Law No. 7491 was published on 28 December 2023 and amended a number of Turkish tax laws, chiefly those on income tax, corporate income tax, value added tax and special consumption tax. This article covers the 33 articles of the Law that matter for tax practice, setting out each amended provision as it reads today and the rates that apply in 2026.
Three parts of the Law are applied most often today: the exemption for dividends and participation income from foreign companies, the profit deduction for exported services, and the separate value added tax return filed by parties responsible for withholding. The rates for the first two were changed by Presidential Decree No. 11257: for periods beginning on or after 1 January 2026, the required shareholding is 20%, the exemption for companies is 80% and the service export deduction is 100%. The lump-sum expense allowance of 0.5% on export revenue was abolished for income earned from 2024, and the corporate tax exemption for FX-protected deposits ended on 30 June 2024.
Which rates under Law No. 7491 apply in 2026?
The rates of the two incentives introduced by the Law were reset by Presidential Decree No. 11257, published in the Official Gazette of 30 April 2026 (No. 33239). The new rates apply to income and profits of taxation periods beginning on or after 1 January 2026; the rates in the Law apply to earlier periods.
| Provision | Rate under Law No. 7491 | Periods beginning on or after 1 January 2026 |
|---|---|---|
| Foreign dividends received by individualsIncome Tax Law, Article 22(4) | 50 per cent of the capital; half the dividend exempt | 20 per cent of the capital; half the dividend exempt |
| Foreign participation income of companiesCorporate Income Tax Law, Article 5(1)(b) | 50 per cent of the capital; 50 per cent of income | 20 per cent of the capital; 80 per cent of income |
| Exported services, income taxpayersIncome Tax Law, Article 89(1)(13) | 80% of the profit deducted | 100% of the profit deducted |
| Exported services, companiesCorporate Income Tax Law, Article 10(1)(ğ) | 80% of the profit deducted | 100% of the profit deducted |
Under all four provisions the income must be transferred to Turkey by the filing deadline of the return for the year in which it was earned. For the service export deduction the whole profit must be transferred and the invoice must be issued to the customer abroad.
Text of the Law
“Half of the dividends listed in items (1), (2) and (3) of the second paragraph of Article 75 that are received from entities in the nature of joint stock or limited liability companies whose legal seat and place of business are not in Turkey is exempt from income tax, provided that at least 50% of the paid-in capital of those entities is held and that the dividend is transferred to Turkey by the date on which the annual income tax return for the calendar year in which it was received must be filed.”
“For participation income that companies derive from their participation in the capital of foreign entities in the nature of joint stock or limited liability companies whose legal seat and place of business are not in Turkey, the exemption rate is applied as 50%, without the other conditions set out in this item being required, provided that the company holding the participation owns at least 50% of the paid-in capital of the foreign participation and that the income is transferred to Turkey by the date on which the corporate income tax return for the accounting period in which it was earned must be filed.”
The 50% figures remain in the text of the Law; from 2026 the rates shown in the table above apply under the Decree.
What Law No. 7491 changed in the Income Tax Law
The seven Income Tax Law provisions covered here read as follows after the amendment.
| Provision | Rule after the amendment | Effective |
|---|---|---|
| Repeated Article 20/BLaw No. 7491, Article 7 | The exemption also covers income from individual courses, training, data processing and product promotion delivered over electronic media. | Income earned from 1 January 2024 |
| Article 22, fourth and fifth paragraphsLaw No. 7491, Article 8 | Half of foreign dividends is exempt. The President may set either rate anywhere between zero and 100 per cent. | Income earned from 1 January 2023 |
| Article 40(1)Law No. 7491, Article 9 | The undocumented lump-sum expense of 0.5 per cent on export and overseas contracting revenue was repealed. | Income earned from 1 January 2024 |
| Article 89(1)(13)Law No. 7491, Article 10 | Raised from 50 to 80 per cent, conditional on transfer of the whole profit. 100 per cent from 2026. | Income earned from 1 January 2023 |
| Article 94Law No. 7491, Article 11 | Withholding on multi-year contract progress payments may be differentiated by public or private, duration, type and contractor status. | 28 December 2023 |
| Provisional Article 67Law No. 7491, Article 12 | The ceiling on the withholding rate authority is 40 per cent, exercisable by issuer, date, account type and opening date. | 28 December 2023 |
| Provisional Article 76Law No. 7491, Article 14 | The exemption for gains on disposal of licensed warehouse receipts was extended to 31 December 2028. | 28 December 2023 |
To use the exemption in repeated Article 20/B, an account must be opened with a bank established in Turkey and all revenue must be collected through that account; the bank withholds 15% income tax on the amounts credited. The exemption is not available where the income exceeds the amount in the fourth bracket of the income tax tariff, which is TRY 5,300,000 for 2026. The tariff is set out in our guide to income tax in Turkey.
What changed in the Corporate Income Tax Law?
The six Corporate Income Tax Law provisions covered here read as follows after the amendment.
| Provision | Rule after the amendment | Effective |
|---|---|---|
| Article 4(1)(p)Law No. 7491, Article 57 | The guarantee company owned by participation banks is exempt from corporate income tax. | Income earned from 1 January 2024 |
| Article 5(1)(b) and Article 5(2)Law No. 7491, Article 58 | A second route was added without the tax burden and one-year holding tests; the President sets its rates. | Income earned from 1 January 2023 |
| Article 10(1)(ğ)Law No. 7491, Article 59 | Raised from 50 to 80 per cent, conditional on transfer of the whole profit. 100 per cent from 2026. | Income earned from 1 January 2023 |
| Article 15(4)Law No. 7491, Article 60 | Withholding on progress payments to resident companies may be set by the nature of the work and the contractor. | 28 December 2023 |
| Article 32(7)Law No. 7491, Article 62 | The five-point reduction extends to manufacturers and suppliers exporting through a foreign trade company under an intermediary agreement. | Income earned from 1 January 2023 |
| Provisional Article 14Law No. 7491, Article 63 | Extended to 30 June 2024, with power to extend further. No further extension was issued. | 28 December 2023 |
Two exemption routes for foreign participation income
The Law did not remove the existing exemption; it added a second route beside it. Where a participation in a low-tax country cannot meet the conditions of the full exemption, the partial exemption applies.
| Condition | Full exemption | Partial exemption (2026) |
|---|---|---|
| Shareholding | At least 10% | At least 20% |
| Holding period | One year, without interruption | Not required |
| Tax burden in the country of the participation | At least 15 per cent; the Turkish rate for financing, insurance and securities participations | Not required |
| Transfer to Turkey | By the filing deadline of the return | By the filing deadline of the return |
| Exemption rate | The whole income | 80% of the income |
Law No. 7582, published in the Official Gazette of 4 June 2026 (No. 33270), introduced a corporate income tax rate of 12.5% for the manufacturing income of companies that hold an industrial registry certificate and actually manufacture, and for income from agricultural production. The rate applies from the first advance tax period of the 2027 accounting period. The five-point reduction on export income is not applied in addition to income taxed at this rate.
What changed in value added tax and special consumption tax?
The Law amended seven provisions of the Value Added Tax Law and three provisions of the Special Consumption Tax Law.
| Provision | Rule after the amendment | Effective |
|---|---|---|
| Value Added Tax Law, Article 29(1)(ç)Law No. 7491, Article 30 | Tax declared and paid under the reverse charge is listed as a separate deductible input tax. | 1 January 2024 |
| Article 36Law No. 7491, Article 31 | The President may remove the right to a refund as well as to deduct, and set the goods and services affected. | 28 December 2023 |
| Articles 41 and 46Law No. 7491, Articles 32 and 33 | VAT return No. 2 was given its own deadline: under the Law, filing by the 21st and payment by the 23rd. | 1 January 2024 |
| Provisional Articles 29, 32 and 33Law No. 7491, Articles 34, 35 and 36 | Exemptions for build-operate-transfer projects, health and education facilities, urban rail transfers and social security real estate ran to 31 December 2028. | 28 December 2023 |
| Special Consumption Tax Law, Article 2(1)(d)Law No. 7491, Article 43 | Dealers and agents qualify as motor vehicle traders only under a contract in official form. | 28 December 2023 |
| Article 5(1)(b)Law No. 7491, Article 44 | Deliveries from the domestic market to free zones are not treated as exports; the export exemption does not apply. | 28 December 2023 |
| Provisional Article 6Law No. 7491, Article 45 | The minimum fixed tax on mobile phones runs to 31 December 2033, revalued annually. | 28 December 2023 |
The text of the Law refers to the 21st and the 23rd of the month. Tax Procedure Law Circular No. 164 of 10 February 2024 extended both the filing and the payment deadline of VAT return No. 2 to the end of the 25th day of the following month, for returns due on or after 1 February 2024.
What changed in tax procedure, stamp duty and other laws?
The remaining ten provisions concern the Tax Procedure Law, the Stamp Duty Law, tax collection, the powers of the Revenue Administration and social security premiums.
| Provision | Rule after the amendment | Effective |
|---|---|---|
| Tax Procedure Law, repeated Article 413Law No. 7491, Article 15 | Bodies receiving Revenue Administration data pay at least TRY 0.25 per query or returned record, revalued annually. | 1 January 2024 |
| Tax Procedure Law, provisional Article 30Law No. 7491, Article 16 | Half-life depreciation on new machinery covers assets acquired by 31 December 2024. | 28 December 2023 |
| Tax Procedure Law, provisional Article 33Law No. 7491, Article 17 | For banks, finance, insurance and capital market institutions, the 2024 and 2025 inflation adjustment result is disregarded in taxable income. | 28 December 2023 |
| Stamp Duty Law, additional Article 2Law No. 7491, Article 20 | Limited to investments financed in foreign currency; winning an international tender no longer suffices on its own. | Tenders launched after 28 December 2023 |
| Stamp Duty Law, Table No. 1Law No. 7491, Article 21 | On a cancelled tender, the duty on the contract is refunded along with the duty on the tender decision. | 28 December 2023 |
| Law No. 6183, provisional Article 8Law No. 7491, Article 5 | Purchase of real estate from public entities against their debts runs to 31 December 2028. | 28 December 2023 |
| Expenditure Taxes Law, Article 29Law No. 7491, Article 6 | Limited to consumers with no dwelling registered in their name on the date the loan is drawn. | 28 December 2023 |
| Law No. 5345, Article 27Law No. 7491, Article 50 | On a system outage, filing, document and payment deadlines may be reset by up to 15 days. The Risk Analysis System gained a statutory basis. | 28 December 2023 |
| Law No. 5345, Article 29Law No. 7491, Article 51 | Contracted staff limited to information technology; revenue specialists may become directors without examination after five years. | 28 December 2023 |
| Law No. 5510, provisional Article 100Law No. 7491, Article 56 | Unpaid general health insurance premiums for periods before 2014, with penalties, were waived; paid premiums are not refunded. | With effect from 31 December 2023 |
Which later measures affected these provisions?
Five developments since the Law was published have changed how the provisions above are applied.
| Date | Measure | Effect |
|---|---|---|
| 4 June 2026 | Law No. 7582 | A 12.5 per cent rate on manufacturing and agricultural income from the first advance tax period of 2027; no five-point reduction on top. |
| 30 April 2026 | Presidential Decree No. 11257 | Shareholding condition 20 per cent, company exemption 80 per cent, service export deduction 100 per cent. |
| 25 December 2025 | Law No. 7571 | Provisional Article 37: no inflation adjustment in 2025, 2026 and 2027, even if the conditions are met. |
| 30 June 2024 | Expiry of the period | No further extension was issued and the exemption ended. |
| 10 February 2024 | Tax Procedure Law Circular No. 164 | Filing and payment of VAT return No. 2 moved to the end of the 25th. |
Which mistakes are common in practice?
- Applying the new rates to 2025 income. The 20% shareholding, the 80% exemption and the 100% deduction are for periods beginning on or after 1 January 2026.
- Bringing the income in after the filing deadline. The exemption and the deduction do not apply to the part that is not transferred in time; for exported services the whole profit must be transferred.
- Continuing to book a lump-sum expense on export revenue. The 0.5% allowance has not been available since 2024 income; expenses must be documented.
- Leaving VAT return No. 2 to the deadline of the regular return. The return filed by the party responsible for withholding has its own deadline: filing and payment by the end of the 25th day of the month.
- Treating a delivery to a free zone as an export for special consumption tax. These deliveries fall outside the export exemption.
- Confusing the partial exemption with the full exemption. Where the tax burden and holding period conditions are met, the whole income is exempt; the 80% rate applies where they are not.
Frequently asked questions
When did Law No. 7491 enter into force?
What is the profit deduction for exported services in Turkey in 2026?
What are the conditions of the exemption for foreign participation income?
How are dividends received by individuals from foreign companies taxed?
By which day of the month is VAT return No. 2 filed?
Is the 0.5% lump-sum expense allowance for exporters still available?
Are deliveries to free zones treated as exports for special consumption tax?
Legal basis: Law No. 7491 (Official Gazette of 28 December 2023, No. 32413); Presidential Decree No. 11257 (Official Gazette of 30 April 2026, No. 33239); Law No. 7582 (Official Gazette of 4 June 2026, No. 33270); Law No. 7571 (Official Gazette of 25 December 2025, No. 33118); Tax Procedure Law Circular No. 164 (10 February 2024).
Ozbek CPA provides accounting, tax, payroll and company formation services to foreign-owned companies in Turkey. To have the application of the foreign participation exemption and the service export deduction to your company reviewed, please contact us.
