International Tax Advisory

Key Takeaways

• Setting up a company abroad does not switch off tax at home. What decides the outcome is where you live and where the company is actually managed.
• An individual whose domicile is in Türkiye, or who stays there for more than six months in a calendar year, is taxed in Türkiye on worldwide income (Income Tax Law, Art. 4).
• A company whose registered seat or place of effective management is in Türkiye is a Turkish full taxpayer, even if it is incorporated abroad (Corporate Tax Law, Art. 3).
• Profits of a low-taxed foreign company with passive income can be taxed in Türkiye even if they are never distributed (controlled foreign company rules, Art. 7).
• Presidential Decision No. 11257, published on 30 April 2026, raised the partial foreign participation exemption to 80% and the service-export deduction to 100%.
• Türkiye has double tax treaties with more than 80 countries, and foreign tax paid can be credited against Turkish tax within set limits.

Who Needs International Tax Advisory?

Most people think about tax advice at filing time. For a founder working across borders, the decisions that matter are made before the company exists: which country, which legal form, who owns what, where profits accumulate and how they eventually come home. Get these wrong and a structure that looks tax-free on paper can turn into an unexpected tax bill, with penalties, in the country where you actually live.

At World Company Setup we run company formation and accounting in more than 50 jurisdictions, and the pattern we see most often is simple. The company sits in Dubai, Delaware or Tallinn, while the founder lives in Istanbul, signs contracts from there and runs the bank account from a laptop at home. International tax advisory puts both sides of that picture on the same table. Our service is built for:

• Turkish residents who own foreign companies such as a UAE free zone company, a US LLC, a UK LTD, an Estonian OÜ or a Hong Kong limited company.
• Turkish companies expanding abroad through a subsidiary, branch or regional office, including SMEs and holding structures.
• Software, design and consulting exporters who want to use Türkiye's service-export deduction.
• E-commerce sellers selling cross-border through Amazon, Etsy, Shopify or other marketplaces.
• People relocating or living between two countries, including digital nomads, Golden Visa holders and anyone planning to change tax residency.

Start Here: Where Are You Tax Resident?

Every cross-border tax analysis starts with residency. It decides whether a country taxes you on your worldwide income or only on income that arises there.

Individuals: Türkiye's Six-Month Rule

Under Article 4 of the Turkish Income Tax Law, you are treated as settled in Türkiye if your domicile is there, or if you stay in Türkiye continuously for more than six months within a calendar year. Temporary trips abroad do not break that period, so flying to Dubai a few times a year does not end Turkish residency on its own. A genuine change of residency usually means obtaining a residence permit and a tax residency certificate in the new country, reviewing your ties in Türkiye (home, family, economic interests) and reading both countries' rules together. Where both countries treat you as resident, the tie-breaker rules of the relevant double tax treaty apply: permanent home, centre of vital interests, habitual abode and, finally, nationality.

Companies: Registered Seat and Place of Management

The Turkish Corporate Tax Law treats a company as a full taxpayer if either its registered seat or its place of business management is in Türkiye. The place of management is where business is actually directed and decisions are taken. If a Dubai company's decisions are all made in an Istanbul office, and its contracts are negotiated and signed there, the tax authority can argue that its place of management is in Türkiye. The whole profit could then be subject to Turkish corporate tax at 25%. Reducing that risk is about real governance rather than a foreign address: a local director, board meetings held in the company's own country, documented decisions and an office and staff that match the scale of the business.

Turkish CFC Rules (Corporate Tax Law, Art. 7): Four Conditions

Türkiye's controlled foreign company (CFC) rules stop profits from being parked tax-free in low-tax countries. When all four conditions below are met, the foreign company's profit is added to the Turkish corporate shareholder's income, even if nothing is distributed:

1. Control: Turkish full taxpayers directly or indirectly hold at least 50% of the foreign company's capital, profit share or voting rights.
2. Passive income: At least 25% of the foreign company's gross revenue is passive income such as interest, dividends, rent, royalties or gains on securities.
3. Low taxation: The foreign company bears an income tax burden of less than 10% on its commercial profit.
4. Size: The foreign company's total gross revenue exceeds the foreign-currency equivalent of TRY 100,000.

Example: A Hong Kong company wholly owned by an Istanbul-based investor earns most of its income from securities and interest on loans, and in practice pays very little tax. All four conditions may be met. If the same company trades goods or provides real services, the passive income test is usually not triggered. Because the CFC rules sit in the Corporate Tax Law, they mainly affect Turkish corporate shareholders. Individual shareholdings still count towards the control test, so founders who hold foreign companies personally should review them together with their Turkish companies.

Bringing Foreign Profits Back to Türkiye: 2026 Rules

Once the foreign company is profitable, the real question is how much it costs to bring that money home. The same amount can be taxed very differently depending on whether it arrives as a dividend, a service fee or a shareholder loan. These are the main rules in force for 2026:

Full Participation Exemption for Turkish Companies (Art. 5/1-b)

Dividends a Turkish company receives from a foreign subsidiary are fully exempt from corporate tax if all of the following apply:

• the Turkish company holds at least 10% of the foreign company's paid-in capital;
• the shares have been held without interruption for at least one year at the date of distribution;
• the foreign subsidiary's profit bears a total tax burden of at least 15% (for companies mainly engaged in finance, insurance or securities investment, not less than the Turkish corporate tax rate);
• the dividend is transferred to Türkiye by the corporate tax return deadline.

Decision No. 11257: Partial Exemption Raised to 80%

The law also offers a partial exemption for structures that cannot meet the full test, most often because of the 15% tax burden condition. Presidential Decision No. 11257, published in the Official Gazette on 30 April 2026, lowered the minimum shareholding for this partial exemption from 50% to 20% and raised the exempt share from 50% to 80%. The dividend must still reach Türkiye by the filing deadline. The change applies from the 2026 tax periods. In practice, only 20% of a dividend from a low-taxed subsidiary now enters the Turkish corporate tax base.

Individual Shareholders (Income Tax Law, Art. 22)

The same decision updated the rule for dividends that Turkish-resident individuals receive from foreign companies. The minimum shareholding fell from 50% to 20%. Shareholders who meet it and bring the dividend to Türkiye by the filing deadline are exempt on half of it. The rest is reported in the annual income tax return and taxed at progressive rates, and foreign tax paid can be credited if the conditions are met.

100% Deduction for Service Exports

For taxpayers who provide software, architecture, engineering, design, medical reporting, call-centre, data and similar services only to clients abroad, and bring the fees back to Türkiye, the income deduction rose from 80% to 100% (Income Tax Law Art. 89/13, Corporate Tax Law Art. 10/1-ğ). For some service exporters, this now beats setting up a foreign company. Which route works better depends on your client base, margins and personal residency plans, and should be calculated rather than assumed.

Double Tax Treaties and Foreign Tax Credits

To stop the same income being taxed twice, Türkiye has signed double tax treaties with more than 80 countries, including the UAE, the United States, the United Kingdom, the Netherlands, Germany, Singapore and Estonia. The treaty with Hong Kong has been published in the Official Gazette; we confirm its application date before relying on it for any transaction.

In practice, treaties do three useful things:

• Lower withholding rates: Dividends, interest and royalties can be subject to lower withholding than domestic law provides. This usually requires a tax residency certificate before payment.
• Foreign tax credit: Tax paid abroad can be credited in Türkiye, up to the Turkish tax on the same income (Income Tax Law Art. 123, Corporate Tax Law Art. 33). You need official proof that the foreign tax was actually paid.
• Permanent establishment definition: Treaties define when a business has a taxable presence in the other country. Unless your foreign company has a permanent establishment in Türkiye, its business profit is normally taxed only in its home country.

In Türkiye, a tax residency certificate can be requested through the Revenue Administration's online tax office. In the UAE, the Federal Tax Authority issues Tax Residency Certificates through the EmaraTax portal.

Corporate Tax Rates by Country (2026)

The table below summarises headline corporate tax rates in the jurisdictions our clients choose most often, and whether a treaty with Türkiye exists. A low rate alone is not a reason to choose a country; CFC, place-of-management and profit repatriation rules need to be read together.

For country-specific detail see our pages on Dubai tax consultancy, company formation in the USA, establishing a company in Estonia, company formation in the Netherlands and company formation in Hong Kong.

Substance, Permanent Establishment and Transfer Pricing

Many countries now ask not only whether a company is registered, but whether it really exists there. The UAE's substance approach, Europe's anti-abuse rules and banks' compliance teams all look at the same things: where are the office, the staff, the directors and the decisions? A company without substance risks administrative penalties in its own country and, at the same time, a place-of-management or permanent establishment challenge in Türkiye.

Permanent establishment risk is often overlooked when the founder lives in Türkiye. A person who habitually signs contracts in Türkiye on behalf of the foreign company, or an office in Türkiye placed at the company's disposal, can create a permanent establishment under the treaties. Profit attributable to that establishment is then taxable in Türkiye.

If your Turkish company and your foreign company buy from, sell to, license to or lend to each other, transfer pricing rules apply (Corporate Tax Law, Art. 13). Related-party transactions must be priced at arm's length, documented and reported on the annual transfer pricing form. Mispricing can be treated as a disguised profit distribution, triggering both corporate tax and dividend withholding.

CRS and FATCA: Foreign Accounts Are Visible

Türkiye takes part in automatic exchange of financial account information under the OECD Common Reporting Standard (CRS) and has a FATCA agreement with the United States. Balances and income of foreign bank and investment accounts held by Turkish residents are reported each year by the country where the account is held. Your personal account in Dubai, or your details as the controlling person of an Estonian company, can fall within that exchange.

The practical consequence is that undeclared foreign income is no longer a matter of chance; it is data the tax authority can match. Check each year whether foreign interest, dividends and rental income have been reported in Türkiye, and fix past-year gaps through voluntary disclosure before an audit starts.

Global Minimum Tax (Pillar Two) and Türkiye's Domestic Minimum Tax

The OECD Pillar Two rules target a 15% minimum effective tax rate per country for multinational groups with consolidated annual revenue above EUR 750 million. Türkiye introduced these rules from 2024. Most SMEs are below the threshold, but suppliers and subsidiaries of large groups can still be drawn into group-level reporting.

A change with wider reach is the domestic minimum corporate tax, applied from the 2025 accounting period: corporate tax cannot be less than 10% of profit before deductions and exemptions. New companies are outside the rule for their first three accounting periods. Because some exemptions are treated separately in the minimum tax calculation, holding structures should always run this calculation as part of their planning.

Indirect Taxes for E-commerce and Digital Services

For online sellers, VAT is as important as corporate tax. Once distance sales to EU consumers exceed EUR 10,000 a year, VAT is charged at the rate of the customer's country and can be reported through the One-Stop Shop (OSS/IOSS). The UAE's standard VAT rate is 5% with a mandatory registration threshold of AED 375,000, and the UK's VAT registration threshold is GBP 90,000. Marketplaces can suspend sellers who are not registered, so these registrations should be in place before sales start.

What Our Tax Advisory Service Covers

• Pre-structuring tax analysis: comparing countries, legal forms and ownership structures under both Turkish and local rules before you incorporate.
• Residency planning: assessing residency under Turkish law and the relevant treaty when you move abroad or live between two countries, and handling residency certificates.
• CFC and place-of-management review: testing existing foreign companies against Articles 3 and 7 of the Corporate Tax Law and documenting governance.
• Profit repatriation planning: calculating the tax cost of dividends, service fees, royalties and loans, and applying the 2026 exemptions.
• Treaty relief and tax credits: applying treaty benefits, documenting foreign tax and claiming credits in Türkiye.
• Transfer pricing: arm's-length analysis and documentation for related-party transactions.
• Compliance calendar: one calendar for Turkish returns and foreign corporate tax, VAT and annual filings, working alongside our international accounting services.
• Audits and disputes: responding to information requests and coordinating with our legal consultancy team during tax audits.

Seven Common Tax Mistakes by Foreign Company Owners

1. Incorporating abroad but running everything from Türkiye, with no record of where decisions are made.
2. Paying personal expenses with the foreign company's card, which can be treated as a hidden profit distribution in both countries.
3. Bringing accumulated profit home as a "loan" with no repayment plan.
4. Skipping Form 5472 for a US LLC because "there were no sales".
5. Not registering for UAE corporate tax because revenue is below AED 375,000.
6. Claiming a foreign tax credit in Türkiye without proof of payment.
7. Transferring dividends after the filing deadline and losing the exemption.

Sources and Legislation

• Turkish Income Tax Law No. 193 (Art. 4, 22, 89, 123)
• Turkish Corporate Tax Law No. 5520 (Art. 3, 5, 7, 10, 13, 33)
• Turkish Revenue Administration: list of double tax treaties
• UAE Federal Tax Authority
• IRS Instructions for Form 5472
• GOV.UK Corporation Tax rates
• Estonian Tax and Customs Board (EMTA)

This page provides general information based on 2026 legislation. Tax rates and exemption conditions change; please make decisions only after a review of your own circumstances.