New Taxation Rules were introduced for Share Buybacks

Through the The Law No.7256 on Restructuring of Some Receivables and Amending Some Laws ("Law No. 7256"), published in the Official Gazette dated 17th November 2020 and No. 31307, withholding tax application was introduced for share buyback transactions to be conducted by full liable corporate taxpayers on the below mentioned 3 conditions. 

Accordingly, withholding tax at the rate of 15% is envisaged for the below mentioned conditions: 

• If the acquired shares were redeemed via capital decrease, withholding tax will be applied over the difference between the purchase price and the nominal value of the shares (to be withheld on the registration date of the capital decrease) 
• If the acquires shares are disposed with a value lower than the purchase price, withholding tax will be applied over the difference between the acquisition and disposal price (to be withheld on the disposal date) 
• If the acquired shares are not disposed within two years starting from the date of purchase or not redeemed by decreasing the capital, withholding tax will be applied over the difference between the purchase price and the nominal value of the shares (to be withheld on the termination date of the 2 years period) 

Additionally, the President of the Republic is granted authorization to reduce the withholding rate to zero or to increase it up to one fold, individually or together, depending on whether (a) the company’s shares are traded in Borsa Istanbul, (b) the ratio of the traded shares in the total shares, (c) the repurchases shares are among the shares traded in Borsa Istanbul, (d) whether they are repurchased from the fully liable companies and the total amount of the annual sales revenue and other income of the fully liable capital company. 

• You may find the full text of the Law no. 7256 here.