Turkish Tax News
Emre BEYAZ
13 December 2016Emre BEYAZ
2141READS

Turkish & Dutch Participation Exemption Regimes For Domestic Subsidiaries on Capital Gains

Turkish Participation Exemption For Domestic SubsidiariesDutch Participation Exemption For Domestic Subsidiaries
• Only shareholdings which are disposed after being held for at least two full years, may benefit from the % 75 capital gain exemption• No minimum holding period of the subject subsidiaries prior to the disposal. Qualifying subsidiaries benefit from a % 100 capital gain exemption.
• No dividend distribution for 5 years• No time limit/waiting period for dividend distributions
• The sales price should be collected before the end of the second calendar year following the year of sale• No specific deadline regarding the collection of sales price
• Share transfer between related parties and group companies, which do not provide additional opportunities in economic terms, will be excluded from the scope of the exemption• No specific requirement regarding the purpose of the transaction
• Transfer, alienation or clearing of shares without receiving cash in return falls outside the scope of the % 75 capital gain exemption• No cash collection requirement
• Each foreign subsidiary in which the Turkish resident joint stock company has a participation must either be a joint stock company or a limited liability company• The Dutch holding company should at least have % 5 of the par value of the paid up share capital of a foreign subsidiary of which the equity is wholly or partly divided into shares
• As of the date of disposal, % 75 or more of the assets of the Turkish resident joint stock company, excluding liquid assets, must be composed of foreign subsidiaries for a continuous period of at least one year• No limitation with regard to balance sheet of the Dutch holding company
• During the test and calculation of the % 75 asset requirement only the subsidiaries in which the Turkish resident joint stock company has a participation of at least % 10 will be taken into consideration• No limitation with regard to balance sheet of the Dutch holding company
• The Turkish resident joint stock company must hold the shares of each foreign subsidiary for at least two years prior to the transfer of the shares• No minimum holding period requirement
• The Turkish holding company should at least have % 10 of the par valuo of the paid up share capital of a foreign subsidiary which must either be a joint stock company or a limited liability company• The Dutch holding company should at least have % 5 of the par value of the paid up share capital of a foreign subsidiary of which the equity is wholly or partly divided into shares
• As of the date of dividend collection, the foreign subsidiary should have been hold by the THC at least for a year• No limitation with regard to minimum holding period
• The foreign subsidiary’s profit should have been subject to a minimum effective tax burden of % 15• If the foreign subsidiary is an active participation, minimum effective tax burden is not a requirement to be fulfilled. If not, the foreign company should be subject to a minimum effective tax rate of % 10 based on Dutch tax principles
• The dividends of a particular financial year must be distributed to THC before the date on which THC files Turkish corporate income tax return of the related year.• No limitation with regard to the timing of the distribution of dividents as well as the physical transfer thereof

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