“Dividend Withholding for Taxpayer Capital Companies Reduced to 0%”
With the amendment made to Article 94 of the Income Tax Law by the Law No. 7256, published in the Official Gazette dated 17.11.2020, regarding the acquisition of their own shares or partnership interests by fully liable capital companies:
- In case of cancellation through capital reduction, the difference between the acquisition cost and the nominal value of the shares or partnership interests will be considered as a dividend, and a withholding tax of 15% will be applied. This will be calculated on the date of registration of the decision on capital reduction in the trade registry.
- In case of sale at a price lower than the acquisition cost, the difference between the acquisition cost and the sale price will be considered as a dividend and taxed at 15% on the sale date.
- If the shares or partnership interests are not redeemed through capital reduction or sold within two full years from the acquisition date, the difference between the acquisition cost and the nominal value of the shares or partnership interests will be considered as a dividend, and a withholding tax of 15% will be applied on the last day of the two full years from the acquisition date.
The aforementioned regulation also grants the President the authority to adjust the withholding tax rate for fully liable capital companies’ own shares or partnership interests. The rate can be adjusted based on factors such as whether the shares are listed on Borsa İstanbul, the proportion of listed shares to total shares, whether the repurchased shares are listed on Borsa İstanbul, whether they are repurchased from fully liable entities, and the total annual sales revenue and other income of the capital company. The rate can be decreased to zero or increased up to one-fold.
As part of this authority, the Presidential Decree No. 6791 published on 14.02.2023 in the Official Gazette (Issue 32104, 1st Repetition) has reduced the withholding tax rate on deemed dividends for shares or partnership interests acquired by fully liable capital companies to 0%.
You can access the related Decree here.
Best regards,
BİLGENER
