No. Withholding tax (stopaj) is not applied on dividends distributed to legal entity shareholders. Withholding tax is applied on dividend payments made to individual shareholders.
Example:
ABC Makine A.Ş. has decided to distribute a dividend of 5,000,000 TL from 2023 and previous years to its shareholders. The company has two shareholders, one holding 50% of the shares as a legal entity and the other holding 50% as an individual.
The withholding tax on the dividend distribution will be calculated as follows:
Distributed Dividend: 5,000,000 TL
Shareholder ÇDE Turizm Ltd. Şti.: 2,500,000 TL (No Withholding Tax) Shareholder Deniz MERT: 2,500,000 TL (Withholding Tax 10% = 250,000) Net Dividend: 2,250,000 TL
Note: Legal reserves have been ignored in the above example.
EXAMPLE JOURNAL ENTRY
Example of the accounting entry that ÇDE Turizm Ltd. Şti., which receives dividends from ABC Makine A.Ş., will record:
__________________________ / __________________________
102 BANKS 2,500,000 TL
640 DIVIDEND INCOME FROM SUBSIDIARIES 2,500,000 TL
__________________________ / __________________________
Source: Istanbul Chamber of Certified Public Accountants
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. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.
