Presidential Decree No. 11257, published on 30 April 2026, raised the service export deduction to 100 per cent and eased the conditions of the exemption for dividends received from foreign companies. The Decree changes the rate in four provisions; its effect on the tax actually payable depends on whether the taxpayer is subject to income tax or to corporate income tax.
The Decree raised the profit deduction for exported services from 80% to 100%, lowered the shareholding required for the exemption on foreign dividends and participation income from 50% to 20%, and raised the partial participation exemption for companies from 50% to 80%. For income taxpayers, the 100% deduction removes the income tax on that profit where the conditions are met. The result is different for companies: the deduction and the exemption cannot be deducted in the domestic minimum corporate income tax calculation, so the tax does not fall below 10% of corporate profit.
Which rates did the Decree change?
The Decree is dated 29 April 2026 and rests on the authority given to the President in the Income Tax Law and the Corporate Income Tax Law. The four rates it changed are set out below; the other conditions of the provisions apply as written in the Laws.
| Provision | Previous rate | New rate |
|---|---|---|
| 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 |
| Foreign dividends received by individualsIncome Tax Law, Article 22(4) | At least 50% of the capital; half of the dividend exempt | At least 20% of the capital; half of the dividend exempt |
| Foreign participation income of companiesCorporate Income Tax Law, Article 5(1)(b) | At least 50% of the capital; 50% of the income exempt | At least 20% of the capital; 80% of the income exempt |
The previous rates were set by Law No. 7491. The other tax changes made by that Law are covered in our article on Law No. 7491.
From which period do the new rates apply?
The Decree entered into force on the date of its publication and applies to income and profits of taxation periods beginning on or after 1 January 2026. Income for 2025 is outside its scope.
| Situation | Rates applied | Note |
|---|---|---|
| Income of calendar year 2025 | Previous rates | Income declared in March and April 2026 |
| Income of calendar year 2026 | New rates | From the first advance tax period of 2026 |
| Special accounting period | New rates, from the accounting period that begins in 2026 | The previous rates apply to a period that began in 2025 and ends in 2026 |
| Transfer of 2026 income to Turkey | By the filing deadline of the return | For calendar-year taxpayers, 31 March 2027 for income tax and 30 April 2027 for corporate income tax |
What are the conditions of the service export deduction?
The Decree changed only the rate. To use the deduction, all the conditions written in the Law must be met.
- A service within scope. Architecture, engineering, design, software, medical reporting, bookkeeping, call centre, product testing, certification, data storage, data processing, data analysis and designated fields of vocational training; also education and health services subject to the permission and supervision of the relevant ministry.
- A customer abroad. The service is provided to persons not resident in Turkey, or to those whose place of business, legal seat and place of management are abroad.
- Benefit abroad. The service must be used exclusively abroad. Education and health services are provided in Turkey; the person benefiting must not be resident in Turkey.
- Invoice. The invoice or equivalent document is issued to the customer abroad.
- Transfer to Turkey. The whole profit is transferred to Turkey by the filing deadline of the return for the year in which it was earned. The deduction does not apply to profit that is not transferred in full and in time.
- Business purpose, for companies. The service must be among the main business activities written in the company’s articles of association.
The deduction is calculated on profit, not on revenue: the costs and expenses of the services in scope are deducted from their revenue, and shared expenses are allocated in proportion to revenue. No deduction is made if the activity ends in a loss, and an unused deduction is not carried forward. The value added tax exemption for exported services rests on a separate provision (Value Added Tax Law, Articles 11(1)(a) and 12(2)) and its conditions are assessed separately.
Does the 100% deduction bring the tax down to zero?
For income taxpayers, yes; for companies, no. The difference comes from the domestic minimum corporate income tax in Article 32/C of the Corporate Income Tax Law: the corporate income tax calculated cannot be less than 10% of corporate profit before deductions and exemptions. The exemptions and deductions that may be taken off corporate profit in this calculation are listed one by one in the article; the service export deduction and the foreign participation exemption are not among them. Law No. 7582 added the deductions for trading of goods abroad and for qualified service centres to that list, but not the service export deduction.
| Subject | Income taxpayer | Corporate income taxpayer |
|---|---|---|
| Deduction rate (2026) | 100% | 100% |
| Minimum tax | None | 10% of corporate profit |
| Tax on the service export profit | No income tax arises where the conditions are met | 10% of corporate profit where the tax calculated falls below the floor |
| Newly established company | — | No minimum tax for three accounting periods from the start of activity |
Example: how the higher rate affects two companies
Company A earns only a service export profit of TRY 10,000,000. Company B has, in addition, a domestic profit of TRY 10,000,000. Both are within the scope of the minimum tax and have no non-deductible expenses or prior-year losses. The calculation uses the general rate of 25%.
| Item (TRY) | Company A, 2025 | Company A, 2026 | Company B, 2025 | Company B, 2026 |
|---|---|---|---|---|
| Corporate profit | 10,000,000 | 10,000,000 | 20,000,000 | 20,000,000 |
| Service export deduction | 8,000,000 | 10,000,000 | 8,000,000 | 10,000,000 |
| Taxable base | 2,000,000 | 0 | 12,000,000 | 10,000,000 |
| Corporate income tax calculated | 500,000 | 0 | 3,000,000 | 2,500,000 |
| Minimum corporate income tax (10%) | 1,000,000 | 1,000,000 | 2,000,000 | 2,000,000 |
| Tax payable | 1,000,000 | 1,000,000 | 3,000,000 | 2,500,000 |
For Company A the higher rate does not change the tax payable; in both years the tax is the minimum amount. For Company B the tax on the domestic profit exceeds the floor, so the whole deduction feeds through and the tax falls by TRY 500,000.
What changed for foreign participation income and dividends?
Companies have two exemption routes. The Decree changed only the second one, the partial exemption that does not require the tax burden and holding period conditions.
| Condition | Full exemption | Partial exemption (2026) |
|---|---|---|
| Shareholding | At least 10% | At least 20% (previously 50%) |
| Holding period | At least 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 (previously 50%) |
| Minimum corporate income tax calculation | Cannot be deducted from corporate profit | Cannot be deducted from corporate profit |
The Corporate Income Tax General Communiqué explains how the partial exemption is applied:
- The part transferred is what counts. The exemption is not available for the part that is not brought to Turkey in time; it applies to the part that is. For the service export deduction, by contrast, the whole profit must be transferred.
- The shareholding is tested on the date the income is earned. The percentage held on that date is taken into account.
- Conversion into Turkish lira is not required. Exchange differences on the transfer date are disregarded in determining the exempt amount.
- Foreign tax is credited in part. Foreign tax relating to the exempt part cannot be credited; foreign tax relating to the taxable part may be credited against the tax calculated on the return.
For individuals the exemption rate has not changed: half of the dividend received from a foreign joint stock or limited liability company is exempt from income tax. What changed is the shareholding required; from 2026 a holding of at least 20% is sufficient. The dividend must still be transferred to Turkey by the filing deadline of the annual return.
For a company whose only income is foreign participation income, the minimum corporate income tax is 10% of corporate profit before the exemption, whatever the exemption rate. For newly established companies this calculation is not made in the first three accounting periods.
Which mistakes are common in practice?
- Treating the 100% deduction as zero tax for a company. The deduction cannot be taken off in the minimum corporate income tax calculation; the floor is 10% of corporate profit.
- Applying the new rates to 2025 income. The Decree is for periods beginning on or after 1 January 2026.
- Leaving part of the service fee abroad. The deduction depends on the whole profit being transferred to Turkey in time.
- Testing the shareholding on the filing date. The percentage held is assessed as at the date the income is earned.
- Crediting foreign tax that relates to exempt income. A credit is possible only for the part that remains taxable.
- Applying the same conditions to the profit deduction and to the value added tax exemption. The two provisions have different legal bases and conditions.
Frequently asked questions
When did Presidential Decree No. 11257 enter into force?
Does the 100% service export deduction apply to 2025 income?
Do companies in Turkey pay no tax at all on service export profit?
Can income taxpayers use the 100% deduction?
What happens if the whole service fee is not brought to Turkey?
What are the conditions of the 80% exemption for foreign participation income?
Can tax paid abroad be credited in Turkey?
Legal basis: Presidential Decree No. 11257 (Official Gazette of 30 April 2026, No. 33239); Income Tax Law, Articles 22 and 89; Corporate Income Tax Law, Articles 5, 10 and 32/C; Corporate Income Tax General Communiqué No. 1, section 5.2; Law No. 7582 (Official Gazette of 4 June 2026, No. 33270).
Ozbek CPA provides accounting, tax, payroll and company formation services to foreign-owned companies in Turkey. To have the effect of the service export deduction and the foreign participation exemption on your company’s tax burden calculated, please contact us.
