Presidential Decree No. 4936 (“Decree“), published in the Official Gazette dated 22 December 2021, decreased the withholding tax rate applied, under Income Tax Law No. 193 and Corporate Income Tax Law No. 5520, to dividend distributions from 15% to 10%.
What does the Decree mean?
According to the Decree, withholding tax at the rate of 10% applies on the following:
- Dividends distributed by the full taxpayers to the nonresident real persons, nonresident taxpayers who are exempt from income or corporate tax, nonresident entities except those receiving dividends through a permanent establishment or a permanent representative in Turkey
- Dividends distributed by the full taxpayers to full taxpayer real persons, to those who are not an income or corporate taxpayer, or who are exempt from the income tax
- Dividends distributed to entities that are exempt from tax (excluding the income subject to the withholding tax under Paragraph 3 of Article 15 of the Corporate Income Tax Law)
Before the Decree, the withholding tax that applied to the above was 15%.
The Decree also decreases the withholding rate from 15% to 10%, which is applied on the amount that the nonresident taxpayers, filing annual or special returns, repatriate to their headquarters after deducting the calculated corporate tax from the business profits before the application of the deductions and exemptions.
The Decree entered into force when it was published on 22 December 2021.
The dividend amounts have been changing rapidly as a result of the vast fluctuations in exchange rates. Decreasing the dividend withholding tax rate from 15% to 10% aims to provide convenience and benefits to taxpayers.