A London fund bought twelve per cent of an İstanbul fintech in a Series A three years ago. A strategic buyer now wants the whole company, the fund’s share of the price is paid in euros to its account abroad, and in the same year the company paid its first dividend. What does Türkiye tax on the way out, and who has to do what? The answers depend on who the seller is (individual or company), what is sold (share certificates, uncertificated shares or limited company shares), how long it was held, and whether a treaty changes the picture. This article walks through the Income Tax Law No. 193 (GVK) and Corporate Tax Law No. 5520 (KVK) rules on capital gains and dividends for a foreign investor, what the statutes leave to Presidential Decision, and the practical steps that decide whether a two-year holding earns its exemption. Exits through a shareholders’ agreement drag or tag follow the same rules.
Who is a non-resident for Turkish tax
For individuals, GVK Article 3 taxes residents on worldwide income and Article 6 taxes non-residents (dar mükellef) only on income derived in Türkiye. Residence under Article 4 means a domicile in Türkiye or a continuous stay of more than six months in a calendar year; Article 5 excludes business people and experts on a specific and temporary assignment even if they stay longer. For corporations, KVK Article 3(2) treats a company as a limited taxpayer only if both its legal centre and its business centre (where transactions are actually managed) are outside Türkiye; a fund vehicle incorporated abroad but run day to day from İstanbul risks being a full taxpayer under Article 3(1).
The source rules then decide whether Türkiye may tax at all. Under GVK Article 7, investment income (menkul sermaye iradı, including dividends) is Turkish-source when the capital is invested in Türkiye, and “other income” (diğer kazanç ve iratlar, including capital gains) is Turkish-source when the transaction is performed in Türkiye or “evaluated” there, meaning the payment is made in Türkiye or booked in the accounts of a payer in Türkiye. KVK Article 3(3)(d) and (e) list the same categories for non-resident corporations and Article 3(4) applies the GVK source rules. A sale to a Turkish buyer who books the price meets the test; a sale between two non-residents settled abroad is a question of fact under the same words.
Capital gains of a non-resident individual: the two-year rule
Gains on shares fall under “other income” in GVK Article 80, and repeated Article 80 (mükerrer madde 80) lists the taxable value-increase gains (değer artışı kazançları). Paragraph (1) covers gains on securities and other capital-market instruments but excludes securities acquired without consideration and share certificates (hisse senetleri) of full-taxpayer corporations held for more than two years. Paragraph (4) covers gains on partnership rights or shares (ortaklık hakları veya hisseleri), with no holding-period exception. The distinction is the whole game: joint-stock shares represented by printed certificates are securities, and a gain on them escapes income tax after two years; limited company shares, and joint-stock shares for which no certificate was ever issued, are partnership rights under paragraph (4) and remain taxable however long they are held. Disposal is defined widely (sale, exchange, expropriation, contribution as capital in kind), so a share-for-share exchange in a flip-up is a disposal too.
Repeated Article 81 defines the net gain: the consideration received, less the acquisition cost, the seller’s disposal expenses and the taxes and duties paid. If the cost of a security cannot be documented, its nominal value is used, which punishes investors who cannot produce the subscription documents for a premium round. The cost is indexed by the producer price index between acquisition and the month before disposal if the increase is at least ten per cent. One rule is written for foreign investors: in computing the gain of non-residents (corporations included) on securities or participation shares acquired with cash or in-kind capital they themselves brought into Türkiye under the foreign capital legislation, exchange-rate gains are disregarded, provided the investor’s Turkish income consists only of the dividends and gains from those shares. In a high-inflation economy the exchange component is often most of the lira gain.
The annual exemption in the third paragraph of repeated Article 80 (150,000 lira for 2026 per the official text) does not apply to securities gains but does apply to partnership-share gains under paragraph (4). Procedurally, a non-resident with no annual return reports the gain by special return (münferit beyanname) under Article 101 to the tax office of the place where the shares were disposed of, within fifteen days, and the tax follows the progressive tariff of Article 103, from 15 to 40 per cent. Private share-sale gains outside the bank-intermediated regime of provisional Article 67 are not withheld on, so the special return is the route.
Capital gains of a non-resident company: no two-year rule
A foreign corporate investor is in a worse position on holding periods. Under KVK Article 3(3)(e) its Turkish-source “other income” is taxable, Article 22(2) computes it under the GVK rules, and Article 26(1) requires the foreign corporation, or the person acting for it in Türkiye, to file a special return (özel beyanname) within fifteen days of deriving the gain. Article 26(2) catches most sellers by surprise: in applying the GVK rules, the exemptions, conditions and holding-period limitations on non-taxation in the Income Tax Law are disregarded, with the single exception of the rule on exchange-rate gains on shares acquired with capital brought into Türkiye. The two-year exemption therefore does not help a non-resident company; the FX exclusion does. The return goes to the tax office of the place of disposal (Article 27(1)(b)) and the tax is paid within the filing period (Article 29(1)(c)) at the Article 32(1) rate of 25 per cent. Under Article 28(1) the assessment is addressed to the foreign company’s representative in Türkiye and, if there is none, to the person who paid the gain, which is why a Turkish buyer insists on seeing the special return and payment receipt before releasing the last tranche. A Turkish-resident corporate investor, by contrast, exempts 50 per cent of a gain on participation shares held for two full years under Article 5(1)(e) (the statutory 75 per cent was reduced to 50 per cent by Presidential Decision No. 9160, Official Gazette 27 November 2024, No. 32735), one reason some foreign investors hold Turkish participations through a Turkish holding company.
The purchase price itself is not withheld on. KVK Article 30(1) lists the payments to non-resident corporations that carry withholding (construction progress payments, professional service fees, immovable property income, investment income other than dividends and certain designated payments); capital gains are not on the list, so the buyer pays gross and the seller settles by special return. The exception is Article 30(7): payments of any kind to companies in jurisdictions listed by the President for inadequate taxation or information exchange carry a 30 per cent withholding, although the President may reduce it, down to zero, for shares purchased at arm’s-length prices.
Dividends: statutory rates and the Presidential Decision
Dividends on joint-stock shares and profit shares from limited company participations are investment income under GVK Article 75(2)(1) and (2). When a full-taxpayer company distributes them to a non-resident individual, Article 94(6)(b)(ii) requires it to withhold income tax; to a non-resident corporation, KVK Article 30(3) requires a corporate tax withholding. Both exclude non-residents who receive the dividend through a Turkish place of business or permanent representative, and both state that adding profits to capital is not a distribution, so a bonus issue is not withheld on. The rate actually applied is set by Presidential Decision under the closing paragraphs of Article 94 and KVK Article 30(8). Presidential Decision No. 9286 (Official Gazette 22 December 2024, No. 32760) set the dividend withholding at 15 per cent (previously 10 per cent), both under GVK Article 94(6)(b) for individuals and under KVK Article 30(3) for non-resident corporations, for dividends distributed from 22 December 2024. Presidential Decision No. 9707 of 30 March 2025, sometimes cited in this context, changed only the rates on construction and repair progress payments, not dividends. A treaty may reduce the rate, and it should still be confirmed at the date of the distribution resolution. Two mechanical rules complete the picture: under KVK Article 30(11) the withholding is computed on the gross amount and grossed up if the company bears the tax, and under KVK Article 30(9) and GVK Article 86(2) the withholding is final, a return being optional for corporations and not required for individuals. The proceeds leave freely: Article 3(c) of Law No. 4875 guarantees the transfer abroad through banks of net profits, dividends and sale and liquidation proceeds.
Double tax treaties in general terms
Article 3(a) of Law 4875 opens with the words “unless international agreements provide otherwise”, and the tax statutes operate under the same reservation. Türkiye’s double tax treaties typically allocate taxing rights over dividends and over gains on shares between Türkiye and the investor’s state of residence; depending on the treaty, the dividend withholding may be capped below the domestic rate, and a gain on shares held for a minimum period may be taxable only in the residence state. This article deliberately cites no treaty rate or threshold: each treaty has its own figures and conditions (minimum shareholding, holding period, real-estate-rich company clauses). In practice the paying company or the buyer applies the treaty only against a certificate of tax residence issued by the investor’s home authority for the relevant year, usually with a Turkish translation, and evidence that the investor is the beneficial owner. Without that paperwork the domestic rate is withheld and the investor is left to seek a refund.
Practical points that decide the outcome
The two-year exemption is earned by paperwork done at the time of investment, not at exit. Under TCC Article 484 share certificates are bearer or registered; under Article 486(2) the board prints bearer certificates within three months of full payment, and interim certificates (ilmühaber) may be issued until then, with the registered-certificate rules applying to them by analogy; under Article 486(3) registered certificates are printed for all holders if the minority requests it. Article 487 requires registered certificates to be recorded in the share ledger (pay defteri), and Article 490(2) provides that they are transferred by endorsement and delivery. An investor who wants the holding period to run should insist, in the subscription documents, that registered share certificates (or at least interim certificates) are printed and delivered at closing and recorded in the share ledger; the two years run from the acquisition of the certificates, and the tax treatment of interim certificates should be confirmed against the administration’s current guidance before relying on them. Limited company shares cannot earn the exemption, and their transfer requires a notarised agreement and, unless the articles say otherwise, general assembly approval under TCC Article 595; converting to a joint-stock company before the round is the usual fix. The bank documents for the inbound capital (for the FX exclusion) and the subscription documents proving cost should be kept. After closing, the transfer is notified through E-TUYS within one month, and the buyer will want the special return filed within fifteen days. Exit due diligence starts with these files; the data room guide lists them.
The fund held its shares for three years. Is the gain tax-free?
Not if the seller is a company. The two-year exemption in GVK repeated Article 80(1) applies to individuals holding share certificates; KVK Article 26(2) disregards GVK holding-period exemptions when a non-resident corporation files its special return, so the gain is taxed at 25 per cent unless a treaty allocates it to the residence state. Only the exchange-rate component is excluded if the capital was brought into Türkiye and documented.
The company never printed share certificates. Does the holding period still run?
The exemption in repeated Article 80(1) is written for share certificates (hisse senetleri); uncertificated joint-stock shares fall under paragraph (4) as partnership rights, where no holding period helps. Printing registered certificates or interim certificates now starts the clock from now, not from the original subscription.
Can the price be paid gross to the foreign seller’s account abroad?
Yes. Share-sale gains are not among the withholding items in KVK Article 30(1), and Article 3(c) of Law 4875 guarantees the free transfer of sale proceeds through banks. The seller then files the special return within fifteen days; a buyer usually makes part of the price conditional on proof of filing, since under KVK Article 28(1) the assessment can be addressed to the payer if the seller has no representative in Türkiye.
Related: shareholders’ agreement anatomy · share ledger · liquidation preference · international desk.
Sources. Income Tax Law No. 193 (Articles 3-7, 75, 80, repeated 80, repeated 81, 86, 94, 101, 103, provisional 67); Corporate Tax Law No. 5520 (Articles 3, 5, 22, 26-30, 32); Turkish Commercial Code No. 6102 (Articles 484-487, 490, 595); Foreign Direct Investment Law No. 4875 (Article 3); Presidential Decision No. 9286 (Official Gazette 22 December 2024, No. 32760) on dividend withholding rates under GVK Article 94 and KVK Article 30; Implementing Regulation of Law 4875 (Article 5, E-TUYS). Statute links open the official Turkish texts on mevzuat.gov.tr.
This article is provided for general information only and does not constitute legal advice. Please seek legal support for an assessment of any specific matter.
