Beneficial Ownership Disclosure Rules in Turkey: A Guide for Investors

Introduction

The Turkish tax authority requires beneficial owners to disclose their identity and status to ensure compliance with withholding taxes on dividend payments from Turkish equities. This guide outlines the rules and regulations governing beneficial ownership disclosure in Turkey.

What are Beneficial Owners?

Beneficial owners are defined as individuals or entities who directly or indirectly hold at least 25% of the voting rights in a company, either by themselves or through a nominee holder.

Types of Beneficial Owners

There are three types of beneficial owners:

• Represented Beneficial Owners: These are investors who have appointed a permanent tax representative in Turkey.
• Unrepresented Beneficial Owners: These are investors who do not have a permanent tax representative in Turkey.
• Residents of a Double Taxation Treaty (DTT) Country: Investors from countries with which Turkey has a DTT may be eligible for reduced withholding taxes.

Disclosure Requirements

Beneficial owners holding a Tax ID or national ID number in Turkey are obliged to inform the Turkish Tax Office, via Clearstream Banking, of changes to their:

• Taxation status
• Workplaces (mainly applicable for Turkish corporate entities with branches located in different workplaces that are registered/recorded in the trade registry and tax offices)
• Windups/liquidations

Notification Process

Beneficial owners should notify Clearstream, which will then forward the notification to its depository, who in turn will notify the Tax Office accordingly. The following documents will be needed:

• Instruction by SWIFT MT599 free-format message
• Official apostilled Certificate of Name Change showing the former name and the new name of the investor and the effective date of change, when applicable.
• NRIF name change letter (only applicable to NRIF status accounts), when applicable.

Time Limits

Notifications should be made within a month of changes occurring. Any taxpayer who realises that a wrong taxation status or tax rate was applied that resulted in a tax underwithholding on a past income or capital gain must declare this to the Tax Office.

Declaration of Underwithholding

Clearstream’s depository will assist in declaring the underwithholding upon the beneficial owner’s request. The declaration is mandatory whenever the taxpayer (beneficial owner) identifies the underwithholding within five years of the date on which the income was paid/the capital gain occurred. No declaration needs to be made whenever the taxpayer identifies the underwithholding later than five years after the date on which the income was paid/the capital gain occurred.

Conclusion

Beneficial ownership disclosure in Turkey is a crucial aspect of complying with withholding taxes on dividend payments from Turkish equities. This guide outlines the rules and regulations governing beneficial ownership disclosure, including the types of beneficial owners, disclosure requirements, notification process, time limits, and declaration of underwithholding. By understanding these requirements, investors can ensure compliance with Turkish tax laws and avoid potential penalties.