Withholding tax and VAT on payments abroad
Withholding tax on service, consultancy, licence, rent, interest and dividend payments by Turkish companies to foreign companies, reverse-charge VAT, double tax treaties and the certificate of residence.
Foreign-capital companies pay their parent companies management fees, software licence fees or dividends. Turkish companies also buy services from consultants, software vendors and advertising platforms abroad. On these payments the tax is usually withheld and declared by the Turkish company making the payment; the foreign company does not need to do anything in Türkiye.
What applies to which payment?
| Type of payment | Income or corporate tax withholding | VAT |
|---|---|---|
| Services, consultancy, engineering (professional services) | Generally 20% | Declared under the reverse charge if used in Türkiye |
| Software licences, trademarks, patents and other intangible rights | Generally 20% | Declared under the reverse charge |
| Rent on property in Türkiye | Generally 20% | Depends on the type of lease |
| Dividends (to a non-resident shareholder) | 15% | — |
| Loan interest | Different rates depending on the type of loan and the lender | — |
| Internet advertising services | 15% | Declared under the reverse charge: Meta and Google ad invoices |
Withholding is calculated on the gross amount of the payment. If the contract provides for a "net payment", the tax is calculated by grossing up, which increases the company's cost. Withholding calculator
How is the withholding declared?
- The tax withheld is declared and paid on the withholding and premium service return in the month after the payment: Withholding and premium service return
- If the payment is in foreign currency, it is converted into Turkish lira at the rate on the payment date: Currency converter
Reverse-charge VAT (VAT return No. 2)
For services bought from a foreign company and used in Türkiye, the foreign company does not declare VAT in Türkiye. The Turkish buyer declares and pays this VAT on VAT return No. 2. The VAT paid can be deducted on VAT return No. 1 for the same month, so in most cases the cash burden is short-lived.
Double tax treaties
When paying a company in a country with which Türkiye has a double tax treaty, the treaty rate may be lower than the domestic rate; on some service payments no tax may be withheld in Türkiye at all. To apply the lower rate:
- Obtain a certificate of residence for the relevant year issued to the recipient by its own tax authority (the original or a certified copy, with a Turkish translation).
- Determine which article of the treaty the payment falls under (business profits, royalties, interest, dividends).
- Put the certificate on file before the payment; if it arrives afterwards, recovering the excess tax requires a separate application.
More detail: Double tax treaties and the certificate of residence
Payments to the parent company
For intra-group payments such as management fees, licence fees or interest, the price must be at arm's length. Otherwise the difference may be treated as a disguised profit distribution and taxed like a dividend: Thin capitalisation and transfer pricing
Common mistakes
- Paying a foreign invoice without withholding because it came from abroad,
- Skipping VAT return No. 2 and losing the deduction,
- Asking for the certificate of residence after the payment,
- Classifying the payment incorrectly (for example, treating a licence fee as a service fee).
Legal basis: Corporate Tax Law No. 5520 art. 30; Income Tax Law No. 193 art. 94; VAT Law No. 3065 art. 9; withholding rates set by the relevant Presidential and Council of Ministers decisions; double tax treaties to which Türkiye is a party.