Tax Insight 2026-1: Türkiye’s New Tax Incentives for Service Exports and Foreign Participation Income

WHAT HAS CHANGED?

The new rules affect two main areas.

First, income derived from qualifying services performed in Türkiye and exclusively utilised abroad may now benefit from a 100% deduction. In practical terms, qualifying service export income may be excluded from the Turkish tax base through a full deduction, provided that the relevant statutory conditions are satisfied.

Second, the exemption regime for dividends and participation income derived from foreign joint-stock and limited liability companies has become more accessible. The minimum shareholding threshold has been reduced from 50% to 20%.

For corporate taxpayers, this change is accompanied by an increase in the exemption rate applicable to qualifying foreign participation income from 50% to 80%.

For individual taxpayers, the 50% exemption for qualifying dividends derived from foreign joint-stock and limited liability companies remains unchanged. However, reducing the minimum shareholding threshold from 50% to 20% may make the regime available to a broader range of individual shareholders, provided that the other statutory conditions, including the repatriation requirement, are satisfied.

WHY IT MATTERS

Although the Decision is framed as an amendment to existing rates and thresholds, its practical implications are wider.

The amendments support two policy objectives: encouraging foreign-currency-generating service activities and making the repatriation of foreign participation income more attractive.

This is particularly relevant for technology companies, software developers, engineering and design businesses, healthcare and education service providers, regional service hubs, Turkish-headquartered groups with foreign subsidiaries, and family-owned groups with international participation structures.

For service exporters, the increase to a 100% deduction may materially reduce the effective Turkish tax burden on qualifying income.

For corporate groups, the lower shareholding threshold and increased exemption rate may create room to revisit holding structures, dividend repatriation plans and capital allocation policies.

ELIGIBILITY AND DOCUMENTATION

The amended rules are favourable, but the statutory conditions remain important.

For service export income, the key question will remain whether the service is actually utilised abroad. This typically requires more than a contractual statement. Taxpayers should be able to provide evidence of the customer profile, scope of service, location where the benefit is consumed, invoicing flow and accounting treatment.

For foreign participation income, taxpayers should review whether the foreign entity qualifies, whether the ownership threshold is met, whether the relevant income is properly characterised and whether the repatriation requirement is satisfied within the statutory deadline.

The benefit will therefore depend not only on the new rates and thresholds, but also on how the relevant structure is operated and evidenced.

PILLAR TWO CONSIDERATIONS

Global minimum tax rules should also be considered.

For multinational groups within the scope of Pillar Two, a Turkish tax benefit may not always produce the same benefit at the group level. If the relevant income is treated as low-taxed income and becomes subject to top-up tax in another jurisdiction, part of the local Turkish advantage may effectively be neutralised.

This does not make the Turkish incentive irrelevant. However, it means that the benefit should be assessed not only from a Turkish tax return perspective, but also by reference to the wider group tax position.

PRIMETAX INSIGHT

Presidential Decision No. 11257 creates a useful opportunity for Turkish businesses with international revenue streams or foreign participation structures.

This is not, however, a change that should be addressed only at the tax return stage. Companies should review their contracts, invoicing models, accounting records, evidence of service delivery, dividend planning and repatriation mechanics before relying on the amended regime.

For service exporters, the priority should be to support the foreign utilisation of the service with clear documentation.

For groups with foreign subsidiaries, the priority should be to assess whether existing structures can now benefit from the lower 20% ownership threshold and the higher 80% corporate exemption rate.

The new framework is clearly positive. The important point is to ensure that the relevant income, documentation and group structure support the intended tax treatment.