Holding Company Formation in Turkey

What Is a Holding Company in Turkey?

A holding company (holding şirketi) is a company whose primary purpose is to own shares in other companies (subsidiaries) and manage those investments. Turkey offers a favorable tax environment for holding structures, with significant exemptions on dividend income and capital gains from share disposals.

Turkish holding companies are typically established as Joint Stock Companies (JSC / A.Ş.) or, for smaller structures, as LLCs (Ltd. Şti.). A JSC is generally preferred for holding structures because it offers more flexibility in share classes, share transfers, and corporate governance.

Why Establish a Holding Company in Turkey?

Tax Efficiency

Turkey’s Corporate Income Tax Law provides significant exemptions that make Turkish holding companies tax-efficient vehicles:

• Dividend participation exemption: Dividends received from Turkish subsidiaries are 100% exempt from corporate income tax at the holding company level, provided the holding company owns at least 10% of the subsidiary’s shares and has held that stake for at least 12 months.
• Capital gains exemption: 75% of capital gains from the disposal of shares in subsidiaries are exempt from corporate income tax if the shares have been held for at least 2 years. (The remaining 25% is taxable at 25%, resulting in an effective tax rate of 6.25% on qualifying share sales.)
• Foreign dividend income: Dividends from foreign subsidiaries may also be exempt if specific conditions are met (foreign corporate tax ≥ 15%, shareholding ≥ 10%, held for 1 year).

Treaty Benefits

Turkey’s extensive network of double taxation treaties (covering 90+ countries) can reduce withholding taxes on dividends paid from Turkish subsidiaries to the Turkish holding company and on distributions made from the holding company to its foreign parent.

Centralized Management

A Turkish holding company provides a centralized management structure for a group’s Turkish and regional operations, enabling consolidated financial reporting, unified governance, and strategic direction from a single entity.

Typical Holding Structure

A common structure used by foreign investor groups looks like this:

Foreign Parent Company
        ↓
Turkish Holding Company (JSC/LLC)
  ↓              ↓              ↓
Turkish      Turkish       Turkish
Subsidiary   Subsidiary    Subsidiary
 (LLC)         (JSC)         (LLC)

The Turkish holding company owns the shares of each operating subsidiary. Dividends flow upward from the subsidiaries to the holding company (tax-exempt under the participation exemption). The holding company can then distribute those dividends to the foreign parent (subject to 15% withholding tax under domestic law, potentially reduced by treaty).

Formation Process

Step 1: Choose the Legal Form

For most holding structures, a Joint Stock Company (JSC) is recommended. It allows bearer shares, share classes with different rights, and has better compatibility with complex group structures. However, for simple two-level structures, an LLC may suffice.

• JSC minimum capital: 250,000 TRY
• LLC minimum capital: 50,000 TRY

See our JSC formation guide and LLC formation guide for complete formation steps.

Step 2: Draft the Articles of Association

The articles of association should clearly state that the company’s purpose includes holding shares in subsidiaries and managing investments. The articles should also address:

• Share capital structure and classes (for JSC)
• Profit distribution policy
• Board composition and authority
• Rules on acquiring and disposing of shares

Step 3: MERSIS and Trade Registry Registration

Register the holding company through the MERSIS system and complete Trade Registry filing at the local Chamber of Commerce. Timeline: 5–10 business days after documents are ready.

Step 4: Tax Office Registration

Register with the tax office. The holding company will be subject to corporate income tax on any taxable income (interest, management fees, and any non-exempt income).

Step 5: Acquire Shares in Subsidiaries

Once formed, the holding company acquires shares in existing subsidiaries through share transfer agreements or subscribes to new share issuances. Share transfers must be reflected in the subsidiary’s share ledger and, for LLCs, registered with the Trade Registry.

Tax Obligations of the Holding Company

Despite the generous exemptions, a Turkish holding company has ongoing tax obligations:

Even if the holding company’s income is primarily exempt dividends, it must file annual corporate tax returns and quarterly advance tax declarations.

Management Fees and Intercompany Services

A holding company may charge management fees to its subsidiaries for services such as strategic direction, financial management, HR, and legal coordination. These fees:

• Are deductible expenses at the subsidiary level (reducing their taxable income)
• Are taxable income at the holding company level (unless otherwise structured)
• Must comply with transfer pricing rules — fees must be set at arm’s length

See our Transfer Pricing guide for documentation requirements.

Governance and Compliance

For a JSC holding company, Turkish Commercial Code requirements apply:

• Board of directors (minimum 1 director for non-public JSCs)
• Annual general assembly of shareholders
• Annual financial statements (independent audit required if specific size thresholds are met)
• Profit distribution resolutions

For ongoing compliance obligations, see our Annual Compliance Requirements guide.

Holding Company vs. Direct Ownership

For a foreign investor with only one Turkish subsidiary, the added complexity of a holding layer may not be justified. A holding structure is most beneficial when managing multiple entities or planning future acquisitions.

Frequently Asked Questions

What is the minimum shareholding for the dividend participation exemption? The Turkish holding company must own at least 10% of the subsidiary’s share capital and must have held that stake continuously for at least 12 months prior to the dividend distribution.

Are capital gains fully exempt? No. The exemption is 75% of capital gains on shares held for at least 2 years. The remaining 25% is subject to corporate income tax at 25%, resulting in an effective rate of approximately 6.25%.

Can a foreign company act as the holding company for its Turkish subsidiaries, or does it need a Turkish holding entity? A foreign company can directly own Turkish subsidiaries. A Turkish holding company is beneficial primarily for the participation exemption and treaty structuring. Tax advice should be obtained before choosing the structure.

Can a Turkish LLC serve as a holding company? Yes. An LLC can hold shares in other companies. However, for larger or more complex holding structures, a JSC is typically preferred due to its greater structural flexibility.