Declaration of foreign dividend income in Türkiye, the 50% exemption conditions, and the crediting of taxes paid abroad are clarified within the scope of a tax ruling. The tax treatment of income earned abroad by fully liable (resident) individuals in Türkiye is particularly significant with respect to dividend income received from foreign companies. One of the most common questions in practice is whether dividends that have already been taxed abroad must also be declared again in Türkiye. The tax ruling issued by the Rize Revenue Directorate dated 08.07.2024 and numbered E-85550353-120.01[2023]-22775 provides important explanations regarding the taxation of dividend income derived from a company resident in the United Kingdom. This article examines the issue strictly within the framework of the specific case addressed in that ruling. What Is the Specific Case in the Tax Ruling? In the case addressed in the ruling, an individual taxpayer who provides translation services in Türkiye as a sole proprietor and is therefore subject to income tax liability, also earns dividend income from a company established in the United Kingdom, where both the legal and effective management centers are located. The applicant stated that both the corporate profits and the dividends distributed to him had already been taxed in the UK and requested clarification as to whether additional income tax would be payable in Türkiye. Case Study Illustration To make the matter more concrete: Mr. Murat is a resident individual in Türkiye who provides translation services through a sole proprietorship. He is also a shareholder in a company established in the UK. At year-end, the company generated profits and distributed dividends to him. Both the corporate earnings and the dividends were taxed in the UK. Mr. Murat’s key question is:Should these already-taxed dividends be declared again in Türkiye, or does foreign taxation eliminate further tax liability in Türkiye? The ruling answers this question within the framework of both the Income Tax Law and the Double Taxation Avoidance Agreement between Türkiye and the United Kingdom. Are Turkish Tax Residents Taxed on Foreign Income? Under Article 3 of the Income Tax Law, individuals resident in Türkiye are taxed on their worldwide income, regardless of whether it is earned domestically or abroad. According to Article 4, individuals with a domicile in Türkiye or who stay in Türkiye for more than six months within a calendar year are considered resident taxpayers. Accordingly, in cases such as the one addressed in the ruling, dividend income obtained from a UK-based company falls within the scope of taxation in Türkiye. Are Foreign Dividends Considered Investment Income? Pursuant to Article 75 of the Income Tax Law, dividends, interest, and similar income derived from financial capital or capital-representing assets outside the scope of commercial, agricultural, or professional activities are classified as investment income (movable capital income). Dividends from shares and income derived from participation rights are explicitly included in this category. Therefore, dividend income obtained from a foreign company is treated as investment income. Must Foreign Dividends Always Be Declared? The ruling evaluates this question under two alternative scenarios: 1. If Exemption Conditions Are Not Met If the conditions set out in Article 22/4 of the Income Tax Law are not satisfied, dividends obtained abroad that are not subject to withholding tax in Türkiye and are not covered by any exemption must be declared in full, provided they exceed the annual declaration threshold. As stated in the ruling: 2023 threshold: TRY 8,400 2024 threshold: TRY 13,000 2025 threshold: TRY 18,000 For the 2025 tax year, foreign dividend income exceeding TRY 18,000 must be declared in March 2026. 2. If Exemption Conditions Are Met If the conditions under Article 22/4 are satisfied: 50% of the dividend is exempt from income tax The remaining 50% is subject to declaration under the general rules When Does the 50% Exemption Apply? According to the amendment introduced by Law No. 7491 (effective from 01.01.2023): Dividends obtained from foreign joint stock or limited liability companies are eligible for a 50% exemption, provided that: The taxpayer holds at least 50% of the paid-in capital of the foreign company The dividend is transferred to Türkiye by the deadline for filing the annual income tax return Both conditions must be satisfied simultaneously. Will the Dividend Be Declared in Türkiye? According to the tax administration: If exemption conditions are not met, the entire dividend must be declared (if above the threshold) If conditions are met, half of the dividend is exempt, and the remainder must be declared Thus, dividend income earned from the UK may be subject to full or partial taxation in Türkiye, depending on the circumstances. Can Taxes Paid Abroad Be Credited in Türkiye? Under Article 123 of the Income Tax Law, taxes paid abroad on foreign income may be credited against the income tax calculated in Türkiye, provided that: The foreign tax is a personal income tax It is documented with official certification The documents are approved by Turkish embassies/consulates or authorized representatives However, the portion corresponding to exempt income cannot be credited. What Does the Double Taxation Agreement with the UK Provide? The Double Taxation Avoidance Agreement between Türkiye and the United Kingdom, effective since 01.01.1989, governs such cases. Under Article 10 (Dividends): Dividends may be taxed in both countries However, the source country’s taxation right (UK) is limited, typically capped (notably up to 20% depending on the case) How Is Double Taxation Prevented? Double taxation is avoided through the tax credit method under Article 23 of the Agreement. This means: Taxes paid in the UK may be credited against Turkish income tax on the same income This prevents the same income from being fully taxed twice Why Is a Certificate of Residence Important? To benefit from treaty provisions, the taxpayer must provide a certificate of residence confirming that they are fully taxable in Türkiye on their worldwide income. This document must be submitted to the UK tax authorities to apply treaty benefits such as reduced withholding rates. Conclusion According to the tax ruling issued by the Rize Revenue Directorate on 08.07.2024, dividend income earned by a resident individual in Türkiye from a UK-based company is subject to taxation in Türkiye. If exemption conditions are not met, the full amount is declared If conditions are met, 50% is exempt, and the remainder is declared Taxes paid abroad may be credited, subject to proper documentation The double taxation agreement ensures relief through the credit mechanism Frequently Asked Questions Question Answer Are dividends earned abroad taxed in Türkiye? Yes. Resident individuals may need to declare such income in Türkiye. Must dividends taxed in the UK also be declared in Türkiye? Yes. Foreign taxation alone does not eliminate declaration obligations. Are foreign dividends considered investment income? Yes. They are classified as movable capital income. How does the 50% exemption apply? If conditions are met, half of the dividend is exempt, and the rest is declared. What is the declaration threshold? TRY 8,400 (2023), TRY 13,000 (2024), TRY 18,000 (2025). Is an income tax return required? Yes, depending on thresholds and exemption conditions. Can foreign taxes be credited? Yes, subject to documentation and excluding exempt portions. How does the tax treaty apply? Both countries may tax, but double taxation is prevented via tax credit. Why is a residence certificate needed? To benefit from treaty provisions. When is the 50% exemption applied? When Article 22 conditions are fulfilled. Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. 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