Company Formation Abroad for Turkish Companies and Investors

It depends on whether the shareholder is a corporation or an individual.

• Corporate investor: Income that a corporation in Türkiye derives from participating in the capital of a foreign entity that has neither its registered office nor its place of business management in Türkiye and is in the nature of a joint stock or limited liability company is exempt, provided that at least 10 per cent of the paid-in capital of the foreign subsidiary is held, the shareholding is held continuously for at least one year as of the date the income is derived, the income bears a total tax burden similar to income and corporate tax of at least 15 per cent in the subsidiary’s country, and the income is transferred to Türkiye by the filing deadline of the corporate tax return for the relevant period. If the principal activity of the subsidiary is the provision of finance, including financial leasing, insurance services or investment in securities, the tax burden must be at least the corporate tax rate in Türkiye. (Law No. 5520, Art. 5/1-b)
• Partial exemption: Where the minimum shareholding ratio in the paid-in capital of the foreign subsidiary is held and the income is transferred to Türkiye by the filing deadline of the corporate tax return for the relevant period, part of the income is exempt without the other conditions of the subparagraph being required. For tax periods beginning on or after 1.1.2026, the minimum shareholding ratio is 20 per cent and the exemption rate is 80 per cent (Presidential Decision No. 11257). For periods beginning earlier, the statutory rates of 50 per cent shareholding and 50 per cent exemption apply. (Law No. 5520, Art. 5/1-b)
• Individual investor: Half of the dividends that individuals who are full taxpayers in Türkiye derive from entities that have neither their registered office nor their place of business management in Türkiye and are in the nature of a joint stock or limited liability company is exempt from income tax, provided that the minimum shareholding ratio in the paid-in capital of these entities is held and the dividend is transferred to Türkiye by the filing deadline of the annual income tax return for the year in which it is derived. The minimum shareholding ratio is 20 per cent for dividends derived in 2026 and later years (Presidential Decision No. 11257) and the statutory 50 per cent for earlier years. (Law No. 193, Art. 22/4) The exemption and credit rules in the Corporate Tax Law do not apply to individuals.

Yes. Within three months following the first export of cash or in-kind capital, the investor submits the information form on the Ministry of Trade website to the Ministry of Treasury and Finance and the Ministry of Trade; the form is updated every year. (Communiqué No. 2008-32/34 on Decree No. 32, Art. 10) The separate notification made by banks and customs authorities does not replace this obligation. (Decree No. 32, Art. 13)

The income of a foreign subsidiary that individuals and corporations who are full taxpayers in Türkiye control, directly or indirectly, individually or jointly, by holding at least 50 per cent of its capital, dividends or voting rights is subject to corporate tax in Türkiye, whether or not it is distributed, if the following conditions are all met: at least 25 per cent of the total gross revenue of the subsidiary consists of passive income such as interest, dividends, rent, licence fees and income from the sale of securities; the subsidiary bears a total tax burden similar to income and corporate tax of less than 10 per cent on its commercial balance sheet profit; and the total annual gross revenue of the subsidiary exceeds the foreign currency equivalent of TRY 100,000. In that case, the income of the subsidiary is included in the corporate tax base of the fully liable corporation in Türkiye in proportion to its shareholding. (Law No. 5520, Art. 7)

Corporate tax and similar taxes paid locally on income earned in foreign countries and transferred to the general results accounts in Türkiye may be deducted from the corporate tax calculated on that income in Türkiye. The amount deducted may not exceed the amount found by applying the Turkish corporate tax rate to the foreign income. Payment of tax in the foreign country must be evidenced by documents obtained from the competent authorities and certified by the Turkish embassy or consulate there. (Law No. 5520, Art. 33/1, 4, 6)

For dividends received from a foreign subsidiary, where at least 25 per cent of the capital or voting rights of the subsidiary is held directly or indirectly, the portion attributable to the dividend of the taxes paid in the country of the subsidiary on the income from which the dividend is distributed may also be credited. (Law No. 5520, Art. 33/3) These rules apply to corporate taxpayers and are not generalised to individuals.

A company has separate legal personality, whereas a branch is part of the company in Türkiye. The taxation of income in Türkiye and the exemption conditions differ between the two structures. The choice is made according to the nature of the activity, the legislation of the country and the tax consequences.

Local formation procedures in each country are carried out by that country’s authorised advisers; KEYBIZ CPAs & Advisors follows up the resolution, notification, accounting and tax procedures on the Turkish side. As the process and documents vary by country, each request is assessed separately.

If there is an agreement between Türkiye and the country concerned, the provisions of the agreement determine in which country and at what rate dividends, interest and permanent establishment profits are taxed. The agreement, Turkish domestic legislation and the legislation of the country concerned are examined together. Country-specific formation conditions and tax consequences are assessed after checking the official sources of the country concerned.