Primetax Guide: Cash Pooling in Türkiye

1. Cash pooling models and why classification matters

Physical cash pooling

Physical cash pooling involves actual transfers of funds between the participating entities and the pool leader. From a Turkish perspective, this is usually the most sensitive model because each debit or credit balance may represent an intercompany borrowing or lending position. A global arrangement that sweeps balances every day can therefore create a series of regulated cross-border credit movements rather than a simple treasury transfer.

Notional cash pooling

In a notional pool, cash is not physically transferred between participants. The bank notionally aggregates the balances for interest calculation and may use cross-guarantees or other security arrangements. The absence of a cash transfer can reduce direct intercompany loan movements, but it does not remove the need to review guarantee exposure, interest allocation, transfer pricing, bank documentation and any Turkish-law restrictions created by the contractual structure.

Multi-currency cash pooling

Multi-currency arrangements can improve group-wide liquidity management but require particular care for a Turkish participant. Turkish foreign-exchange rules restrict when a Turkish resident company may borrow in foreign currency and how foreign loans may be drawn and repaid. A model that works for another group jurisdiction should therefore not be assumed to work in Türkiye without a separate review.

The key practical question is not simply whether the group calls the arrangement a cash pool. The Turkish analysis starts with what the Turkish company is legally doing: borrowing, lending, guaranteeing, depositing, netting or paying for treasury services.

2. Foreign-exchange rules for a Turkish participant

The most important development for structuring a cross-border cash pool is the interaction with Decree No. 32 on the Protection of the Value of Turkish Currency and the Central Bank of the Republic of Türkiye (CBRT) Capital Movements Circular. Cross-border group funding is permitted in defined circumstances, but it is subject to banking intermediation, documentation and, for foreign-currency borrowing, specific eligibility rules.

Borrowing by a Turkish company from the foreign pool

Foreign loans obtained by a Turkish resident company are generally required to be drawn through a bank in Türkiye. The intermediary bank may require the loan agreement, repayment plan and supporting documents and is responsible for checking the transaction against the foreign-exchange rules. Foreign-currency borrowing is also subject to the borrower’s foreign-currency income position and the statutory exceptions in the Capital Movements Circular.

Where the Turkish borrower does not fall within an exception and its outstanding foreign-currency loan balance is below USD 15 million, the amount of the new foreign-currency loan together with the existing foreign-currency loan balance is generally limited by the borrower’s aggregate foreign-currency income for the preceding three financial years. The specific exemptions and calculation rules should be checked before each facility is implemented.

The revolving-credit restriction

A standard global physical pool often allows a participant to draw, repay and redraw within a continuously reusable balance. That feature requires particular attention in Türkiye. Article 24 of the CBRT Capital Movements Circular provides that, except for banks and financial institutions, Turkish residents may not use foreign revolving or current-account style loans that have no fixed maturity and allow repeated drawdowns and repayments within a credit limit. A foreign loan may be drawn in tranches if this is consistent with the amount and term stated in the agreement, but repaid amounts cannot become available for reuse.

This rule means that a global two-way sweep should not simply be extended to a Turkish company without analysing the mechanics. In practice, a Turkish participant may need a separately documented facility with a defined amount and maturity rather than an open-ended, reusable intercompany balance.

Lending by a Turkish company to the foreign pool

The current Capital Movements Circular permits Turkish resident persons to extend Turkish lira or foreign-currency loans to their foreign participations, foreign parent company and foreign group companies. The funds must be transferred through banks, and the Turkish lender must provide the intermediary bank with the loan agreement and documentation demonstrating the group relationship. The Circular also states that these loans may not be structured as open-ended revolving or current-account facilities.

Accordingly, an automatic daily sweep of Turkish surplus cash to an offshore pool leader should be mapped against the lending rules and the bank’s operational process. A “free transfer” description in the payment message does not change the legal character if the funds are economically repayable group financing.

3. Corporate-law considerations

A cash pool should also be consistent with the Turkish company’s own corporate interest, capital position and solvency. The fact that an arrangement benefits the group as a whole does not remove the need to consider the Turkish entity as a separate company with its own assets, creditors and governance obligations.

Loans to shareholders and group companies

Article 358 of the Turkish Commercial Code restricts shareholders from borrowing from the company unless their due capital contribution obligations have been fulfilled and the company’s profits together with its free reserves are sufficient to cover prior-year losses. This provision is particularly relevant where a Turkish subsidiary transfers cash upstream to a shareholder or parent under a physical pool.

For wholly owned group structures, Articles 203 and 204 of the Turkish Commercial Code contain special rules on directions given by the controlling company. A parent may, within the statutory framework, issue directions reflecting group policy, but it cannot require action that clearly exceeds the subsidiary’s payment capacity, endangers its existence or causes the loss of essential assets. The Turkish company should therefore retain sufficient liquidity and should not be used as an unlimited source of group funding.

Loan agreement and interest

Intercompany funding is also governed by the general loan provisions of the Turkish Code of Obligations. The agreement should identify the lender and borrower, currency, principal, maturity, repayment terms and interest mechanism. For commercial loans, interest can arise even where it is not expressly stipulated; in a group context, however, the tax rules make an arm’s-length pricing policy essential rather than optional.

Board approvals and treasury mandates should be aligned with the cash-pool agreement. Where the Turkish entity is a recurring net lender, management should be able to explain why the arrangement is commercially appropriate for that company, not only for the group treasury function.

4. Transfer pricing and pricing the cash pool

Cash pooling transactions between related parties fall within Article 13 of Corporate Tax Law No. 5520. Borrowing and lending are expressly treated as related-party transactions, and the terms must comply with the arm’s-length principle. The analysis should cover not only the headline interest rate but also the economic functions performed by the pool leader, the credit position of each participant and any guarantee or liquidity support embedded in the arrangement.

Interest on debit and credit balances

The rate paid by a Turkish net borrower and the rate earned by a Turkish net lender should be supported by market evidence. Relevant factors include the currency, term, amount, credit quality of the participant, seniority, security, group support, availability of alternative financing and the actual liquidity risk borne by the pool leader. Applying a single global rate without considering these factors can create a Turkish transfer-pricing exposure.

The role of the pool leader

A treasury entity that merely coordinates bank accounts and performs administrative functions may economically be entitled to a service-type return rather than the full financing spread. A pool leader that controls liquidity, assumes credit risk and has the financial capacity and personnel to manage those risks may justify a larger return. The written agreement should reflect the functions actually performed in practice.

Domestic and cross-border positions

For purely domestic related-party transactions, the Turkish transfer-pricing rules contain a treasury-loss condition that can affect whether an adjustment arises. That limitation does not provide the same protection for cross-border related-party transactions. Cross-border cash-pool pricing should therefore be supported as an arm’s-length transaction from the outset.

Interest calculations should be retained at participant level, with a clear daily or periodic balance history. A year-end journal entry unsupported by the underlying cash movements is not a substitute for contemporaneous pricing documentation.

5. Thin capitalisation and financing expense limitation

Thin capitalisation

Article 12 of the Corporate Tax Law applies where a Turkish company obtains debt directly or indirectly from its shareholders or persons related to them and the relevant debt exceeds three times the company’s shareholders’ equity during the financial year. The excess is treated as thin capital. Interest, foreign-exchange losses and similar financing costs attributable to the thin-capital portion are generally non-deductible for corporate income tax purposes.

Cash-pool borrowings from a foreign parent, sister company or group treasury entity may therefore enter the thin-capital calculation. The analysis should be made using the statutory related-party definitions and the beginning-of-period equity measure required by the law.

Pass-through bank funding

There is an important distinction where a group entity obtains funding from a bank, financial institution or capital market and passes that funding on to a related Turkish company under the same conditions. Turkish administrative guidance recognises that, where the maturity, interest rate and other lending terms are passed through without change, the borrowing may fall outside the thin-capital calculation under the specific statutory exception. If the group treasury entity changes the terms or adds a financing margin, the position should be reassessed rather than assumed to qualify.

Financing expense limitation

Thin capitalisation is not the only deductibility restriction. Under Article 11/1-i of the Corporate Tax Law and the applicable implementing rules, taxpayers other than specified financial-sector entities may also face a financing expense limitation where total liabilities exceed equity. Ten per cent of the financing costs attributable to the excess portion - including interest, commission and foreign-exchange costs - is treated as non-deductible, subject to the statutory rules and exclusions for amounts capitalised as investment cost.

A cash-pool borrower should therefore model thin capitalisation and the financing expense limitation separately and coordinate the calculations so that the same expenditure is not restricted twice. The 2026 Corporate Tax Return Guide continues to reflect both restrictions in the corporate tax computation.

6. Withholding tax and VAT

Withholding tax on interest paid abroad

Interest paid or accrued by a Turkish company to a non-resident lender is generally within the Turkish corporate withholding-tax regime. The domestic rate depends on the status of the lender. Interest on loans from foreign states, international institutions, foreign banks and qualifying foreign credit institutions that are authorised to lend in their home jurisdiction and lend to parties beyond their own related group is generally subject to 0% withholding under the relevant domestic decision. Other foreign loan interest, including interest paid to a typical non-financial related-party treasury company, is generally subject to 10% withholding under domestic law.

The applicable double-tax treaty must then be checked. A treaty may cap or reduce the Turkish tax on interest, but the lender must satisfy the treaty conditions, including residence and, where relevant, beneficial-ownership requirements. A cash-pool leader should not automatically be assumed to be the beneficial owner merely because it is the contractual lender.

Where debt is treated as thin capital, interest and similar payments other than foreign-exchange differences can be recharacterised as a deemed dividend at year-end. That recharacterisation may change the withholding-tax analysis and should be reviewed together with the relevant treaty.

VAT on financing

The original cash-pooling guide treated foreign-loan interest as automatically subject to reverse-charge VAT. The current position is more nuanced. Turkish administrative guidance generally treats financing supplied by a non-financial foreign related party as a service used in Türkiye; interest can therefore be subject to Turkish VAT under the reverse-charge mechanism where the foreign lender has no Turkish VAT establishment.

However, loans obtained from qualifying foreign banks or foreign credit institutions can fall within the VAT exemption for credit transactions under Article 17/4-e of the VAT Law. The lender’s regulatory status matters. A group treasury company that only lends within its group should not be assumed to qualify for the exemption simply because its business is described as treasury or finance.

Domestic intercompany lending is generally treated as a financing service for VAT purposes, and interest is subject to VAT unless a specific exemption applies. Outbound lending by a Turkish company should be reviewed separately, including whether the financing service is used abroad and whether the conditions for a service-export treatment can be met.

Revenue Administration rulings distinguish related-party/non-financial funding from qualifying foreign credit institutions for VAT purposes.

7. Stamp tax and RUSF

Stamp tax

The general stamp-tax rate for agreements containing a monetary amount remains 0.948% (9.48 per thousand), subject to the annual statutory cap and the rules governing where and how the document is executed or used. A foreign-law cash-pool agreement is therefore not automatically outside Turkish stamp tax merely because it is signed abroad; use, submission or benefit in Türkiye can be relevant to the analysis.

An important exemption applies to documents relating to loans granted by banks, foreign credit institutions and international institutions, including qualifying security and repayment documents. A loan made by an ordinary foreign group company or treasury centre does not automatically benefit from that exemption. The lender’s legal status and the specific document should be checked before relying on the exemption.

Resource Utilisation Support Fund (RUSF / KKDF)

Foreign loans obtained by Turkish residents other than banks and financing companies may also be subject to RUSF. For foreign-currency and gold loans, the current rates are based on average maturity:

• Average maturity of less than 1 year: 3%.

• Average maturity from 1 year (inclusive) to less than 2 years: 1%.

• Average maturity from 2 years (inclusive) to less than 3 years: 0.5%.

• Average maturity of 3 years or more: 0%.

For Turkish-lira loans obtained from abroad by resident non-bank companies, the current rate is 1% where the average maturity is less than one year and 0% where the average maturity is one year or more. Specific exemptions may apply depending on the borrower, lender and purpose of the financing.

RUSF can materially affect short-term cash pooling. A group may regard a balance as temporary treasury liquidity, while Turkish rules may treat it as a short-maturity foreign loan. Early repayment can also change the effective maturity and may require an additional RUSF calculation. The maturity profile should therefore be designed before the Turkish participant starts drawing from the pool.

Current foreign-loan RUSF rates reflected in Revenue Administration guidance; the July 2025 change for domestic bank/finance-company foreign-currency commercial loans is a separate rule and does not replace the maturity-based foreign-loan rates above.

8. Practical structuring for a Turkish group company

The safest structure depends on whether the Turkish company is expected to be predominantly a borrower, predominantly a lender or a genuine two-way participant. The legal and tax profile is different in each case.

Turkish company as a net borrower

Where the Turkish company is expected to draw from a foreign pool, the first step is to confirm whether it can borrow in the relevant currency under Decree No. 32 and the CBRT Circular. The facility should then be designed with a defined principal and maturity, bank intermediation and a repayment structure that does not create a prohibited revolving credit. Transfer-pricing support, thin-capital capacity, financing expense limitation, withholding tax, VAT and RUSF should be modelled before the loan is drawn.

Turkish company as a net lender

Where the Turkish company regularly has surplus cash, an outbound loan to a foreign parent or group company is possible within Article 48 of the CBRT Circular, but it must be documented and transferred through a bank and may not take the form of an open-ended revolving balance. The company-law restrictions on upstream lending, liquidity and solvency should be reviewed, and the Turkish company should earn an arm’s-length return for the financing it provides.

Turkish company as a two-way participant

A classic global pool in which the Turkish entity moves repeatedly between debit and credit positions is the structure that deserves the most scrutiny. The revolving-loan restriction can make an unrestricted two-way cash-pool account difficult to replicate in Türkiye. A common solution is to ring-fence the Turkish participant through separately documented inbound and outbound facilities, defined maturities and bank-controlled transfers rather than treating all group treasury movements as a single evergreen balance.

Notional pool as an alternative

A notional structure may reduce direct cross-border cash movements, but it is not automatically risk-free. Cross-guarantees, interest allocation, bank set-off rights and the remuneration of the treasury function should be reviewed under Turkish company law and transfer pricing. The contractual package should be analysed rather than relying on the absence of a physical sweep.

9. Documentation and ongoing compliance

A Turkish cash-pool file should allow a reviewer to trace each balance from the bank movement to the legal agreement, accounting entry, interest calculation and tax treatment. At a minimum, groups should maintain:

• the master cash-pool agreement and any Türkiye-specific accession or sub-facility agreement;

• board or management approvals showing the Turkish entity’s commercial rationale and authorised limits;

• documents evidencing the relationship with the foreign parent, participation or group company for CBRT Article 48 purposes;

• bank correspondence and the documents submitted for inbound or outbound loan transfers;

• currency, principal, maturity and repayment schedules for each facility;

• daily or periodic participant balances and detailed interest calculations;

• transfer-pricing benchmarking for borrower rates, lender rates, pool-leader remuneration and any guarantee fees;

• thin-capital and financing-expense-limitation computations;

• withholding-tax, VAT and RUSF analyses and returns where applicable;

• stamp-tax analysis for the master agreement, local accession documents, amendments and security documents.

The arrangement should be reassessed if the Turkish company moves from a net lender to a net borrower, the currency changes, a facility is extended or repaid early, the pool leader changes, the interest spread is revised or the bank introduces new guarantee or set-off mechanics. Those changes can alter the Turkish tax and foreign-exchange outcome even if the global cash-pool agreement remains formally unchanged.

Implementation sequence

Before onboarding the Turkish entity, the group should first map the expected cash flows, then classify each flow under Turkish foreign-exchange rules, confirm the banking route, determine the legal facility structure and only then finalise tax pricing and reporting. Implementing the global treasury mechanics first and analysing Turkish compliance afterwards can be difficult to unwind, particularly where payments have already created short-term or revolving loan balances.