Turkey: Distribution Of Profits And Calculation Of Distributable Profits Under Turkish Commercial Law

Last Updated: 24 November 2015
Article by Naz Bandik Hatipoğlu

Article by Av. Naz Bandik Hatipoğlu, Stj. and Av. Dicle Su Han


Year-end Dividends and Dividend Advance

The distribution of profits and the payment of any year-end dividends in respect of the preceding financial year are made each year upon the recommendation of the Board of Directors ("BoD") and approval of the shareholders at the annual General Assembly ("GA"). Dividends are payable on a date and in the form determined at the annual GA. Advance dividend payments are also possible in joint stock companies under the TCC provided that the respective company is profitable during the relevant accounting period where the dividend advance will be distributed. Such calculations are made based on the profit generated according to interim financial statements (i.e. March, June, and September). It should be noted that such advance dividend is eventually deducted from the year end dividends and the decision of an advance dividend is rendered in the annual general assembly of the company. In other words, shareholders do not become entitled to receive dividends solely based on interim financial statements but receive an advance payment from the year-end financials. In the event that the net profit of the company based on the year-end financials does not cover the dividend advance within the year, the dividend advance exceeding the net profit will be deducted from the free reserves as in the balance sheet of the previous year and if the free reserves fall short of covering the distributed dividend advance, the excessive dividend advance is returned to the company by the shareholders upon notification by the BoD.

Under Turkish law, the statute of limitations in respect of dividend payments, including interim dividends, is five years following the date of the GA approving the distribution, after which time uncollected dividends are transferred to the Treasury.

Dividends can only be determined in Turkish Lira by the GA. A shareholder wishing to receive dividends in a foreign currency is exposed to currency fluctuations in general and particularly between the date on which dividends are declared and the date on which dividends are paid.


It is also noteworthy to underline the relation of the independent auditing requirement with the distribution of profit which was introduced by the new TCC. The new system opened the door to new questions regarding the basis of the calculation of net profit. Before the launch of the new accounting and bookkeeping standards and requirements, all financial statements used to be prepared in accordance with the Tax Procedural Law, with the exception of public companies. However after 1 January 2013, companies became obligated to prepare two separate financial statements if they are subject to independent auditing, one under the Turkish Accounting Standards – a transposition of the International Financial Standards (IFRS) – and the other subject to the Tax Procedural Law, which inevitably caused certain accounting discrepancies. A recent development, the Decision of Public Monitoring, Accounting and Audit Standards Institution dated 26 August 2014, brings the requirement for the companies and institutions that are listed in its annex to prepare their financial statements pursuant to Turkish Accounting System and leaves an optional choice for the others that are not listed. The list contains a range of companies and institution such as banks, joint-stock companies, financing institutions etc.

Nevertheless, there is now a vital question waiting to be answered: briefly, which accounting system must a company, subject to independent auditing, take as the basis to calculate its profit?

The legislation does not provide any express provision in this regard. This ambiguity has already been settled for public companies as they are also required to prepare IFRS financial statements in addition to tax law based financial statements under the capital market legislation. Accordingly, the "Profit Share Guide" issued by Capital Market Board provides that the upper limit of the distributable profit for public companies is the profit calculated in accordance with the Tax Procedural Law based financial statements. Based on this provision, some argue that the net profits of the company should be calculated based on the Tax Procedural Law. On the other hand, a widely held view is that the net profits of the company subject to independent auditing should be calculated according to the annual balance sheet, which is prepared based on the Turkish Accounting Standards in order to comply with the requirements of the Turkish Commercial Code. Usually in practice, certified public accountants suggest that their clients calculate their profit in accordance with the system which brings the lowest level of profits, to be on the safe side. This might be either the Tax Procedural Law or the Turkish Accounting Standards, depending on the criteria they bring.

It seems that Turkish companies will continue to struggle with this ambiguity until the issue is addressed by supplementary legislation and the market practice is settled with relevant court precedents.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
ELIG Gürkaynak Attorneys-at-Law
Erdem & Erdem Law
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
ELIG Gürkaynak Attorneys-at-Law
Erdem & Erdem Law
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions