Primetax Guide: Ordinary Partnerships, Joint Ventures and Consortia in Türkiye: Taxation and Investor Takeaways

Introduction

Large infrastructure, energy, industrial and public-sector projects in Türkiye are frequently undertaken by two or more contractors acting together. The parties may use a Turkish company as the project vehicle, but many projects are instead carried out through a contractual arrangement without separate legal personality.

The terminology can be misleading. A document may describe the arrangement as a joint venture, consortium or partnership, while the Turkish tax treatment depends on the substance of the arrangement and, in the case of a business partnership (iş ortaklığı), whether the participants have requested separate corporate income tax status. The tax classification should therefore be determined before bids are submitted and contracts are signed, rather than inferred from the English title of the agreement.

Three Structures That Need to Be Distinguished

An ordinary partnership (adi ortaklık) is a contractual partnership governed by the Turkish Code of Obligations. It has no separate legal personality and is not itself an income or corporate income tax taxpayer. Its profit or loss is attributed to the partners.

A business partnership (iş ortaklığı) is a specific corporate income tax concept under Article 2(7) of the Corporate Income Tax Law. Where the statutory conditions are met and the participants request this tax status, the business partnership becomes a separate corporate income tax taxpayer even though it still has no separate legal personality under private law.

A consortium is generally an arrangement in which the participants divide the project into clearly identifiable scopes and each participant undertakes its own part. A consortium is outside the business partnership definition where the members are not jointly responsible for the whole project and the allocation of work is properly reflected in the contractual documentation.

Ordinary Partnerships (Adi Ortaklık)

The ordinary partnership is regulated by Articles 620 and following of the Turkish Code of Obligations. Two or more persons combine their contributions or efforts for a common purpose without creating a separate legal entity.

As a general private-law rule, partners that jointly, or through a representative, assume obligations towards a third party within the partnership relationship are jointly and severally liable unless otherwise agreed with the third party. Internal allocation of risk between the partners does not necessarily alter the employer's or another creditor's rights unless the relevant contractual arrangements support that result.

Income and Corporate Tax Treatment

An ordinary partnership is fiscally transparent for income and corporate income tax purposes. The partnership calculates the result of its activity, but the resulting profit or loss is allocated to the partners in accordance with their shares and included in each partner's own tax computation. A corporate partner includes its share in corporate taxable income; an individual partner applies the rules relevant to commercial income.

This treatment also means that losses arising in an ordinary partnership may, subject to the general tax rules applicable to the partner, flow through to the partners. This is materially different from a corporate-tax business partnership, whose losses remain at the business partnership level.

VAT, Withholding and Tax Administration

Although an ordinary partnership is not an income or corporate income tax taxpayer, it is treated as a separate business unit for VAT purposes. It normally has its own VAT registration, maintains the relevant records, issues invoices for partnership activities and files VAT returns separately from the partners. It may also have withholding-tax responsibilities in its own name.

This distinction is operationally important: invoices relating to the partnership activity should generally be addressed to, and issued by, the partnership where that is the correct transaction party. A transparent income-tax result does not mean that VAT and documentation can be handled informally through the individual partners.

Foreign Corporate Partners

A foreign corporate participant in an ordinary partnership carrying on a project in Türkiye should separately analyse whether the activity gives rise to a Turkish permanent establishment or other taxable business presence. In construction, installation and similar projects, the applicable double tax treaty may contain a project-duration threshold, while domestic-law concepts of workplace and permanent representative also remain relevant.

Where the foreign partner is required to file a Turkish corporate income tax return in respect of its Turkish business profits, the general 2026 corporate income tax rate is 25%, subject to any specific statutory rate or incentive. Under domestic law, after-tax profits transferred to the foreign head office are generally subject to a 15% branch-profit remittance withholding tax. The applicable double tax treaty may reduce that rate or otherwise affect the result.

Business Partnerships (İş Ortaklığı)

The Corporate Income Tax Law allows qualifying project partnerships to request separate corporate income tax status as a business partnership. This is a tax classification: it does not convert the arrangement into a company or give it separate legal personality.

According to the Corporate Income Tax General Communiqué, the principal characteristics include a partnership formed to perform a specific job expected to be completed within a defined period, a contract between the business partnership and the employer, joint responsibility of the participants to the employer for the whole contracted work, sharing of the profit at the end of the project, and termination of the tax status after the work and the related tax obligations have been completed.

If the participants do not request corporate income tax status, an arrangement that is otherwise a collaborative project structure may remain taxed as an ordinary partnership. The election therefore changes the taxpayer, but it does not change the private-law nature of the relationship by itself.

Corporate Income Tax Position of the Business Partnership

A business partnership that has elected corporate taxpayer status computes and pays corporate income tax in its own name. The general corporate income tax rate for 2025 and 2026 is 25%, although specific sectors or projects can be subject to different statutory rates.

From 2025, business partnerships are expressly within the scope of the domestic minimum corporate tax regime. Broadly, corporate income tax cannot fall below 10% of the pre-exemption and pre-deduction corporate profit, subject to the exclusions and adjustments specified in Article 32/C. The minimum-tax position should therefore be modelled where the project expects to rely on material exemptions or deductions.

A key structural difference is the treatment of losses. Losses incurred by a corporate-tax business partnership cannot be passed through and deducted by its partners. They remain losses of the business partnership and can only be used within the limits of the rules applicable to that taxpayer.

Distributions to the Partners

After-tax profit distributed by a business partnership is treated as profit-share income rather than as a transparent allocation of project profit. For a non-resident corporate partner, Turkish domestic law generally imposes 15% withholding on the distribution, subject to any lower rate available under the applicable double tax treaty.

For a Turkish corporate partner, the domestic participation-income rules should be considered when the profit share is received. The tax profile at partner level should therefore be reviewed separately from the tax paid by the business partnership itself.

VAT and Other Compliance

A business partnership has separate tax registrations and performs its filing, invoicing, bookkeeping, VAT and withholding obligations independently from its partners. The partnership normally invoices the employer for the contracted work and accounts for the related VAT in its own returns.

Consortia

A consortium is not a separate category of corporate taxpayer merely because the agreement uses that description. The decisive point for Turkish tax purposes is whether the members have divided the work into distinct scopes or have jointly undertaken the entire job.

The Corporate Income Tax General Communiqué states that a structure in which each participant undertakes a specified part of the work falls outside the business partnership definition. The allocation should be stated in the contract with the employer. If it is set out only in an agreement among the consortium members, the employer's acceptance of that allocation becomes important.

In a properly structured consortium, each participant accounts for the revenue, expenses and tax consequences of its own scope. Foreign participants separately determine whether their activities constitute a Turkish permanent establishment. VAT registration and invoicing should follow the actual contractual allocation and the identity of the party supplying each package.

The common statement that consortium members always have limited liability is too broad. Liability to the employer and third parties depends on the contractual structure and applicable law. What distinguishes the consortium for tax purposes is the separation of work packages, not a universal statutory limitation of liability.

Long-Term Construction and Repair Projects

Many infrastructure projects fall within the special regime for construction and repair work extending over more than one calendar year. Where the conditions of Article 42 of the Income Tax Law are met, profit or loss from the relevant construction or repair work is determined definitively in the year in which the work is completed rather than recognised under the ordinary annual basis.

Progress payments relating to qualifying long-term construction and repair work are generally subject to 5% withholding, creditable against the final income or corporate income tax liability. Specific project categories may be subject to a special rate under a Presidential Decision.

The rule applies by reference to the nature of each activity. This is particularly important for consortia: one member may undertake a multi-year construction package subject to the special regime while another performs engineering, procurement or other services that are taxed under ordinary annual principles. The contractual separation of scope therefore affects both liability and tax timing.

Permanent Establishment and Treaty Analysis

For foreign contractors, the partnership label does not replace the permanent-establishment analysis. A foreign participant may have a Turkish permanent establishment because of a fixed place of business, a construction or installation project that exceeds a treaty threshold, or the activities of a dependent representative. The applicable treaty should be checked from the outset because project duration thresholds and attribution rules differ by treaty.

The allocation of profit to the Turkish taxable presence should also reflect the functions performed, assets used and risks assumed in Türkiye. Head-office charges, financing, equipment allocations and intra-group services should be documented consistently with the corporate tax return and transfer pricing rules.

Why the Tax Election Is Not Simply a Rate Choice

The original comparison between an ordinary partnership and a business partnership is often presented as if both structures create the same 25% tax cost and differ only in whether the second layer is called branch-profit tax or dividend withholding. That is too simple.

The election changes who is the corporate taxpayer, where losses sit, how the profit is legally characterised, how tax registrations and filings are organised, and how treaty provisions may apply. It can also change the domestic minimum-tax analysis. For a foreign investor, the better structure depends on the project economics, loss profile, treaty, financing arrangements and exit or profit repatriation plan.

Equally, electing corporate tax status does not turn the joint venture into a limited-liability company or automatically make it a single legal borrower. Financing and security arrangements remain dependent on the underlying contracts, the partners and the requirements of the lenders and project authority.

Illustrative Project

Assume a foreign contractor and a Turkish contractor jointly undertake a large Turkish infrastructure project. If they perform the project through an ordinary partnership, the partnership itself is transparent for income and corporate tax; each partner takes its share of the result into its own tax position, while the partnership maintains separate VAT and withholding compliance. The foreign partner must determine whether the activity creates a Turkish permanent establishment and, if so, the branch-profit rules become relevant.

If the same parties qualify for and elect business-partnership status, the business partnership becomes the corporate taxpayer. It pays corporate income tax on the project result, its losses do not pass to the partners, and the after-tax profit is distributed as profit-share income. A distribution to the foreign partner is generally subject to dividend-type withholding, subject to treaty relief.

If the project is instead divided so that one contractor is solely responsible for the civil works and the other solely for a separate engineering or systems package, a consortium treatment may be appropriate. Each participant then accounts for its own package, and different tax timing can apply to the different scopes.

Practical Structuring Considerations

Before selecting the project structure, international investors should consider at least the following points:

• Do not rely on the terms “JV” or “consortium” in the bid documents; identify the Turkish legal and tax classification separately.

• Decide at the outset whether a qualifying joint project should request corporate income tax status as an iş ortaklığı or remain tax-transparent as an adi ortaklık.

• For a business partnership, confirm that the contract and operating model satisfy the conditions in the Corporate Income Tax General Communiqué, including joint responsibility for the whole work.

• For a consortium, document each member's scope clearly and ensure the employer recognises the allocation where required.

• Model the treatment of project losses: ordinary-partnership losses may flow to the partners, while business-partnership losses remain at the partnership level.

• For foreign participants, analyse permanent-establishment exposure and treaty thresholds before mobilisation begins.

• Model both corporate income tax and the second-layer branch-profit or dividend withholding tax, using the actual treaty applicable to the investor.

• Consider the domestic minimum corporate tax where an iş ortaklığı or foreign permanent establishment is required to file a Turkish corporate income tax return.

• For multi-year construction and repair work, identify the Article 42 scope and the withholding treatment of progress payments.

• Align the contract, invoicing model, VAT registration, accounting records and financing documents with the intended structure.

Conclusion

Ordinary partnerships, business partnerships and consortia can all be effective structures for projects in Türkiye, but they are not interchangeable. An ordinary partnership is tax-transparent for income and corporate tax, a business partnership is a separate corporate taxpayer by election, and a consortium generally leaves each participant responsible for the tax consequences of its own clearly identified project scope.

For 2026, the general corporate income tax rate remains 25% and the domestic withholding rate on relevant dividend and branch-profit remittances is generally 15%, subject to treaty relief. Corporate-tax business partnerships are also within the domestic minimum corporate tax regime introduced from 2025. These features mean that the choice of structure can affect not only tax cost but also loss utilisation, tax timing, compliance, treaty treatment and financing documentation.

The most reliable approach is to determine the legal responsibilities and tax status together before the project agreement is signed. Where the contractual allocation, tax registrations and actual conduct remain aligned throughout the project, the structure is much easier to defend and administer.