With the Presidential Decision No. 11257 dated 29.04.2026, published in the Official Gazette dated 30.04.2026 and numbered 33239, certain amendments have been made to the exemption/deduction rates applicable to foreign participation income and income derived from certain services provided abroad.
The relevant amendments entered into force to apply to income and earnings of taxation periods starting from 1 January 2026.
The main changes are summarized below.
1. Dividend exemption for real persons from foreign companies
Under Article 22 of the Income Tax Law, 50% of dividends obtained from institutions in the nature of joint stock or limited liability companies whose legal and business headquarters are not located in Türkiye may be exempt from income tax, provided that certain conditions are met.
With the amendment, the minimum shareholding ratio required to benefit from this exemption has been reduced from 50% to 20%.
Accordingly, provided that real persons hold at least 20% of the paid-in capital of foreign institutions in the nature of joint stock or limited liability companies, and transfer the dividends obtained to Türkiye by the due date for filing the annual income tax return for the relevant calendar year, 50% of such dividends may be exempt from income tax.
Summary:
Previous shareholding ratio: 50%
New shareholding ratio: 20%
Exemption rate: 50% of the dividend
Main condition: Transfer of the dividend to Türkiye
2. Foreign participation income exemption for corporate taxpayers
Under Article 5 of the Corporate Tax Law, participation income derived by corporate taxpayers from foreign institutions in the nature of joint stock or limited liability companies whose legal and business headquarters are not located in Türkiye may be exempt from corporate tax, provided that certain conditions are met.
With the amendment, for the special exemption that may be applied without seeking the other standard conditions for foreign participation income exemption:
- The minimum shareholding ratio has been reduced from 50% to 20%, and
- The exemption rate has been increased from 50% to 80%.
Accordingly, provided that corporate taxpayers hold at least 20% of the paid-in capital of their foreign participations in the nature of joint stock or limited liability companies, and transfer the participation income to Türkiye by the due date for filing the corporate tax return for the relevant accounting period, an 80% participation income exemption may be applied to such income.
The Circular also states that the participation income exemption will apply even if the participation is not subject to tax in the country where it operates.
Summary:
Previous shareholding ratio: 50%
New shareholding ratio: 20%
Previous exemption rate: 50%
New exemption rate: 80%
Main condition: Transfer of the participation income to Türkiye
3. Deduction rate for service export income increased to 100%
Under Article 89/13 of the Income Tax Law and Article 10/1-ğ of the Corporate Tax Law, income derived from certain services provided in Türkiye and exclusively utilized abroad may be deducted in the income or corporate tax return, provided that certain conditions are met.
The relevant services mainly include architecture, engineering, design, software, medical reporting, accounting record keeping, call center, product testing, certification, data storage, data processing, data analysis, certain professional education services, and education and health services meeting the relevant conditions.
With the amendment, the deduction rate applicable to such income has been increased from 80% to 100%.
In order to benefit from this deduction:
- The service must be provided to persons who are not resident in Türkiye or to persons/entities whose workplace, legal headquarters and business headquarters are located abroad,
- The service must be exclusively utilized abroad,
- The invoice or similar document must be issued in the name of the customer abroad, and
- The entire income must be transferred to Türkiye by the due date for filing the relevant income or corporate tax return.
Summary:
Previous deduction rate: 80%
New deduction rate: 100%
Scope: Income tax and corporate tax taxpayers
Main conditions: The service must be utilized abroad, the invoice must be issued in the name of the customer abroad, and the entire income must be transferred to Türkiye
Conclusion
The amendments introduced by Presidential Decision No. 11257 are generally favorable for taxpayers in terms of foreign participation income and service export income.
In summary:
- For real persons, the shareholding ratio required for the dividend exemption on foreign company dividends has been reduced from 50% to 20%.
- For corporate taxpayers, the shareholding ratio required for the foreign participation income exemption has been reduced from 50% to 20%, and the exemption rate has been increased from 50% to 80%.
- For income tax and corporate tax taxpayers, the deduction rate applicable to service export income has been increased from 80% to 100%.
- All amendments entered into force to apply to income and earnings of taxation periods starting from 1 January 2026.
Submitted for your information.
