Withholding tax rate recudes from 5% to 1% for certain long-term construction and repair projects, Turkey

As it is known, advance payments and progress payments made under construction and repair projects that span more than one calendar year are subject to withholding tax pursuant to Article 94 of the Income Tax Law and Articles 15 and 30 of the Corporate Tax Law.

The withholding tax rates applied under these articles had been determined as 5% by the following Presidential Decrees, all dated January 12, 2009:
• Annex to the Council of Ministers Decision No. 2009/14592 (Income Tax Law Article 94),
• Annex to the Council of Ministers Decision No. 2009/14594 (Corporate Tax Law Article 15),
• Annex to the Council of Ministers Decision No. 2009/14593 (Corporate Tax Law Article 30).

With the Presidential Decree No. 9707, published in the Official Gazette dated 30 March 2025 and numbered 32857, an amendment has been made to the above decrees. Accordingly, the withholding tax rates have been revised as follows:
• 1% on progress payments made for construction and repair works related to railway lines, tramways, funiculars, monorails, subways, and urban rail transport systems,
• 1% on progress payments made for ship construction and repair works,
• 5% on progress payments made for all other long-term construction and repair works.

In this way, the general withholding tax rate for long-term construction and repair contracts has been differentiated for certain types of works, allowing a reduced rate of 1% to apply.

For all other projects not covered by the exceptions above, the standard 5% withholding tax will continue to apply to progress payments made to the contractors.

This amendment entered into force on its publication date and will be applicable to all payments made as of 1 April 2025.

Tax advisory, Tax Consulting