Turkey Increased Its Corporate Tax Rate

Turkey Increased Its Corporate Tax Rate

September 12, 1998

TURKEY INCREASED ITS CORPORATE TAX RATE from 25% to 30%.

It also eliminated withholding taxes on dividends in favor of a tax on the distributing corporation at the time it pays dividends. The rate for the distributions tax is expected to be 10%. A 10% corporate surtax will continue to apply. 

Turkey may soon find itself in the same bind as India. India last year eliminated a requirement that Indian companies paying dividends to foreign shareholders must withhold income taxes on the shareholder.  Instead, a tax is imposed on the distributing corporation directly. Some argue the move backfired because the typical power sales contract with a state electricity board allows a passthrough of taxes imposed on the project company. Thus, the government ends up bearing the new distributions tax.