue Department; a company applies on form IR1313B. The IRD aims to reply within 21 working days of a complete application; it issues certificates only once an agreement has become effective, and says the treaty partner decides whether relief is granted.
5. Withhold and file. The company withholds 15%, or the lower treaty rate, and reports it on the monthly withholding and social security return (Muhtasar ve Prim Hizmet Beyannamesi), due by the 26th of the following month with payment in the same period (Corporate Tax Law, Articles 30(3) and 31; Revenue Administration deadlines, January 2026). Any booking that shows the company owing the amount to the shareholder counts as payment (Article 30(10)), so the withholding month can come before the money leaves.
6. Transfer the net amount through the bank. For a dividend of TRY 1,000,000 to a mainland Chinese parent, the withholding is TRY 150,000 at the domestic rate, or TRY 100,000 at the treaty rate with the certificate on file.
Dividends to a Hong Kong parent: pay in 2026 or 2027?
The Hong Kong treaty entered into force on 30 January 2026. In Türkiye it applies to taxes withheld at source on amounts paid or credited on or after 1 January 2027 (Article 28(2)(b)(i)). So:
- A dividend paid or credited in 2026, including an advance dividend, bears 15% Turkish withholding.
- A calendar-year company approves its 2026 accounts by 31 March 2027, so a dividend out of 2026 profit is normally paid or credited in 2027 and can use the treaty limits if the conditions are met.
- The 5% cap requires the beneficial owner to be a company (not a partnership) holding at least 25% of the Turkish company’s capital directly throughout a 365-day period that includes the payment date (Article 10(2)(a)). Other Hong Kong residents are capped at 10%.
- The treaty’s Protocol records that Hong Kong does not tax these dividends. If Hong Kong starts to tax them, the caps rise from 5% to 10% and from 10% to 15%.
- Article 27 denies a treaty benefit where it is reasonable to conclude that obtaining it was one of the principal purposes of an arrangement, unless granting it is in line with the treaty’s object and purpose. A Hong Kong company inserted only to reach 5% risks being refused the benefit.
Dividends to a mainland Chinese parent
Türkiye and China have a tax treaty (Official Gazette 30 December 1996, No. 22863). Under Article 10(2), Turkish tax on dividends paid to a Chinese resident that is the beneficial owner may not exceed 10% of the gross dividend. Interest (Article 11) and royalties (Article 12) are capped at 10% on the same condition.
Service fees, royalties and interest: Turkish withholding
When a Turkish company pays a company abroad that has no permanent establishment in Türkiye, it withholds corporate tax on the income listed in Article 30 of the Corporate Tax Law. The rates published by the Revenue Administration under Decision 2009/14593 (accessed 24 October 2026) include:
- Professional service fees (serbest meslek kazançları): 20%.
- Royalties: 20%, both for licensing patents, trademarks, know-how and similar rights (Article 30(1)(c), with Income Tax Law Article 70) and for selling or transferring such rights (Article 30(2)).
- Interest: 0% on loans from foreign states, international institutions, foreign banks and other lenders authorised in their country to lend to the public, not only to related companies; 10% on other loans, such as one from your Chinese or Hong Kong parent.
If the Turkish company bears the tax itself, the withholding is calculated on the amount paid plus the tax borne (Article 30(11)).
Business income, apart from multi-year construction work, is not on the Article 30 list, so a fee that counts as business income of a foreign company with no workplace or permanent representative in Türkiye bears no withholding. Which category a fee falls into depends on the facts.
Treaty relief:
- Service fees. Under both treaties, a company’s business profits are taxed only where it is resident unless it has a permanent establishment in the other place (Article 7). The China treaty also covers professional services by any resident: Türkiye may tax them only if they are performed in Türkiye and the provider has a fixed base there or stays more than 183 days in the calendar year (Article 14). In a 2020 ruling on a CE-marking service that a Chinese company provided without coming to Türkiye, the Revenue Administration treated the fee as business income: no withholding under domestic law, and only China could tax it under the treaty. The ruling answered one company’s facts.
- Staff working in Türkiye. Services through employees on the same or connected projects create a permanent establishment under the China treaty if they last more than 12 months in total (Article 5(3)), and under the Hong Kong treaty if they last more than 183 days in any 12-month period (Article 5(3)(b)).
Reverse-charge VAT on services from abroad (VAT return No. 2)
A service counts as performed in Türkiye if it is performed or used there (VAT Law, Article 6(b)). Where the provider has no residence, workplace, legal seat or place of business in Türkiye, the Turkish customer declares and pays the whole VAT as the responsible party (Article 9(1); VAT General Implementation Communiqué, section I/C-2.1.2.1). A Revenue Administration ruling of 12 January 2023 applied this to a trademark bought from a French company. The general VAT rate is 20% (Decision 7346).
The tax goes on VAT return No. 2 (KDV 2), filed and paid by the 25th of the following month (Revenue Administration deadlines, January 2026). Since January 2024 it is deductible on the regular VAT return (KDV 1) for the period in which it was paid; that is the same month if the KDV 2 was filed and paid on time before the KDV 1 (Communiqué, section III/C-1.1).
Why the price of group payments matters
If a Turkish company pays a related company more than an arm’s-length price for services, licences or loans, the excess is profit distributed in disguise: it is not deductible and counts as a dividend as of the last day of the period (Corporate Tax Law, Articles 11(1)(c), 13(1) and 13(6)).
Borrowings from shareholders or related persons that at any time in the period exceed three times the company’s equity at the start of the period count as disguised capital; interest on the excess is not deductible and is treated as a dividend (Articles 11(1)(b), 12(1), 12(3)(b) and 12(7)).
What this means for you
- Withholding returns. Both annual packages include the monthly withholding return: Basic (USD 3,750 per year) for existing companies, Professional (USD 4,950 per year, plus government fees) for new investors. Before we apply a treaty rate, we check the residence certificate and the conditions with you. See bookkeeping and tax filing.
- Changing the holding chain. If a new holding company or a share transfer changes the beneficial owners already reported in Türkiye (the individuals behind the chain, a different test from the treaty’s), a new notification is due within one month. See our beneficial ownership filing (USD 1,250 per notification).
- Large groups. Groups in scope of country-by-country reporting or the global minimum tax can use our CbCR notification and global minimum tax notification services (USD 750 each). Transfer pricing documentation is priced separately.
Prices exclude VAT: no VAT is charged to clients invoiced outside Türkiye; 20% VAT is added for companies in Türkiye. See pricing or contact us.
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