In addition to residency criterion, within a limited scope, nationality criterion also applies regardless of their residency status, Turkish citizens who live abroad and work for government or a governmental institution or a company whose headquarter is in Turkey, are considered as unlimited liable taxpayers. Accordingly, they are subject to PIT on their worldwide income. Non-residents are only liable to pay tax on their income derived from the incomes in Turkey (limited liability). For tax purposes, it is especially important to determine in what circumstances income is deemed to be derived in Turkey. The provisions of Article 7 of the PIT Law regulate this issue.

In the following circumstances, the income is assumed to be derived in Turkey.

Business Profit: A person must have a permanent establishment or permanent representative in Turkey and income must result from business carried out in this permanent establishment or through such representatives.

Agricultural Income: Agricultural activities yielding income must take place in Turkey.

Wages and Salaries:
– Services must be rendered or accounted for in Turkey,
– Fees, allocations, dividends and as such paid to the chairmen, directors, auditors and liquidators of the establishment situated in Turkey must be accounted for in Turkey.

Income from Independent Personal Services: Independent personal services must be performed or accounted for in Turkey.

Income from Immovable Property:
– Immovable must be in Turkey,
– Rights considered as immovable must be used or accounted for in Turkey.

Income from Capital Investment (interest, dividends, etc.): Investment of the capital must be made in Turkey.

Other Income and Earnings: The activities or transactions generating for other income, specified in the PIT Law, must be performed or accounted for in Turkey.

The term “accounted for” used above to clarify tax liability of the non-residents means that a payment is to be made in Turkey, or if the payment is made abroad, it is to be recorded in the books in Turkey.

Source: Revenue Administration

Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

2-Is it necessary to declare the whole dividend?
No. The half of the dividend should be declared. The other half is exemption.
The half of the dividend (that are acquired from fully responsible and mentioned above) is exempted from income tax.
The other half of the dividend which is not regarded as an exemption should be taken into consideration while calculating the tax.
To the extent that there is no other income being subject to declaration, if the dividends that are subject to tax in 2016 overstep the limits of 30.000 TL, it should be declared with income tax return.

3-Can I deduct stoppage paid on behalf of me during profit distribution from the tax?
Yes.
You may deduct dividend withholding in the ratio of 15 % (that amount is paid to the taxpayer’s own tax office)from the tax amount which is calculated through the income tax return by issuing on behalf of each shareholder for profit distribution.

4-Should I deduct the half of fifteen per cent of stoppage?
You may deduct all.
You will deduct the half of resulting profit; however, you will deduct the whole stoppage. 

5-Can you explain profit distribution with an example?
The table with reference to profit distribution is specified below:The explanations about the sample table:

• 1 million TL which will be distributed is the balance after the deduction of legal requirements.
• The shareholder who declares his/her profit hasn’t got any other income being subject to declaration.
• The dividend was paid to the shareholders in 2016.

6-If prior year profit is distributed, is it compulsory to file income tax return?
In case of distribution of prior year profits (31 December 1998 and previous years), shareholders/partners will not submit a declaration whatever the amount is.
İn case of the distribution of the incomes, which are exempted from Corporation tax and related to the accounting period ending between the dates of 01.01.1999 – 31.12.2002, as well as incomes that benefit from investment allowance exemption being subject to tax cut within the scope of provisional article 61 of Income Tax Law;
After 1/9 of the realized profit will be added to the dividend made by real persons, the half of the remaining amount will be regarded as taxable income. 1/5 of the declared amount will be set off from the estimated income tax.

7-Should the Turkish citizens living abroad declare their profit share that they gain in Turkey?
Turkish citizens who live abroad more than 6 months by getting residence/work permit will be taxed as a limited taxpayer in respect to the incomes and revenues that they gain in Turkey.
The citizens who are taxed as a taxpayer will not submit a declaration if their incomes are made up of income from moveable capitals that are taxed by means of detention.

In brief, 15 % stoppage of profit shares of Turkish citizens living abroad is the final taxation; additionally, they will not file income tax return for their dividends.

Dividend: income, profit share, acquisition, earnings

Source: sanayi.gov.tr
Date: 20 January 2017

Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

2- DEDUCTIBLE EXPENSES ACCORDING TO CORPORATE TAX LAW
In the determination of company’s income calculated like commercial income, a tax payer can deduct expenses stated below from its revenue.

1- Stock certificates and export cost of bonds
2- Incorporation and organizational costs
3- General meeting, business combinations, denouncement and liquidation costs
4- Insurance costs
5- Profit shares of partnership of commendams
6- R&D discount
7- Creditors without interest-fee and profit shares paid to private financial institutions

3- LOSS OFFSETTING AND OTHER DISCOUNTS
3.1- Loss offsetting
3.1.1- Previous losses
3.1.2- Losses of acquired company
3.1.3- Overseas losses
3.2- Donations and subsidies
3.3- Sponsorship costs
3.4- Dividends

Source: Corporate Tax Law numbered 5520 – Income Tax Law numbered 193

Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.