An Increase Has Been Introduced to the Withholding Tax Rate Applied to Dividend Distribution and the Withholding Tax Rate for E-commerce Has Been Determined

Through Presidential Decrees No. 9286 and 9284, published in the Official Gazette on December 22, 2024, and No. 32760, (i) an increase in the withholding tax rate applied to dividend distribution has been introduced, and (ii) the withholding tax rate for those selling goods and services through e-commerce has been determined.

Increase in the Withholding Tax Rate for Dividend Distribution:

Through Presidential Decree No. 9286, the withholding tax rate applied to dividend distributions conducted by fully liable corporate taxpayers within the scope of Article 94 of the Income Tax Code No. 193 (“ITC”) and the Corporate Tax Code No. 5520 (“CTC”) has been increased from 10% to 15% to the following:

• To fully liable individuals,
• To those who are not taxpayers under the Income Tax and Corporate Tax laws and those exempt from these taxes,
• To non-resident corporations, except those earning dividends through a permanent establishment or a permanent representative in Turkiye,
• To non-resident individuals,
• To non-resident entities exempt from Income and Corporate Taxes.

The Decree entered into force as of December 22, 2024. Thus, the increased withholding tax rate will be applied to dividend distributions as of the mentioned date. The time at which the withholding tax obligation arises is determined according to the provisions of the Turkish Commercial Code No. 6102, as follows: (i) for joint-stock and limited liability companies, the date determined by the general assembly; or (ii) if no date is set by the general assembly, according to the date of the relevant general assembly decisions; or (iii) if the general assembly/board of partners has granted authority to the board of directors/managers to determine the date for the distribution of profits, the date set for the distribution of profits by this authority.

Under this regulation, whether an additional financial burden will effectively arise for individual shareholders/investors regarding dividend recipients should be evaluated based on the relevant individual’s annual declaration status. Moreover, in any case, monitoring the dividend policies of companies (especially for publicly held companies) will be necessary.

Withholding Tax Rate for Payments Realized through E-Commerce Platforms:

Through the regulation introduced by Law No. 7524, intermediary service providers and electronic commerce intermediary service providers have been liable to withhold tax on their payments to service providers and electronic commerce service providers due to their activities within the scope of Law No. 6563.

With the Presidential Decree No. 9284, the referred withholding tax rate is determined as 1%. The decision will be effective on January 1, 2025.

The essence of the mentioned regulation targets electronic commerce conducted through e-commerce platforms. Considering the offsetting opportunity granted later, it can be said that the withholding tax is envisaged as a tax security mechanism and provides an early collection opportunity for the administration. However, whether an effective tax burden arises on the seller depends on the seller’s tax position (whether they are in profit or loss) and should be evaluated accordingly.

You may find the full texts of the relevant Presidential Decrees here and here.