Thousands of Turkish companies used the cash amnesty: Laws 6736, 7143, 7326 and most recently 7440 (2023) allowed them, for 3% tax, to remove from their books cash that was recorded but not physically present, and fictitious receivables from partners. Most accountants did not expense the difference immediately, but "parked" it in temporary account 296. A Council of State ruling of 18 June 2026 has shown that the way this account is later closed can cost the company dividend withholding tax.
Why the difference was held in account 296
The amnesty laws set only the 3% rate; they did not say which account should record the correction. There were two options. First: expense the difference immediately to other extraordinary expenses (account 689), cutting equity in one move, which pushed some companies close to the insolvency threshold. Second: hold the difference in temporary account 296 and reduce equity only by the 3% paid. Most chose the second route, an understandable accounting choice: the balance sheet looks healthier for the finance-expense limitation, thin capitalisation and loss carry-forward calculations. The problem is not the choice itself, but how the account is closed later.
What Danıştay ruled
At many companies, account 296 was eventually closed against retained earnings from prior years. The 3rd Chamber of the Council of State (ruling E.2024/4503, K.2026/3120) held this to be a profit distribution. The reasoning: the law allows only prior-year losses to be offset against prior-year profits, and the amount in account 296 is not an operating loss but a bookkeeping correction difference. By reducing distributable profit this way, the company effectively transfers value to its partners, and must therefore withhold dividend tax. The court upheld the withholding assessment. The Finance Ministry had already taken this position; it now has a court ruling behind it.
Three situations and what to do in each
The account has already been closed against retained earnings, and no audit has taken place yet. The key question is timing: file the withholding voluntarily under the voluntary disclosure regime (pişmanlık), or wait for an audit. Voluntary disclosure costs the tax plus late-payment interest; an assessment following an audit adds a tax-loss penalty on top. With audits now reaching almost a third of large taxpayers, betting that the issue will not be found is becoming an increasingly expensive gamble. Note that voluntary disclosure is available only before an audit formally begins.
An assessment has already arrived, and a dispute is under way. After the Danıştay ruling, expecting a different outcome on the merits is unrealistic, and the settlement procedure (uzlaşma) deserves serious consideration. But abandoning the dispute entirely is not necessary: see the argument below.
The amount is still sitting in account 296, and nothing has been done yet. This is where the real opportunity lies. Before closing the account against retained earnings, consider a capital increase from internal resources. A capital increase is an equity transaction, not a profit distribution, so it carries no withholding risk. It can also solve a second problem at the same time: by 31 December 2026, companies with capital below the new minimum (250,000 lira for an A.Ş., 50,000 for an Ltd.) must raise it or fall into automatic dissolution. This route has its own technical conditions, which balance sheet items can be transferred to capital is determined on the specific balance sheet together with your accountant.
Does the ruling have a weak point?
Honestly: there are no guarantees, but there is an inconsistency worth using in an appeal or in new cases. In 2024, the same chamber (E.2022/3017, K.2024/5674), on imputed interest charged on a fictitious cash balance, held that without a concrete and legally valid finding, a calculated amount cannot be treated as actually transferred to partners. Closing account 296 is likewise, in substance, a pure bookkeeping entry with no real outflow of money to the partners. Set the two rulings side by side, and the line between "a bookkeeping operation" and "a real economic result" is not drawn consistently. Nobody can promise a case will be won on this, but the argument deserves a place in the petition.
What to check now
If your company used the cash amnesty, answer three questions: what is the current balance in account 296; was it closed against retained earnings, and when; and does a capital increase from internal resources suit your balance sheet, especially given the minimum capital deadline.
Used the cash amnesty, or not sure what your accountant did with the difference? We will review the balance sheet, assess the withholding risk and find a way to close the issue without an assessment. Contact us.