Two agreements between Türkiye and the Hong Kong SAR are now in force: a comprehensive double taxation agreement and an investment promotion and protection agreement. For a Hong Kong company that owns a Turkish company, or plans to, they change how much Turkish tax is withheld on dividends, interest and royalties, and they add treaty protection for the investment itself.
This article is general information, not tax or legal advice.
The two agreements at a glance
| Tax treaty | Investment agreement | |
|---|---|---|
| Signed | 24 September 2024, Hong Kong | 1 June 2023 (Ankara) and 31 October 2023 (Hong Kong) |
| Approved in Türkiye | Law 7569 and Presidential Decision 10782 | Law 7570 and Presidential Decision 10796 |
| In force | 30 January 2026 | 4 February 2026 |
| Applies | Türkiye: from 1 January 2027. Hong Kong: from the 2027/28 year of assessment | Since entry into force |
When the treaty starts to apply
Entry into force and application are not the same. Under Article 28, the treaty applies in Türkiye:
- to taxes withheld at source on amounts paid or credited on or after 1 January 2027;
- to other taxes for tax years beginning on or after 1 January 2027.
In Hong Kong it applies from the year of assessment beginning on 1 April 2027.
A dividend that your Turkish company pays to its Hong Kong parent in 2026 is therefore still taxed at Türkiye’s domestic rate.
Withholding: domestic rate and treaty limits
Türkiye withholds 15% on dividends paid to a non-resident company with no permanent establishment in Türkiye (Presidential Decision 9286, Official Gazette 22 December 2024, No. 32760). From 1 January 2027 the treaty limits the Turkish tax as follows:
| Payment by the Turkish company | Treaty limit | Condition |
|---|---|---|
| Dividends | 5% | The beneficial owner is a company (not a partnership) that holds at least 25% of the capital of the paying company directly, throughout a 365-day period that includes the payment date |
| Dividends | 10% | All other cases |
| Interest | 7.5% | Interest derived by a financial institution on loans or debt instruments with a term of more than two years |
| Interest | 10% | All other cases |
| Royalties | 7.5% | Payments for the use of, or the right to use, industrial, commercial or scientific equipment |
| Royalties | 10% | All other cases |
Points to note:
- The limits apply only if the beneficial owner of the income is a Hong Kong resident.
- When counting the 365 days, changes in shareholding that result directly from a reorganisation, such as a merger or division of the shareholder or of the paying company, are ignored.
- Interest paid to the Hong Kong SAR Government, the Hong Kong Monetary Authority or the Exchange Fund is exempt from Turkish tax.
- These are upper limits. Turkish domestic withholding on interest and royalties depends on the type of payment and the lender, so check the domestic rate for each payment as well.
- The treaty does not change Turkish corporate tax on the profits from which dividends are paid.
- Profits from operating ships or aircraft in international traffic are taxed only where the operator is resident (Article 8).
For comparison, the mainland China–Türkiye tax treaty (Official Gazette 30 December 1996, No. 22863) limits Turkish tax on dividends to 10%.
The anti-abuse rule
The treaty’s full title refers to the prevention of tax evasion and avoidance. Article 27 (“Entitlement to Benefits”) puts that into practice. A treaty benefit is denied if it is reasonable to conclude that obtaining it was one of the principal purposes of an arrangement or transaction, unless granting it would be in line with the object and purpose of the treaty. Article 27 also keeps each side’s domestic rules against tax evasion and avoidance.
In practice, a Hong Kong company with a real role in the group is in a different position from one inserted shortly before a dividend just to reach the 5% rate. If you are thinking of moving Turkish shares to a Hong Kong company, look first at the business reasons and at the tax cost of the transfer itself.
What the investment agreement protects
According to the Hong Kong Government, the agreement provides:
- fair and equitable, non-discriminatory treatment;
- compensation in case of expropriation;
- free transfer of investments and returns;
- settlement of investment disputes under internationally accepted rules, including arbitration.
Türkiye’s list of agreements entering into force (Presidential Decision 11064) confirms 4 February 2026 as the start date. Who counts as an investor, the exceptions and the dispute forum are defined in the agreement itself. Ask your lawyers to check those definitions against your structure before you rely on them.
Practical steps for a Hong Kong parent
- Map the ownership chain. Does the Hong Kong company own the Turkish shares directly? What percentage, and since when? The 5% dividend rate needs at least 25%, held directly, for 365 days including the payment date.
- Plan the timing of distributions. Dividends paid or credited before 1 January 2027 bear 15% Turkish withholding. From that date the treaty limits can apply if the conditions are met.
- Get a Certificate of Resident Status. Hong Kong’s Inland Revenue Department issues it to Hong Kong residents who claim benefits under a double taxation agreement. Apply before the payment, so that the Turkish company has it on file when it withholds. The IRD issues certificates only once an agreement has become effective, so check the timing for payments due early in 2027. It also points out that the treaty partner, not the certificate, decides whether the benefit is granted.
- Review intra-group loans and licences. Check whether the lender is a financial institution and how long the loan runs; check what each royalty pays for. Related-party payments should be priced at arm’s length.
- Document substance. Be ready to explain what the Hong Kong company does, with Article 27 in mind.
What this means for you
From 1 January 2027, a Hong Kong parent that meets the ownership and beneficial-ownership conditions can receive Turkish dividends with 5% withholding instead of 15%. The investment agreement already applies.
- You already have a Turkish company: our bookkeeping and tax filing service covers the Turkish withholding tax returns. Before we apply a treaty rate to a payment to your Hong Kong parent, we check the conditions and documents with you.
- You are setting up under a Hong Kong holding company: a corporate shareholder needs a Turkish tax number first (ITIN), then the company is formed (company formation). Our step-by-step formation guide explains the documents.
- Your group is large: see our article on the global minimum tax in Türkiye.
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