2026 Turkey Tax Update introduces lower ownership thresholds and higher deduction rates for foreign dividends, service exports, and cross-border corporate participation income.

Foreign investors and corporate decision-makers reading the official Gazette of 30 April 2026 encountered a familiar legal-policy question: is a four-paragraph Presidential Decree a technical adjustment, or is it the structural lever that quietly determines where capital is parked for the next decade? Presidential Decree No. 11257, issued under Article 22 and Article 89 of Income Tax Law No. 193 and Article 5 and Article 10 of Corporate Tax Law No. 5520, is short in length and consequential in effect. It lowers the foreign participation threshold from 50 percent to 20 percent and raises the service export deduction rate from 80 percent to 100 percent.

The deeper logic of the decree resists easy reduction. The fastest way for Turkey to attract repatriated capital was to make staying offshore less profitable, and the most direct way to expand service exports was not to subsidize them but to stop taxing them. The decree closes the gap between the 24 April 2026 announcement at the Dolmabahçe Working Office, where President Erdoğan outlined a broader tax reform package, and its first concrete instrument in force. As of 2026, this is the legal text foreign investors and Turkish corporates with foreign holdings must read first, not the press release that preceded it.

The decree itself is procedurally simple and substantively focused. Four provisions are amended across two foundational tax laws. Each amendment lowers a barrier or raises a benefit, and each takes effect for taxation periods beginning on or after 1 January 2026. The remainder of this guide sets out what changed, why it changed at this point in the policy cycle, and how the changes interact with the broader 2026 tax reform package still moving through delegated decrees and statutory amendments.

⚖️ What Changed Under Presidential Decree No. 11257?

Presidential Decree No. 11257, published in the Official Gazette dated 30 April 2026 (issue 33239), restructures four specific provisions across two foundational tax laws. The changes apply to income and earnings derived from taxation periods beginning on or after 1 January 2026.

The four amendments are precise and self-contained:

Under Article 22, paragraph 4 of Income Tax Law No. 193, the minimum ownership threshold required for individuals to benefit from the foreign dividend exemption has been reduced from 50 percent to 20 percent. The exemption itself, applicable to half of the dividend received from foreign joint-stock and limited-liability companies under specified conditions, remains unchanged in scope.

Under Article 89, paragraph 1, item 13 of the same Law, the deduction rate applicable to income derived by individuals from services rendered to non-residents and consumed abroad has been increased from 80 percent to 100 percent. Eligible services include architecture, engineering, design, software development, medical reporting, accounting, call center operations, product testing, certification, data storage, data processing, data analysis, education, and healthcare.

Under Article 5, paragraph 1, item (b) of Corporate Tax Law No. 5520, the simplified gateway to the foreign participation income exemption has been restructured. Where a Turkish corporation holds at least 20 percent of the paid-in capital of a foreign joint-stock or limited-liability company (down from 50 percent), and where the dividend is transferred to Turkey by the corporate tax return filing deadline, the exemption applies to 80 percent of the participation income (up from 50 percent). The other conditions of Article 5/1-(b), including the minimum holding period and the foreign tax burden test, are not required when this simplified gateway is used.

Under Article 10, paragraph 1, item (ğ) of the same Law, the deduction rate applicable to corporate income from services rendered to non-residents and consumed abroad has been increased from 80 percent to 100 percent, mirroring the individual-side amendment in Income Tax Law Article 89.

The decree was issued under the authority granted by the relevant articles of each law and is administered by the Minister of Treasury and Finance.

⚖️ Why Were These Tax Rates Restructured in April 2026?

The restructuring did not arrive in isolation. On 24 April 2026, President Erdoğan announced a comprehensive tax reform package at the Türkiye Century Strong Center for Investment Program at the Dolmabahçe Working Office in Istanbul. The package set out a broad policy direction covering a 20-year exemption on foreign-sourced income for returning residents, a 1 percent inheritance tax provision, asset repatriation incentives, expanded Istanbul Finance Center benefits, regional management center incentives for multinationals, and a Single Window structure for investor coordination.

Presidential Decree No. 11257 is the first concrete legal instrument to enter force from that announcement. It addresses the corporate and individual provisions that could be implemented through delegated decree authority, without requiring full parliamentary legislation. The remaining components of the April package are expected to follow through additional decrees and statutory amendments.

The policy logic operates on three axes.

The first axis is foreign exchange inflow. By lowering the ownership threshold for foreign dividend exemptions, the decree makes it materially easier for Turkish individuals and corporations holding minority stakes in foreign entities to repatriate dividends without losing the tax benefit. The 20 percent threshold opens the exemption to a much wider population of investors than the 50 percent threshold permitted.

The second axis is service export support. By raising the deduction rate from 80 percent to 100 percent for services rendered to non-residents and consumed abroad, the decree effectively eliminates Turkish income and corporate tax on a defined range of cross-border professional services, including software, engineering, healthcare, and education. The list of eligible services is set out in the underlying legislation and tracks the global pattern of tradable services.

The third axis is competitive positioning. The 20 percent ownership threshold places Turkey closer to the participation exemption thresholds applied in several European jurisdictions, where 10 to 25 percent ownership is typical for similar regimes. Turkey is signaling, through this decree, that it wishes to be evaluated by international investors against those benchmarks.

This is precisely why foreign investors increasingly ask: which Turkish tax measures actually change the after-tax math of holding a minority stake in an offshore entity? Decree 11257 is one of the few measures in the past five years that does. The shift from a 50 percent ownership requirement to a 20 percent requirement is not a marginal adjustment. It is a category change.

⚖️ Foreign Dividends Under GVK Article 22: From 50 Percent to 20 Percent Ownership Threshold

Article 22, paragraph 4 of Income Tax Law No. 193 governs the treatment of dividends received by Turkish-resident individuals from foreign joint-stock and limited-liability companies. Under the existing framework, half of such dividends are exempt from individual income tax, provided the recipient holds the qualifying ownership stake and transfers the dividend to Turkey within the relevant tax return filing period.

Before Decree 11257, the qualifying ownership stake was set at 50 percent. This threshold excluded most minority foreign investors, including diaspora professionals, returning residents holding non-controlling stakes in foreign businesses, and Turkish nationals with passive investment positions in foreign companies. The exemption was, in practice, a tool for a narrow population of majority owners.

After Decree 11257, the threshold is 20 percent. The half-exemption itself remains unchanged. What has changed is the population of investors who can actually access it.

The practical effect is that a Turkish-resident individual holding, for example, 25 percent of a German or U.S. limited-liability company can now exempt 50 percent of the dividend received from Turkish individual income tax, provided the dividend is transferred to Turkey by the relevant filing deadline. Under the previous regime, the same individual would have received no exemption at all.

The exemption requires careful documentation. Proof of ownership percentage at the time the dividend is declared, evidence of transfer to Turkey within the statutory period, and the legal nature of the foreign entity (it must be a joint-stock or limited-liability equivalent) all need to be substantiated. A poorly documented dividend is a fully taxable dividend, regardless of the underlying ownership percentage.

⚖️ Service Export Income Under GVK Article 89 and KVK Article 10: From 80 Percent to 100 Percent Deduction

The service export deduction is one of the longer-standing tax incentives in the Turkish system. It applies to income earned by Turkish residents and Turkish corporations from services rendered to non-resident persons and entities, where the services are consumed abroad. The intent is to support tradable services as an export category, comparable in policy logic to goods exports.

Under the framework that existed before Decree 11257, eligible service income could be deducted at a rate of 80 percent on the annual tax return. Twenty percent of the income remained subject to ordinary income or corporate tax. After Decree 11257, the deduction rate is 100 percent. The eligible income is, in effect, fully removed from the Turkish tax base.

The list of eligible services is set out in the underlying legislation and includes architecture, engineering, design, software development, medical reporting, accounting recordkeeping, call center operations, product testing, certification, data storage, data processing, data analysis, training and education, and healthcare services delivered remotely or to non-resident recipients.

Three structural conditions remain in place under both Article 89 of Income Tax Law and Article 10 of Corporate Tax Law:

The recipient of the service must be a non-resident person or an entity whose legal and operational headquarters are abroad. The service must be consumed abroad, not in Turkey. The income must be derived from one of the eligible service categories specified in the legislation. Income from services that fall outside these categories, even when rendered to non-residents, does not qualify for the deduction.

The 100 percent deduction operates through the annual tax return rather than through withholding adjustments at source. Service exporters continue to issue invoices in the ordinary manner. The benefit materializes at the year-end filing, when the deduction is applied to the relevant income line on the return.

For Turkish-resident professionals working remotely for foreign clients, particularly in software, engineering, and design, the change is significant. A freelance software developer earning the equivalent of $120,000 per year from non-resident clients, previously taxable on 20 percent of that income, now sees the entire income excluded from the Turkish income tax base, subject to the documentation and consumption-abroad conditions being met.

⚖️ Corporate Foreign Participation Income Under KVK Article 5/1-(b): The Effective 5 Percent Tax Rate

Article 5, paragraph 1, item (b) of Corporate Tax Law No. 5520 governs the foreign participation income exemption available to Turkish corporations. The provision has two distinct gateways, and Decree 11257 modifies the second.

The first gateway, the standard exemption, requires that the foreign subsidiary be a joint-stock or limited-liability equivalent, that the Turkish corporation hold at least 10 percent of its capital for at least one year, that the foreign entity bear a minimum 15 percent foreign tax burden, and that the dividend be transferred to Turkey by the relevant filing deadline. Where all conditions are met, the dividend is 100 percent exempt from Turkish corporate tax.

The second gateway, the simplified exemption, was introduced by Tax Law No. 7491 in late 2023. It removes the holding period and foreign tax burden tests and substitutes a single, more demanding ownership requirement. Decree 11257 restructures this second gateway. The qualifying ownership threshold is reduced from 50 percent to 20 percent, and the exemption rate is increased from 50 percent to 80 percent.

The effective tax math is the practical consequence of the change.

A Turkish corporation receiving 100 units of dividend from a foreign subsidiary in which it holds 20 percent ownership, transferring the dividend to Turkey by the filing deadline, applies the 80 percent exemption. Twenty units of the dividend remain subject to Turkish corporate tax at the standard rate of 25 percent (subject to sector-specific variations). The resulting effective corporate tax burden on the dividend is 5 percent. Under the previous framework, the same dividend would have been 50 percent exempt, leaving 50 units subject to 25 percent tax, for an effective burden of 12.5 percent.

The simplified gateway does not require a holding period test or a foreign tax burden test. It does require that the dividend be transferred to Turkey within the relevant filing window. Dividends not transferred within the window cannot benefit from the simplified gateway, even if transferred in subsequent years.

For Turkish corporations structuring outbound investments, particularly in jurisdictions where the local foreign tax burden is low or where the holding structure does not support a one-year minimum holding test, the simplified gateway is now substantially more accessible. The 20 percent threshold reaches a wider range of joint-venture structures, minority co-investments, and portfolio holdings than the prior 50 percent threshold permitted.

⚖️ Old Rates vs New Rates: Comparative Table

The decree’s four amendments restructure both ownership thresholds and exemption percentages. The table below sets out the change for each provision.

The thresholds and rates apply uniformly to taxation periods beginning on or after 1 January 2026, regardless of the calendar date on which the underlying transaction occurs within that period.

⚖️ Who Benefits From the 2026 Turkey Tax Update?

The decree addresses four distinct populations. Each interacts with the change differently.

Foreign investors holding minority stakes in offshore entities through Turkish residency structures are the first beneficiaries. Investors who previously failed the 50 percent ownership test, and therefore could not access the foreign dividend exemption at the individual level, now qualify at the 20 percent level. This shift is particularly relevant for diaspora investors holding professional or business stakes in companies in the United States, Germany, the United Kingdom, the Netherlands, and the Gulf states.

Returning residents who maintain investment positions in foreign companies during their initial years of relocation to Turkey are the second beneficiaries. The 20 percent threshold aligns with the typical ownership percentages held by mid-level executives, founding-team members, and partners in professional services firms. The combination of the 20-year foreign-sourced income exemption announced on 24 April 2026 with the dividend exemption restructured by Decree 11257 creates a coordinated framework for returning residents holding both salary income and equity income from abroad.

Turkish-resident professionals and freelancers exporting services to non-resident clients are the third beneficiaries. The increase in the service export deduction from 80 percent to 100 percent removes the residual 20 percent tax liability that previously applied. For software developers, designers, engineers, healthcare consultants, and educational service providers, the deduction now eliminates Turkish income tax on qualifying foreign-client revenue entirely.

Turkish corporations with outbound investments and foreign subsidiaries are the fourth beneficiaries. The shift from a 50 percent to a 20 percent simplified-gateway threshold opens the foreign participation exemption to joint-venture structures, minority equity positions, and portfolio holdings that previously required the more demanding standard-gateway tests. The 5 percent effective corporate tax burden on qualifying dividends is competitive with the participation exemption regimes of several European jurisdictions.

Sophisticated investors routinely ask: how does Turkey’s revised foreign participation regime compare to Cyprus, the Netherlands, or Luxembourg under similar holding structures? The answer depends on the specific structure, the underlying treaty network, and the substance requirements at each level. The decree has not made Turkey identical to those jurisdictions, but it has made the comparison material rather than ornamental.

⚖️ Effective Date and Compliance Implications

The decree applies to income and earnings derived from taxation periods beginning on or after 1 January 2026. For Turkish corporations and individuals operating on a calendar-year fiscal basis, this means the changes are effective for the entire 2026 tax year, including income earned before the decree itself was published on 30 April 2026.

For corporations operating on a special accounting period that begins on a date other than 1 January, the changes apply to the first taxation period commencing on or after 1 January 2026. A corporation with a fiscal year running from 1 July to 30 June, for example, applies the new framework to its 2026 to 2027 fiscal year.

Three compliance implications follow.

The first concerns dividend transfer timing. Both Article 22 of Income Tax Law and Article 5/1-(b) of Corporate Tax Law require the dividend to be transferred to Turkey by the filing deadline of the relevant tax return. For dividends declared by foreign subsidiaries during 2026 but not transferred within the corresponding return filing window, the exemption is lost and cannot be recovered in subsequent years.

The second concerns documentation of ownership and service consumption. The 20 percent ownership threshold requires documentary evidence of ownership at the time the dividend is declared. The 100 percent service export deduction requires documentary evidence that the recipient is non-resident and that the service is consumed abroad. Both documentary trails should be established at the time of the underlying transaction, not reconstructed at the year-end filing.

The third concerns the interaction with broader tax planning. The decree changes the after-tax math for outbound investments, foreign dividend repatriation, and cross-border service delivery. Existing structures designed under the prior framework, particularly those structured to satisfy the 50 percent ownership threshold or the 80 percent deduction rate, may now be either overbuilt or underbuilt for the new rules. A structural review is warranted in the first year of application.

Foreign investors evaluating the 2026 Turkey tax update alongside the broader package announced on 24 April 2026 will find the relevant cross-references in our parallel guide on the 20-year tax exemption for returning residents. For Turkish-resident readers seeking the same material in Turkish, the yurt dışından gelenlere 20 yıl vergi muafiyeti rehberi covers the corresponding ground. Where the change affects a broader corporate or investment structure, coordination with a Turkish investment lawyer in Istanbul is the appropriate next step.

The official text of Presidential Decree No. 11257 is published in the Official Gazette of the Republic of Türkiye dated 30 April 2026, issue 33239.

❓ Frequently Asked Questions

✅ What is the 2026 Turkey Tax Update?

The 2026 Turkey Tax Update is the package of changes introduced by Presidential Decree No. 11257, published in the Official Gazette on 30 April 2026. The decree restructures four provisions of Income Tax Law No. 193 and Corporate Tax Law No. 5520, lowering the foreign participation ownership threshold from 50 percent to 20 percent and raising the service export deduction rate from 80 percent to 100 percent. The changes apply to taxation periods beginning on or after 1 January 2026.

✅ Who can use the new 20 percent ownership threshold for foreign dividends?

Turkish-resident individuals holding at least 20 percent of the paid-in capital of a foreign joint-stock or limited-liability equivalent entity can apply the 50 percent dividend exemption under Article 22 of Income Tax Law, provided the dividend is transferred to Turkey within the relevant tax return filing window. The same threshold, with an 80 percent exemption rate, applies to Turkish corporations under the simplified gateway of Article 5/1-(b) of Corporate Tax Law.

✅ When does the 2026 Turkey Tax Update take effect?

The decree applies to income and earnings derived from taxation periods beginning on or after 1 January 2026. For taxpayers on a calendar-year fiscal basis, this covers the entire 2026 tax year. For taxpayers on a special accounting period, it applies to the first period commencing on or after that date.

✅ Which services qualify for the 100 percent service export deduction?

Eligible services include architecture, engineering, design, software development, medical reporting, accounting recordkeeping, call center operations, product testing, certification, data storage, data processing, data analysis, training and education, and healthcare services. The recipient must be a non-resident, the service must be consumed abroad, and the service must fall within the categories specified in the legislation.

✅ What is the effective corporate tax rate on foreign dividends after Decree 11257?

A Turkish corporation using the simplified gateway of Article 5/1-(b) faces an effective corporate tax burden of approximately 5 percent on qualifying foreign dividend income. The 80 percent exemption removes most of the dividend from the tax base, and the remaining 20 percent is subject to the standard 25 percent corporate tax rate, producing the effective 5 percent rate. Sector-specific corporate tax rates may produce a different effective burden.

✅ Does the decree change the standard gateway for foreign participation income?

No. The decree modifies only the simplified gateway introduced under Tax Law No. 7491. The standard gateway, requiring 10 percent ownership for one year plus a minimum foreign tax burden, remains in place and continues to provide a 100 percent exemption when its conditions are met.

✅ Is the dividend transfer to Turkey still required?

Yes. Both the individual exemption under Article 22 of Income Tax Law and the corporate simplified gateway under Article 5/1-(b) of Corporate Tax Law require the dividend to be transferred to Turkey by the filing deadline of the relevant annual tax return. Dividends not transferred within the window cannot benefit from the exemption, regardless of the ownership percentage.

✅ How does the 2026 Turkey Tax Update connect to the broader tax reform package?

Decree 11257 is the first concrete legal instrument enacted from the tax reform package announced by President Erdoğan on 24 April 2026 at the Dolmabahçe Working Office. The broader package includes a 20-year exemption on foreign-sourced income for returning residents, a 1 percent inheritance tax provision, asset repatriation incentives, and expanded Istanbul Finance Center benefits. Additional decrees and statutory amendments are expected to follow.

✅ Does the decree affect existing tax planning structures?

It can. Structures designed to satisfy the previous 50 percent ownership threshold or the 80 percent deduction rate may now be either overbuilt or underbuilt for the new framework. A structural review is appropriate in the first year of application, particularly for outbound investment structures, foreign holding companies, and cross-border service arrangements.

✅ Where is the official text of Presidential Decree No. 11257 published?

The official text appears in the Official Gazette of the Republic of Türkiye dated 30 April 2026, issue 33239. The Gazette is published electronically at resmigazete.gov.tr. The current consolidated text of Income Tax Law No. 193 and Corporate Tax Law No. 5520 is available at mevzuat.gov.tr.

A four-paragraph decree changes more than four lines of legal text. It changes the after-tax math of every cross-border investment, dividend, and professional service that crosses the Turkish border. The 2026 Turkey Tax Update lowers the cost of repatriated capital, raises the value of exported services, and brings Turkey closer to the participation exemption regimes that competing jurisdictions have used for years.

For tax law is not merely the rate on the page, but the architecture that determines whether capital arrives, stays, or moves on.