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Can a Turkish company pay dividends to its foreign shareholders?

As a general rule, the answer is yes.

A foreign shareholder of a Turkish company can receive dividends and, subject to applicable tax and banking procedures, transfer those dividends abroad.

Türkiye’s Foreign Direct Investment Law expressly provides that foreign investors may transfer abroad net profits, dividends, proceeds from the sale or liquidation of investments and certain other investment-related amounts through banks or financial institutions.

However, owning shares in a profitable Turkish startup does not automatically mean that the shareholder can withdraw company money whenever desired.

A lawful dividend distribution generally requires:

• distributable profit or appropriate free reserves;
• preparation and approval of financial statements;
• allocation of mandatory reserves;
• a valid corporate resolution;
• compliance with the articles of association;
• application of withholding tax;
• and proper banking and accounting documentation.

For foreign investors, double-tax treaties can also materially affect the ultimate tax burden.

This guide explains the principal legal and tax issues foreign shareholders should consider when receiving dividends from a Turkish startup or other Turkish company.

1. Can a Foreign Shareholder Receive Dividends From a Turkish Company?

Yes.

There is generally no rule preventing a foreign individual or foreign company from receiving dividends merely because the shareholder is not Turkish.

Foreign investors are generally subject to equal treatment with domestic investors under Türkiye’s foreign investment framework.

The Foreign Direct Investment Law specifically recognizes the right of foreign investors to transfer dividends abroad through banks or financial institutions.

This means that a Turkish company may generally distribute profits to shareholders located in:

• Germany;
• the United Kingdom;
• the United States;
• the Netherlands;
• France;
• the UAE;
• Saudi Arabia;
• Singapore;
• or another jurisdiction,

provided that Turkish corporate and tax requirements are satisfied.

The more important question is therefore not whether the shareholder is foreign.

The real question is:

Does the company legally have distributable profit, and has the distribution been properly approved?

2. A Shareholder Cannot Simply Withdraw Company Profits

This distinction is particularly important for founders.

The company’s bank account is not the shareholder’s personal bank account.

Even where a founder owns 100% of a Turkish company, company funds belong to the company until they are lawfully transferred through an appropriate legal mechanism.

Payments to shareholders may potentially take different forms, including:

• dividend distributions;
• repayment of genuine shareholder loans;
• salary or management remuneration;
• reimbursement of documented business expenses;
• share-sale proceeds;
• or other lawful payments.

Each category has different legal and tax consequences.

A shareholder should therefore not simply transfer money from the company to a personal foreign bank account and describe the transfer afterwards as a dividend.

The corporate decision and accounting basis should exist first.

3. When Can a Turkish Company Distribute Dividends?

Under Article 509 of the Turkish Commercial Code, dividends may be distributed from:

net profit for the financial year and freely disposable reserves.

The Commercial Code also provides that annual profit is determined according to the annual balance sheet.

Therefore, revenue does not equal distributable profit.

Consider a startup with:

Annual Revenue: TRY 50 million

Operating Expenses: TRY 35 million

Other Costs and Taxes: TRY 10 million

The shareholder cannot simply request a dividend calculated from the TRY 50 million revenue figure.

The company’s actual distributable profit must be determined from its financial statements after taking into account relevant expenses, losses, taxes and reserves.

4. Previous Years’ Losses Matter

A company can generate accounting profit in the current year but still have accumulated losses from previous years.

Those losses must be considered before determining what can lawfully be distributed.

This is especially important for startups.

Technology companies commonly operate at a loss during their first years because they spend heavily on:

• software development;
• marketing;
• employee salaries;
• customer acquisition;
• infrastructure;
• research and development;
• and market expansion.

Suppose a startup has:

Previous accumulated losses: TRY 12 million

Current-year profit: TRY 8 million.

It would be incorrect to assume automatically that the full TRY 8 million can be distributed to shareholders.

Historical losses and mandatory reserve requirements need to be considered in determining the distributable amount.

5. Turkish Companies Must Allocate Legal Reserves

A company’s entire annual profit is not automatically available for distribution.

Article 519 of the Turkish Commercial Code requires a general legal reserve.

Under the statutory rule, 5% of annual profit is allocated to the general legal reserve until that reserve reaches 20% of paid-in capital.

Further reserve requirements may also arise when dividends are distributed.

The Commercial Code provides, subject to its detailed rules and exceptions, for an additional allocation to the general legal reserve in connection with distributions after the first 5% dividend threshold.

The company’s articles of association may also require additional reserves.

Therefore, the dividend calculation should normally be prepared by the company’s accountant or financial advisers and reviewed together with applicable corporate rules.

6. Who Decides Whether a Dividend Will Be Distributed?

A company having profit does not necessarily mean shareholders automatically receive a dividend.

The competent corporate body must decide whether the profit will be:

• distributed;
• retained in the company;
• allocated to reserves;
• or otherwise dealt with in accordance with applicable law and the articles of association.

For a typical private Turkish company, dividend distribution is generally dealt with through the shareholders’ general assembly.

The financial statements and profit distribution proposal should therefore be coordinated with the annual general assembly process.

This creates an important distinction:

A shareholder may have an economic right to participate in profits, but the timing and amount of a lawful dividend distribution depend on the applicable corporate decision-making process.

7. Can Majority Shareholders Refuse to Distribute Dividends?

This can become a significant issue for foreign minority investors.

Imagine the following structure:

Turkish Founder: 70%

Foreign Investor: 30%.

The company becomes highly profitable.

However, the founder controls the general assembly and repeatedly prefers to leave all profits inside the company.

The foreign investor may have expected regular distributions but receives nothing.

This is why dividend policy can be an important subject in a Shareholders’ Agreement.

The parties may negotiate provisions addressing:

• minimum dividend policy;
• circumstances in which profit should be retained;
• investor consent requirements;
• cash-reserve requirements;
• reinvestment;
• future funding needs;
• and exceptions to dividend distribution.

However, contractual arrangements must still comply with mandatory Turkish corporate law and the company’s actual financial position.

A clause promising dividends regardless of whether distributable profit legally exists would create obvious problems.

8. Do All Shareholders Receive the Same Dividend?

Not necessarily in every company structure.

The ordinary starting point under Turkish company law is that profit participation is connected to shareholding rights.

Article 508 of the Turkish Commercial Code provides, unless the articles of association state otherwise, that profit and liquidation shares are calculated proportionately according to payments made by the shareholder for its capital contribution.

However, companies can also have:

• privileged shares;
• different classes of shares;
• contractual economic rights;
• usufruct rights;
• or special profit participation provisions.

Foreign investors should therefore review both:

• the articles of association;
• and the shareholders’ agreement.

A cap table showing that an investor owns 20% of the shares does not always answer every question concerning economic distributions.

9. Can Preferred Investors Receive Dividends Before Founders?

Startup investment agreements sometimes provide investors with preferential economic rights.

For example, an investor may negotiate:

• preferred dividend rights;
• cumulative dividend mechanisms;
• liquidation preference;
• preferential distribution rights;
• or special share classes.

However, contractual concepts imported from U.S. or English venture capital documents should not simply be copied into Turkish agreements.

The rights must be structured consistently with:

• the Turkish Commercial Code;
• the articles of association;
• share-class rights;
• capital-maintenance principles;
• and mandatory corporate rules.

A Shareholders’ Agreement alone may not always be sufficient if the intended corporate right must also be reflected in the company’s articles.

10. What Is the Dividend Withholding Tax in Türkiye?

This is one of the most important questions for foreign shareholders.

As of 2026, the domestic Turkish withholding tax rate applicable to many dividend distributions to non-resident shareholders is 15%.

The Turkish Revenue Administration’s current guidance confirms that, following Presidential Decision No. 9286, the withholding rate applicable to relevant dividend payments has been 15% since 22 December 2024.

For example:

Gross Dividend: EUR 100,000

Assuming a 15% Turkish withholding rate applies:

Turkish withholding: EUR 15,000

Net payment to shareholder: EUR 85,000.

However, this example is only the starting point.

A double-tax treaty may reduce the Turkish withholding rate depending on:

• the shareholder’s country of residence;
• whether the shareholder is an individual or company;
• the percentage of ownership;
• beneficial ownership requirements;
• and the specific treaty provisions.

Therefore, the domestic 15% rate should not automatically be assumed to be the final rate in every cross-border distribution.

11. Double-Tax Treaties Can Reduce Dividend Withholding

Türkiye has entered into double-tax treaties with many jurisdictions.

These agreements frequently contain special rules governing dividends.

A treaty may provide a lower maximum Turkish withholding-tax rate if certain requirements are satisfied.

For corporate shareholders, the applicable treaty rate may also depend on the ownership percentage held in the Turkish company.

Consequently, before distributing a substantial dividend, the company should determine:

1. Where is the shareholder tax resident?
2. Is there a double-tax treaty between Türkiye and that country?
3. What does the treaty provide regarding dividends?
4. Does a reduced rate depend on a minimum shareholding?
5. Is the recipient the beneficial owner of the dividend?
6. What documentation is required to apply treaty benefits?

This analysis should be performed before payment.

Attempting to correct an improperly withheld payment afterwards may create unnecessary administrative work.

12. Tax Residency Documentation Is Important

A foreign shareholder seeking treaty treatment may need to document its tax residence.

In practice, tax-residency certificates and other supporting documents may become important.

The shareholder should ensure that documentation:

• relates to the correct tax year;
• identifies the correct shareholder;
• comes from the competent foreign authority;
• and satisfies Turkish procedural requirements regarding certification and translation where applicable.

Where a holding structure involves several entities, the company should also consider whether the direct shareholder is the genuine beneficial owner of the dividend.

This can be particularly important where a foreign holding company was established primarily for treaty access.

13. Foreign Corporate Shareholder and Foreign Individual Shareholder Are Not Always Treated Identically

The tax analysis may differ depending on whether the shareholder is:

• a foreign individual;
• a foreign company;
• an investment fund;
• a partnership;
• a pension fund;
• or another legal arrangement.

For non-resident corporate shareholders, Article 30 of the Turkish Corporate Tax Law and applicable treaty provisions can be particularly relevant.

Current Revenue Administration guidance states that dividends distributed by resident Turkish companies to qualifying non-resident corporate taxpayers are generally subject to 15% withholding under domestic law, subject to the applicable legal framework and treaty relief.

Foreign shareholders should therefore obtain transaction-specific tax advice rather than assuming that every shareholder receives identical treatment.

14. Corporate Tax and Dividend Withholding Are Separate Issues

Foreign investors sometimes misunderstand the relationship between company tax and dividend tax.

The Turkish company generally first calculates its corporate taxable income and pays corporate income tax.

Türkiye’s current general corporate income tax rate for ordinary commercial companies is 25%, while certain financial-sector entities are subject to a 30% rate.

After corporate tax and other relevant calculations, distributable profit may remain.

When this profit is subsequently distributed to a shareholder, dividend withholding may arise separately.

Therefore:

company-level corporate tax and shareholder-level dividend taxation are different stages.

Foreign investors calculating expected returns should model both.

15. Example: Foreign Investor Receiving Dividends

Consider a simplified example.

A Turkish software company has distributable profit after the relevant corporate-level calculations.

The general assembly decides to distribute:

TRY 10,000,000

to a foreign corporate shareholder.

Assuming, solely for illustration, that:

• the domestic 15% withholding rate applies;
• no lower treaty rate is available;
• and no other adjustment is relevant,

the withholding would be:

Gross Dividend: TRY 10,000,000

Withholding Tax: TRY 1,500,000

Net Dividend: TRY 8,500,000.

If a double-tax treaty reduces the applicable withholding rate, the result may be different.

The investor’s home jurisdiction may then also tax the dividend, potentially giving credit or relief for Turkish tax depending on domestic law and the relevant treaty.

Cross-border tax planning should therefore examine both countries, not Türkiye alone.

16. Can Dividend Payments Be Made in Foreign Currency?

Foreign shareholders naturally prefer to receive distributions in currencies such as:

• EUR;
• USD;
• GBP;
• CHF.

The actual payment mechanics should be coordinated with Turkish banking, foreign-exchange and accounting requirements.

The company’s general assembly decision and accounting records should clearly establish the amount and nature of the distribution.

If the corporate resolution determines an amount in Turkish lira but payment will effectively be transferred in foreign currency, the parties should ensure that the conversion methodology and payment documentation are clear.

Large dividend transfers may also trigger ordinary bank compliance checks.

17. Can Dividends Be Transferred Abroad?

Yes, as a general principle.

This is expressly protected within Türkiye’s foreign direct investment framework.

Article 3 of the Foreign Direct Investment Law provides that foreign investors may freely transfer abroad through banks or special financial institutions:

• net profits;
• dividends;
• proceeds from sale or liquidation;
• compensation;
• amounts arising from certain agreements;
• and specified foreign-loan payments.

This is one of the most significant protections available to international investors.

There is therefore generally no requirement that dividends earned by a foreign investor remain permanently in Türkiye.

18. Does “Freely Transferable” Mean the Bank Will Ask No Questions?

No.

The legal right to transfer dividends abroad does not eliminate:

• tax compliance;
• anti-money laundering controls;
• banking compliance procedures;
• accounting documentation;
• or source-of-funds verification.

For a significant dividend payment, a bank may ask for documents establishing the nature of the transaction.

These may include, depending on the circumstances:

• general assembly resolution;
• financial statements;
• dividend distribution calculation;
• tax withholding documentation;
• shareholder information;
• tax-residency documentation;
• and payment instructions.

This should not necessarily be interpreted as a prohibition on transferring the dividend.

It is part of the normal compliance process applicable to cross-border payments.

19. Can a Turkish Startup Pay Interim Dividends?

Potentially, yes.

Turkish law recognizes dividend advances (kâr payı avansı) for qualifying companies.

The Ministry of Trade explains that non-public companies may distribute dividend advances subject to the Dividend Advance Distribution Communiqué.

Among the core requirements are:

• a general assembly decision;
• profit reflected in interim financial statements for the relevant three-, six- or nine-month period;
• deduction of previous losses;
• taxes and financial provisions;
• mandatory reserves;
• and other required amounts.

The distributable dividend advance cannot exceed the applicable amount calculated under the Communiqué.

This can be useful for profitable companies where shareholders do not want to wait until completion of the full annual dividend cycle.

However, dividend advances require careful accounting and legal compliance.

20. Can a Startup Distribute Investment Money as a Dividend?

This question deserves special attention.

Suppose an investor contributes EUR 5 million to a startup through a capital increase.

The founders then want the company to distribute part of this amount back to themselves.

Investment capital is not automatically equivalent to distributable profit.

Turkish corporate law contains capital-maintenance principles designed to protect the company’s capital and creditors.

Dividend distributions should therefore be based on legally distributable sources, not simply on the fact that the company’s bank account contains cash.

A startup may have:

EUR 5 million cash

but

no distributable profit.

Liquidity and distributable profit are different concepts.

21. Can Shareholders Distribute All Available Profit?

Not necessarily.

Even where sufficient profit exists, the company must consider:

• statutory reserves;
• articles-of-association reserves;
• previous losses;
• contractual restrictions;
• financing agreements;
• investor agreements;
• banking covenants;
• and other legal obligations.

The board and shareholders should also consider the company’s continuing financial position.

A startup distributing all available cash and immediately becoming unable to pay employees, taxes or creditors can create serious corporate-governance problems.

22. Bank Loan Agreements May Restrict Dividends

A company may legally have distributable profit but still be contractually restricted from distributing it.

Financing agreements frequently contain covenants restricting:

• dividends;
• shareholder payments;
• related-party transfers;
• capital reductions;
• or repayment of shareholder loans.

For example, a lender may provide:

“No dividend may be distributed while an Event of Default continues.”

A dividend adopted without reviewing loan documentation may therefore create a contractual default.

Legal due diligence should include financing agreements before a significant distribution.

23. Shareholders’ Agreements May Also Restrict Dividends

A foreign investor may itself have negotiated restrictions on distributions.

For example, an investment agreement may require that:

• the investor approve any dividend;
• minimum cash reserves remain in the company;
• profits be reinvested for three years;
• debt be repaid before dividends;
• or distributions occur only after specified financial targets are reached.

The company should therefore review:

1. Turkish Commercial Code;
2. articles of association;
3. Shareholders’ Agreement;
4. Investment Agreement;
5. financing agreements;
6. and any preferred-share arrangements

before approving a distribution.

24. What If One Shareholder Receives Money but Others Do Not?

Payments to related shareholders require careful legal and tax review.

A controlling founder should not simply extract company value through:

• artificial consultancy fees;
• undocumented expenses;
• related-party loans;
• excessive management fees;
• or asset transfers

in order to avoid sharing profits with a foreign minority investor.

Such transactions may raise issues under:

• corporate law;
• directors’ duties;
• shareholder-equality principles;
• transfer-pricing rules;
• tax law;
• and the shareholders’ agreement.

For foreign investors, related-party transaction protections should therefore be included in investment documentation.

25. Minority Investors Should Negotiate Reserved Matters

A foreign investor holding 10% or 20% may have little ability to control ordinary general assembly decisions.

The investor can potentially negotiate reserved matters requiring its consent for specified transactions.

These may include:

• dividend distributions;
• material related-party transactions;
• capital increases;
• new debt;
• sale of major assets;
• changes to business activity;
• issuance of new share classes;
• amendments to the articles;
• or company sale.

Reserved matters can protect an investor against value being extracted or redirected without its involvement.

However, contractual rights should be structured carefully and, where necessary, coordinated with corporate documents.

26. What Happens If an Unlawful Dividend Is Distributed?

An unlawful distribution can create serious consequences.

Article 512 of the Turkish Commercial Code provides that shareholders who receive dividends or certain other payments unlawfully and in bad faith may be required to return them.

Improper distributions may also create issues for directors or managers responsible for the transaction.

This is why the company should not distribute money simply because all shareholders informally agree.

The legal availability of distributable funds should first be established.

27. Dividend Policy Should Be Negotiated During the Investment Round

A foreign investor should consider dividend strategy before subscribing for shares.

For an early-stage technology startup, immediate dividends may not make commercial sense because profits may need to be reinvested.

For a mature SaaS or profitable family-owned business, distributions may be one of the investor’s primary expected returns.

The shareholders should therefore discuss:

• growth strategy;
• expected investment horizon;
• reinvestment;
• cash reserves;
• dividend thresholds;
• financing needs;
• exit strategy;
• and preferred distributions.

An investor expecting annual cash returns should not rely solely on an assumption that “profitable companies normally pay dividends.”

That expectation should be reflected appropriately in the transaction structure.

28. Dividend Rights and Exit Rights Are Different

A startup investor can earn a return in two principal ways:

Dividend Return

The company distributes profits during the holding period.

Capital Gain

The investor sells its shares for more than the original investment price.

Some startups never distribute meaningful dividends because profits are continuously reinvested.

Instead, investors expect to realize their returns through:

• secondary share sales;
• strategic acquisition;
• merger;
• founder buyout;
• or IPO.

Dividend rights should therefore be analysed together with the investor’s exit rights.

Common Problems Foreign Shareholders Face With Turkish Dividends

Foreign shareholders may encounter issues such as:

1. The company is profitable but the majority shareholder refuses to distribute dividends.
2. The startup has cash but no legally distributable profit.
3. Previous years’ losses reduce the distributable amount.
4. Legal reserves were not properly calculated.
5. The dividend was paid without a valid corporate resolution.
6. The company applied the domestic tax rate without checking the relevant double-tax treaty.
7. The foreign shareholder failed to provide tax-residency documentation.
8. A bank delays the international transfer because corporate and tax documentation is incomplete.
9. A Shareholders’ Agreement restricts distributions without investor approval.
10. A loan agreement prohibits dividends while financial covenants are breached.
11. The founder withdraws company money through related-party payments instead of declaring dividends.
12. The shareholder expected a dividend but the investment documentation contains no dividend policy.
13. Different share classes have different economic rights.
14. The company tries to distribute newly invested capital instead of profits.
15. The investor misunderstands the difference between gross dividend and net amount received after withholding.

Frequently Asked Questions

Can a Turkish company pay dividends to a foreign shareholder?

Yes. Foreign shareholders may generally receive dividends from Turkish companies, provided that applicable corporate and tax requirements are satisfied.

Can dividends be transferred outside Türkiye?

Yes. Türkiye’s Foreign Direct Investment Law expressly permits foreign investors to transfer dividends abroad through banks and financial institutions.

What is the Turkish dividend withholding tax for foreign shareholders?

Under current domestic rules, the withholding rate applicable to many dividend distributions to non-resident shareholders is generally 15%, following the rate change effective from 22 December 2024.

A double-tax treaty may reduce the applicable rate depending on the shareholder and treaty conditions.

Does a foreign investor need to pay tax again in its own country?

Possibly.

The answer depends on the shareholder’s country of tax residence, domestic tax legislation and the applicable double-tax treaty.

Foreign tax credit or exemption mechanisms may prevent or mitigate double taxation.

Can the shareholder receive dividends in euros or dollars?

Cross-border dividend payments can generally be structured through the banking system, but currency, accounting, tax and documentation requirements should be coordinated before payment.

Can a company distribute dividends if it made a loss?

Ordinary dividends are generally based on net period profit and freely disposable reserves under Article 509 of the Turkish Commercial Code.

Accordingly, the availability of free reserves and historical losses must be examined before determining whether a distribution is legally possible.

Is a general assembly resolution required?

Dividend distribution is generally subject to the company’s corporate approval process, normally involving the general assembly for ordinary private Turkish companies.

Can a foreign shareholder force the company to distribute profit?

Not simply because the company made a profit.

The answer depends on Turkish corporate law, the articles of association, shareholder rights and contractual arrangements. Foreign investors concerned about dividend policy should address the issue in the investment documentation.

Can a startup pay dividends during the financial year?

Qualifying non-public companies can potentially distribute dividend advances subject to the statutory conditions and the Dividend Advance Distribution Communiqué.

Does Türkiye prevent foreign investors from taking profits out of the country?

As a general rule, no. The foreign investment framework expressly recognizes the ability of foreign investors to transfer net profits and dividends abroad.

Conclusion

A Turkish startup can generally pay dividends to its foreign shareholders, and foreign investors can generally transfer those dividends abroad.

However, a lawful cross-border dividend distribution requires more than simply having cash in the company’s bank account.

The company should first determine:

• whether legally distributable profit exists;
• whether previous losses must be covered;
• how much must be allocated to mandatory reserves;
• whether the articles impose additional requirements;
• whether shareholders have different economic rights;
• whether financing agreements restrict distributions;
• whether the general assembly has properly approved the dividend;
• what withholding tax applies;
• whether a double-tax treaty provides a lower rate;
• and what documentation the bank will require for the international payment.

For foreign shareholders, the distinction between gross accounting profit, legally distributable profit and the net amount ultimately received abroad is particularly important.

Türkiye provides a generally liberal framework for foreign investment and expressly allows dividends to be transferred abroad.

The principal risks therefore usually arise not from the shareholder’s foreign nationality, but from incorrect corporate procedures, tax treatment or poorly structured shareholder arrangements.

Foreign investors expecting regular returns from Turkish companies should therefore address dividend rights when negotiating the original investment rather than waiting until the company becomes profitable.

A properly structured investment should answer four questions from the beginning:

When can profits be distributed?

Who decides whether they will be distributed?

How will Turkish tax affect the payment?

How will the net dividend be transferred to the foreign shareholder?

Answering these questions at the investment stage can prevent significant disputes between founders and foreign shareholders later.

This article provides general information regarding Turkish law and taxation and does not constitute legal or tax advice. The tax consequences of dividend distributions should be reviewed according to the shareholder’s residence, legal status, ownership percentage, applicable double-tax treaty and the circumstances of the individual transaction.

Related reading: Foreign companies in Turkish litigation.