A Turkish company that earns income abroad and has already paid tax on it in the source country is entitled to credit that tax against Turkish corporate tax. In practice, the credit is regularly forgotten in the return. The Grand Chamber for Tax Disputes of Türkiye's Council of State (ruling of 28 January 2026, E:2024/69, K:2026/11) has confirmed this is a correctable error, and that a corrected return removes the basis for a tax payment demand. But a separate ruling shows that the deadlines here are unforgiving.
How the foreign tax credit works
Where a company earns income abroad that is taxable in Türkiye, tax already paid in the source country is credited against the Turkish corporate tax on that income. There is one cap: the credit cannot exceed the amount produced by applying the Turkish corporate tax rate to the foreign income.
If, in the year of the credit, the company has no taxable profit in Türkiye, for example because of loss carry-forwards or exemptions, and the foreign tax cannot be credited in full or in part, the credit right carries forward until the end of the third following tax period.
Most of Türkiye's double tax treaties use the credit method, applied under the rules of Turkish corporate tax law.
How payment abroad is evidenced
A credit is only available with documentary proof: a certificate from the competent authority of the source country, authenticated by the Turkish embassy or consulate there. If the documents are not available at assessment, the tax on the relevant portion is assessed but deferred, and the documents must be submitted to the tax office within one year of the assessment date. If they are not submitted in time without a valid reason (force majeure), late-payment interest is charged on the deferred tax.
Treaties do not lift the deadlines
An important limitation: double tax treaties remove neither the one-year documentation deadline nor the three-year limit for using the credit. In a case heard by the 4th Chamber of the Council of State (21 March 2023, E:2020/1168, K:2023/1168), a company sought to credit taxes withheld abroad on service payments for 2008-2011, but had not applied to the tax office with the documents within the required period. The assessment was upheld.
A forgotten credit is fixed through the return
Under the Tax Procedure Law (Article 117), a credit that was not made, or was made incorrectly, is treated as an error in the amount of tax. Where there is no dispute on the merits, the error is corrected by filing a corrected return.
That is exactly the situation the Grand Chamber examined. The company included its foreign income in the return and calculated tax, but did not credit the tax paid abroad. The tax office issued a payment demand. The company filed a corrected return with the credit, attached the documents and asked for the demand to be cancelled. The tax court cancelled it: after the correction, there was simply no debt. In 2023 the 4th Chamber reversed that ruling, holding the demand lawful because the tax had been assessed on the company's own return. The appellate court insisted on its decision, and the Grand Chamber upheld it. The outcome: a corrected return with a substantiated credit removes the legal basis for the payment demand.
What this means in practice
If your Turkish company receives foreign income with tax withheld at source (a typical case: service fees or dividends from another country, including countries along the Türkiye-Kazakhstan corridor), check three things. Was the foreign tax credited in the return. Do you have a certificate from the source country authenticated by a Turkish consulate, and are you within the one-year deadline. Is the three-year carry-forward period for any uncredited amount about to expire, if there was no profit to absorb it.
If the credit was forgotten, correct the return immediately rather than waiting for a demand. And if a demand has already arrived, the 2026 ruling gives a direct argument: after the correction, there is no basis for collection.
Earning foreign income through a Turkish company? We will review the foreign tax credit for past periods, the deadlines and the documents, and prepare corrected returns where needed. Contact us.