Shareholder loans are a widely used financing mechanism in Turkish companies — they allow shareholders to inject capital without diluting ownership percentages, without the formality of a capital increase registered at the Trade Registry, and without the delays and costs associated with external debt financing. However, the apparent simplicity of a shareholder loan conceals a demanding compliance environment: Turkish tax law requires that loans between related parties be priced at arm's length; the thin capitalization rules under the Corporate Tax Law (Kurumlar Vergisi Kanunu, Law No. 5520) limit the interest deductibility of loans from shareholders who hold more than a defined ownership threshold; the disguised profit distribution rules impose withholding tax on interest payments that are not commercially justified; and in publicly traded companies, the Capital Markets Board (SPK) imposes specific disclosure and approval requirements for related-party loans. A shareholder loan that is undocumented, interest-free, or structured without regard to these rules may be recharacterized by the Turkish Revenue Administration (GİB) as equity rather than debt, with consequences that include loss of interest deductibility, imposition of withholding tax, and corporate tax assessments. The Turkish Corporate Tax Law (Kurumlar Vergisi Kanunu) and the transfer pricing provisions it contains are accessible at Mevzuat. This article provides a comprehensive, practice-oriented guide to shareholder loan agreements in Turkish companies, addressed to shareholders, company management, foreign investors, and their advisors who need to understand the legal structure, tax compliance obligations, and risk management considerations applicable to shareholder lending in Turkey.
Legal nature and enforceability of shareholder loans
A lawyer in Turkey advising on the legal nature of shareholder loans must explain that a loan from a shareholder to a Turkish company is a standard loan agreement (ödünç sözleşmesi) governed by the Turkish Code of Obligations (TBK, Law No. 6098), and its enforceability depends on the same conditions applicable to any commercial loan: mutual consent, identified principal amount, defined repayment terms, and—for amounts exceeding the statutory threshold—written documentation. An oral or undocumented shareholder loan is legally risky on multiple fronts: in a shareholder dispute or insolvency proceeding, the company may contest the loan's existence or characterize it as an equity contribution, leaving the shareholder with no enforceable debt claim and no preference over equity holders in the distribution of assets. Practice may vary by authority and year — check current guidance on the current Turkish civil court standards for establishing the existence of an undocumented shareholder loan and on the evidentiary requirements for proving that a transfer of funds was a loan rather than a capital contribution.
An Istanbul Law Firm advising on the corporate law dimension of shareholder loans must explain that the Turkish Commercial Code (TTK, Law No. 6102) imposes specific requirements on transactions between a company and its shareholders that affect both the formal validity of the loan and the directors' liability exposure. A loan from a shareholder to the company is a related-party transaction under TTK, and the company's board of directors must ensure that the transaction terms are commercially reasonable, that the transaction is properly approved through the applicable internal governance procedure, and that it is correctly recorded in the company's statutory books and annual financial statements. Directors who approve a shareholder loan on terms that are unfavorable to the company—for example, at a below-market interest rate or without any repayment mechanism—may face personal liability for any resulting loss to the company or its minority shareholders. The corporate structure Turkey framework—covering the governance and compliance obligations of Turkish limited liability and joint stock companies—is analyzed in the resource on corporate structure Turkey. Practice may vary by authority and year — check current guidance on the current TTK provisions governing related-party transactions in Turkish joint stock companies and on the board approval requirements applicable to shareholder loans of different amounts.
A Turkish Law Firm advising on the courts' approach to shareholder loan recharacterization must explain that Turkish courts — and, separately, the Turkish Revenue Administration — may recharacterize a loan as a capital contribution where the economic substance of the arrangement supports equity rather than debt characterization. The factors that indicate equity rather than debt include: no defined repayment schedule; repayment contingent on the company's profitability; interest that mirrors dividend distributions rather than reflecting a market rate; and the lender's conduct as an owner rather than as a creditor (for example, waiving repayment repeatedly without formal documentation). A well-drafted shareholder loan agreement that establishes a defined repayment schedule, a commercially justified interest rate, and a creditor's enforcement right in the event of default provides the strongest defense against recharacterization. Practice may vary by authority and year — check current guidance on the current Turkish Revenue Administration's criteria for distinguishing shareholder loans from equity contributions and on any recent GİB circulars that have updated the recharacterization analysis.
Drafting the shareholder loan agreement
A law firm in Istanbul advising on shareholder loan agreement drafting must explain that a legally sound shareholder loan agreement (pay sahibi kredi sözleşmesi) must contain: identification of the parties (the lending shareholder and the borrowing company, with their trade registry and identity numbers); the principal amount; the disbursement mechanics (lump sum or tranches, bank transfer references); the interest rate and calculation basis (fixed or variable, daily or annual, compounded or simple); the repayment schedule (specific dates, amounts, and method); the events of default and the lender's remedies; the governing law and dispute resolution clause; and the representations and warranties of both parties. For cross-border shareholder loans where the lender is a foreign entity, the agreement should additionally address the currency of the loan (subject to the foreign exchange regulations under Decree No. 32), the applicable withholding tax regime and any treaty benefit claims, and the enforceability of the agreement in both Turkish and foreign jurisdictions. Practice may vary by authority and year — check current guidance on the current Turkish foreign currency loan regulations under Decree No. 32 and on any recently changed restrictions on shareholder loans denominated in foreign currency to Turkish resident companies.
An English speaking lawyer in Turkey advising on the board approval and internal documentation requirements must explain that a shareholder loan to a Turkish company should be accompanied by a formal board of directors resolution (yönetim kurulu kararı) — or in a limited liability company (limited şirket), a managers' decision (müdürler kurulu kararı) — that authorizes the company to accept the loan on the specified terms. The board resolution should specifically identify the lender, the principal, the interest rate, the repayment terms, and the authorization for the company's authorized signatory to sign the loan agreement on the company's behalf. Without this authorization, the company's capacity to enter the loan may be challenged, and a director who signed without proper authorization may face personal liability. The resolution should be registered in the company's decision book (karar defteri), which is a statutory book that must be maintained by all Turkish companies. Practice may vary by authority and year — check current guidance on the current TTK requirements for board resolution content in related-party lending transactions and on the specific authorization chain required for shareholder loans that exceed the company's ordinary course financing threshold.
A Turkish Law Firm advising on security and enforcement provisions in shareholder loan agreements must explain that an unsecured shareholder loan ranks as an ordinary unsecured creditor claim in Turkish insolvency proceedings — behind secured creditors (pledge holders, mortgage holders) and ahead of equity holders. Where the shareholder lender wants stronger creditor protection, options include: taking a pledge over the company's movable assets (including receivables, equipment, or intellectual property) under the Commercial Enterprise Pledge Law (Ticari İşletme Rehni Kanunu); registering a mortgage over company real estate; requiring a personal guarantee (kefalet) from the other shareholders; or — in larger transactions — structuring the loan as a participating or convertible instrument that grants additional rights in the event of non-repayment. Each security structure has different registration, cost, and enforcement implications. The enforcement proceedings Turkey framework—covering the mechanics of debt collection against Turkish companies—is analyzed in the resource on enforcement proceedings Turkey. Practice may vary by authority and year — check current guidance on the current Turkish commercial pledge registration procedures and on the enforcement timeline and mechanics applicable to each type of security that can be taken by a shareholder lender.
Interest rate requirements and transfer pricing
A lawyer in Turkey advising on the interest rate obligations for shareholder loans must explain that under Turkish transfer pricing law (Corporate Tax Law Article 13), transactions between related parties — including loans between a shareholder and a company — must be priced at the arm's length rate, meaning the rate that would have been agreed between independent parties in comparable circumstances. For shareholder loans, the arm's length interest rate is typically benchmarked against Turkish interbank rates (TLREF or TRLIBOR for TRY-denominated loans) or EURIBOR/SOFR for foreign currency loans, adjusted for the borrower's credit risk. A shareholder loan with no interest, with a below-market interest rate, or with a rate that has not been benchmarked against comparable market transactions creates a transfer pricing exposure: the GİB may assess the difference between the actual interest charged and the arm's length rate as deemed income for the lending shareholder, subject to corporate or personal income tax. Practice may vary by authority and year — check current guidance on the current GİB transfer pricing benchmarking standards applicable to intercompany loans and on the specific documentation requirements for defending an arm's length interest rate in a GİB audit.
An Istanbul Law Firm advising on the transfer pricing documentation requirements must explain that Turkish companies with related-party transactions exceeding defined annual thresholds are required to prepare a transfer pricing documentation report (yıllık transfer fiyatlandırması raporu) that justifies the arm's length character of each related-party transaction, including shareholder loans. The report must be prepared annually, retained for five years, and made available to the GİB upon request within fifteen days. For multinational groups with Turkish entities, the Turkish transfer pricing documentation requirements interact with the OECD three-tiered approach (country-by-country reporting, master file, local file) — and failure to comply with any tier creates exposure to transfer pricing penalties that are additional to the tax assessment itself. The tax audit defense Turkey framework—covering the GİB audit process and taxpayer defense strategies—is analyzed in the resource on tax audit defense Turkey. Practice may vary by authority and year — check current guidance on the current transfer pricing documentation thresholds and report format requirements applicable to Turkish companies with shareholder loan arrangements.
A Turkish Law Firm advising on the withholding tax implications of shareholder loan interest must explain that interest paid by a Turkish company to a foreign shareholder lender is subject to withholding tax (stopaj) at a rate currently set at 10% under Turkish domestic law — though this rate may be reduced by an applicable Double Taxation Treaty (Çifte Vergilendirmeyi Önleme Anlaşması) between Turkey and the lender's country of residence. To benefit from the reduced treaty rate, the foreign lender must provide a valid tax residence certificate (ikamet belgesi) from the competent authority in their home country, and the Turkish borrower must file the applicable withholding tax declaration forms. Interest paid to a Turkish resident shareholder lender may also be subject to withholding tax under specific conditions. Where interest payments are characterized as disguised profit distribution (örtülü kazanç dağıtımı) by the GİB, the withholding tax is assessed at the dividend rate rather than the interest rate, creating additional tax liability. Practice may vary by authority and year — check current guidance on the current Turkish withholding tax rates on interest payments to foreign shareholders and on the treaty rate reduction procedures applicable to shareholder lenders from different jurisdictions.
Thin capitalization rules
A law firm in Istanbul advising on thin capitalization must explain that Turkish Corporate Tax Law Article 12 imposes a thin capitalization rule that limits the deductibility of interest on loans from shareholders (or related parties) where the outstanding loan balance exceeds three times the shareholder's paid-up equity in the Turkish company at any point during the tax year. Interest on the portion of the loan that exceeds this three-to-one debt-to-equity ratio is treated as disguised profit distribution (örtülü kazanç dağıtımı) and is not deductible for corporate income tax purposes — it is instead subject to the tax consequences of dividend distribution, including withholding tax. For capital-intensive businesses that rely heavily on shareholder funding, exceeding the thin capitalization threshold can create material tax inefficiency in the shareholder lending structure. Practice may vary by authority and year — check current guidance on the current GİB interpretation of the thin capitalization threshold calculation methodology and on any recently issued administrative guidance on how the three-to-one ratio is calculated for companies with multiple classes of shareholders or complex capital structures.
An English speaking lawyer in Turkey advising on thin capitalization planning must explain that the practical solution to thin capitalization exposure is either to maintain shareholder loan balances within the three-to-one threshold (which may require monitoring throughout the year as equity fluctuates with retained earnings or losses), or to structure part of the shareholder funding as equity rather than debt — accepting the dilution or capital increase formality in exchange for full interest deductibility on the debt component. An alternative approach for groups with multiple Turkish entities is to route part of the shareholder funding through intercompany loans from a Turkish subsidiary that does not have the same shareholder relationship as the lender — though this requires careful analysis to ensure the intercompany loan is not itself subject to the related-party rules. We model the thin capitalization exposure and the tax cost of different funding structures before advising on the optimal capital structure for each client. Practice may vary by authority and year — check current guidance on the current thin capitalization calculation methodology as applied by Turkish administrative courts and on any recent judicial decisions that have clarified the scope of the thin capitalization rule in complex corporate structures.
A Turkish Law Firm advising on the disguised profit distribution rules more broadly must explain that beyond the thin capitalization provision, the broader disguised capital (örtülü sermaye) and disguised profit distribution (örtülü kazanç) rules in Turkish Corporate Tax Law can affect shareholder loan arrangements in multiple ways: interest on loans in excess of the capitalization threshold is treated as disguised profit distribution; interest on loans that is not priced at arm's length is treated as a transfer pricing adjustment with dividend tax consequences; and loans that are economically equivalent to equity (for example, because they have no defined repayment obligation) may be fully recharacterized as equity and all associated interest deductions disallowed. These rules interact with each other and must be assessed together for any shareholder loan structure. The tax optimization in Turkey framework—covering legal tax planning strategies for Turkish companies—is analyzed in the resource on tax optimization in Turkey. Practice may vary by authority and year — check current guidance on the current Turkish administrative court case law addressing the intersection of thin capitalization and transfer pricing in shareholder loan disputes.
Loan-to-equity conversion
A lawyer in Turkey advising on loan-to-equity conversion must explain that converting an outstanding shareholder loan into share capital (borç-sermaye dönüşümü) is a common financing tool that eliminates the thin capitalization and transfer pricing compliance burden associated with ongoing debt while improving the company's balance sheet leverage ratios — but the conversion must be executed through the formal capital increase procedure under the Turkish Commercial Code rather than through an informal book entry, because an informal conversion has no legal effect on the company's registered capital. The formal procedure requires: a shareholder resolution to increase the company's capital by the converted amount; a sworn financial advisor (SMMM or YMM) certificate confirming that the debt is valid and that the conversion is permissible; amendment of the company's articles of association to reflect the new capital amount; and registration of the capital increase at the Trade Registry and publication in the Trade Registry Gazette. Practice may vary by authority and year — check current guidance on the current TTK requirements for debt-to-equity conversions in Turkish joint stock and limited liability companies and on the specific SMMM/YMM certification format required for the capital increase registration.
An Istanbul Law Firm advising on the tax consequences of loan-to-equity conversion must explain that the tax treatment of a debt-to-equity conversion depends on whether the loan is converted at face value or at a discount, and whether the company has any outstanding tax losses or accumulated deficits. A conversion at face value where the shareholder forgoes the repayment claim in exchange for new shares generally does not generate taxable income for the company — the balance sheet entry is a debit to the loan payable and a credit to share capital. However, if the loan was previously assessed by the GİB as disguised capital, or if there is any difference between the face value of the loan and the fair value of the shares issued, the conversion may generate a tax event. For convertible loans where the conversion right was built into the original agreement, the tax analysis at the time of conversion must consider whether the company issued shares at a premium or at par. Practice may vary by authority and year — check current guidance on the current GİB administrative position on the tax treatment of debt-to-equity conversions in Turkish companies and on any recently issued guidance addressing convertible shareholder loan instruments.
A Turkish Law Firm advising on the use of convertible shareholder loans in Turkish venture and startup contexts must explain that Turkish law does not have a specific convertible note legal framework equivalent to the US-style SAFE or convertible note — convertible shareholder loans in Turkey are structured as standard TBK loan agreements with a conversion option that entitles the lender to convert the outstanding principal into equity at a defined valuation or formula upon a trigger event (typically a qualifying financing round or an agreed milestone). The conversion mechanism must be specifically agreed in the original loan agreement, and the mechanics of the conversion — including the valuation methodology, the share class to be issued, and the procedure for effecting the capital increase — must be precisely drafted to avoid disputes at the time of conversion. The shareholder derivative actions Turkey framework—covering the rights of minority shareholders affected by shareholder loan and conversion decisions—is analyzed in the resource on shareholder derivative actions Turkey. Practice may vary by authority and year — check current guidance on the current Turkish legal requirements for convertible loan agreements used in startup and venture financing contexts and on the Trade Registry procedures for effecting a conversion-triggered capital increase.
SPK requirements for public companies
A law firm in Istanbul advising on the SPK framework for shareholder loans in publicly traded companies must explain that the Capital Markets Board's (SPK) Communiqué on Related Party Transactions (II-17.1) imposes specific disclosure, approval, and valuation requirements on transactions between publicly traded companies and their significant shareholders — including shareholder loan arrangements. A shareholder loan to or from a publicly traded Turkish company that meets the materiality thresholds defined in the Communiqué requires: an independent expert valuation of the loan terms; approval by the independent members of the board of directors; disclosure on the Public Disclosure Platform (KAP) within the timeframe specified in the Communiqué; and, for transactions above a higher threshold, approval at a general assembly meeting of shareholders where the lending shareholder is excluded from voting. Failure to comply with these requirements can result in administrative fines from the SPK, suspension of trading in the company's shares, and personal liability for the directors who approved the transaction. Practice may vary by authority and year — check current guidance on the current SPK Communiqué II-17.1 materiality thresholds, approval procedures, and disclosure requirements for related-party shareholder loan transactions in publicly traded Turkish companies.
An English speaking lawyer in Turkey advising on the KAP disclosure content requirements for shareholder loan transactions must explain that the KAP disclosure must specifically describe: the parties to the transaction; the nature and terms of the transaction (principal, interest rate, maturity, security); the rationale for the transaction and its expected impact on the company; the independent expert's opinion on the arm's length character of the terms; and the independent board members' assessment. The disclosure must be made simultaneously in Turkish and English for companies with significant international investor bases. A disclosure that is incomplete, materially misleading, or filed outside the required timeframe creates regulatory exposure for the company and its management regardless of whether the underlying transaction was commercially justified. We prepare KAP disclosure drafts as part of every public company shareholder loan mandate, coordinating the required independent expert opinion and board approval sequence. Practice may vary by authority and year — check current guidance on the current KAP disclosure format requirements and submission deadlines applicable to related-party shareholder loan transactions under SPK Communiqué II-17.1.
A Turkish Law Firm advising on the SPK's approach to related-party loans in group structures must explain that Turkish holding groups with multiple publicly traded subsidiaries face a particularly complex SPK compliance environment — because a single intercompany loan transaction may constitute a related-party transaction for multiple listed entities simultaneously, each with its own disclosure and approval obligations. The SPK has consistently taken a demanding approach to the substance of the required independent expert opinion in these cases, and a perfunctory opinion that merely notes the transaction's existence without genuinely assessing its arm's length character will not satisfy the regulatory requirement. We coordinate the SPK compliance workflow across multiple group entities to ensure that each entity's obligations are fulfilled simultaneously and consistently. Practice may vary by authority and year — check current guidance on the current SPK enforcement approach to related-party transaction compliance failures in Turkish holding group structures and on any recently changed SPK Communiqué provisions affecting intercompany loan transactions.
Foreign currency loans and Decree No. 32
A lawyer in Turkey advising on foreign currency shareholder loans to Turkish companies must explain that Turkey's foreign exchange regulations — principally Decree No. 32 on the Protection of the Value of Turkish Currency and the implementing Central Bank of Turkey (TCMB) regulations — impose specific conditions on foreign currency lending to Turkish resident entities. The key restriction is that a Turkish resident company with a foreign currency revenue base may borrow in foreign currency, but Turkish companies whose revenues are predominantly in Turkish lira face restrictions on foreign currency borrowing below certain threshold amounts. Shareholders who are foreign entities and who wish to lend to their Turkish subsidiaries in a foreign currency must verify that the Turkish borrower meets the regulatory eligibility criteria for foreign currency borrowing, and must ensure that the loan terms (maturity, disbursement mechanics, repayment currency) comply with the current TCMB requirements. Practice may vary by authority and year — check current guidance on the current TCMB regulations governing foreign currency loans to Turkish resident companies and on the specific eligibility criteria and notification requirements applicable to shareholder loans from foreign entities.
An Istanbul Law Firm advising on the bank reporting obligations for cross-border shareholder loans must explain that cross-border loans received by Turkish resident companies from foreign lenders — including from foreign shareholder entities — must be reported to the TCMB through the Turkish bank that handles the disbursement, as part of Turkey's balance of payments reporting framework. The receiving Turkish bank is responsible for collecting the required transaction data and submitting it to the TCMB, but the company must ensure that the required information is provided accurately and promptly. Non-compliance with the reporting requirements can result in administrative fines under the foreign exchange regulations. For companies that receive multiple shareholder loans from different foreign entities over a fiscal year, maintaining a comprehensive register of all cross-border loan transactions and their TCMB reporting status is an important compliance tool. Practice may vary by authority and year — check current guidance on the current TCMB reporting requirements for cross-border shareholder loans and on the specific information that must be provided to the receiving bank for each loan disbursement.
A Turkish Law Firm advising on the interest rate regulations applicable to foreign currency shareholder loans must explain that while there is no statutory cap on the interest rate for shareholder loans in domestic currency, foreign currency loans from foreign lenders to Turkish resident companies must comply with any TCMB-imposed interest rate ceilings that may be in effect from time to time for foreign currency borrowing. The TCMB has periodically imposed maximum reference rate spreads for foreign currency loans during periods of significant currency pressure, and a foreign currency shareholder loan entered into when such restrictions were in effect that does not comply with the applicable ceiling may be deemed void to the extent of the excess. We verify the current regulatory environment for foreign currency loan pricing before advising on the interest rate for any cross-border shareholder loan. Practice may vary by authority and year — check current guidance on any currently applicable TCMB interest rate restrictions for foreign currency loans to Turkish resident companies and on the regulatory treatment of existing loans where the agreed rate subsequently becomes non-compliant.
Shareholder loan subordination in insolvency
A law firm in Istanbul advising on the priority of shareholder loans in Turkish insolvency must explain that under Turkish insolvency law (İcra ve İflas Kanunu, Law No. 2004), a shareholder loan is treated as an ordinary unsecured creditor claim — unless it has been secured by a pledge, mortgage, or other registered security interest, in which case it ranks as a secured claim to the extent of the collateral value. A shareholder loan that is unsecured ranks behind all secured creditors and behind employees' priority wage claims, but ahead of equity holders in the distribution of the insolvent company's assets. This ranking means that in a liquidation with insufficient assets to satisfy all creditors, a shareholder lender may recover significantly less than the face value of the outstanding loan. Practice may vary by authority and year — check current guidance on the current Turkish insolvency law creditor priority rules and on the specific circumstances under which a shareholder loan claim may be subordinated below other unsecured creditors under equitable subordination principles that have begun to develop in Turkish commercial court jurisprudence.
An English speaking lawyer in Turkey advising on the fraudulent preference risk in the period before insolvency must explain that a shareholder loan repayment made within a defined period before the company's insolvency may be challenged as a preferential payment (tasarrufun iptali) under the İcra ve İflas Kanunu — allowing the insolvency administrator or a creditor to recover the repaid amount from the shareholder for distribution to all creditors pro rata. The preference risk is particularly significant for shareholder lenders because courts may scrutinize with additional skepticism any repayment to a shareholder (as an insider) in the period leading up to insolvency. Where a Turkish company is experiencing financial difficulty, a shareholder lender who is repaid ahead of commercial creditors faces the risk that those repayments are unwound in subsequent insolvency proceedings. The debt recovery law Turkey framework—covering creditor protection mechanisms in Turkish insolvency contexts—is analyzed in the resource on debt recovery law Turkey. Practice may vary by authority and year — check current guidance on the current Turkish fraudulent preference look-back period and on the specific grounds for challenging shareholder loan repayments in insolvency proceedings.
A Turkish Law Firm advising on the structural protection tools available to shareholder lenders must explain that subordination risk can be managed through several structural mechanisms: taking registered security (pledge or mortgage) over company assets, which converts the shareholder loan from an unsecured to a secured claim; including a negative pledge covenant in the loan agreement that prohibits the company from granting senior security to other creditors without the shareholder lender's consent; structuring the shareholder loan as a participating loan that gives the lender additional contractual rights in a restructuring; or negotiating an intercreditor agreement with the company's bank creditors that defines the priority of different debt layers and the conditions under which each layer can enforce its claims. Each of these protections has different cost and enforcement characteristics that must be assessed in the context of the company's existing financing structure. Practice may vary by authority and year — check current guidance on the current Turkish commercial pledge and mortgage registration procedures and on the enforceability of negative pledge covenants in Turkish insolvency proceedings.
Loan forgiveness and write-offs
A lawyer in Turkey advising on shareholder loan forgiveness must explain that a decision by a shareholder to forgive (waive) an outstanding loan to a Turkish company — or to write it off for accounting purposes — triggers specific tax and legal consequences that must be carefully managed. From the Turkish company's perspective, a debt forgiveness received from a related party may constitute income that is subject to corporate income tax, unless the forgiveness qualifies as a capital support (sermaye desteği) — which it can only do if it is structured as a formal capital contribution rather than as an informal waiver. From the shareholder's perspective, a written-off loan creates a capital loss — the deductibility of which depends on whether the shareholder is a corporate or individual taxpayer and on the documentation supporting the claim that the loan was genuinely irrecoverable. Practice may vary by authority and year — check current guidance on the current GİB administrative position on the tax treatment of shareholder debt forgiveness and on the specific conditions under which forgiven shareholder loans are treated as taxable income versus non-taxable capital support for the Turkish borrowing company.
An Istanbul Law Firm advising on the optimal approach to a shareholder loan that the company cannot repay must explain that there are several structuring alternatives to straightforward forgiveness that may achieve the economic objective with more favorable tax outcomes: converting the loan to equity through the formal capital increase procedure eliminates the debt without generating taxable income for the company; restructuring the loan on extended terms or with a principal reduction agreement may allow the company to recover without a forgiveness event; and in certain cases where the company is genuinely insolvent, the shareholder may be able to write off the loan as a bad debt loss with appropriate supporting documentation from the company's auditors. The choice among these alternatives depends on the company's financial position, the shareholder's tax position, and the anticipated future of the company. Practice may vary by authority and year — check current guidance on the current Turkish accounting standards applicable to shareholder loan restructuring and write-offs and on the GİB documentation requirements for a shareholder to claim a bad debt loss on a written-off company loan.
A Turkish Law Firm advising on the board process for formalizing a loan forgiveness decision must explain that a shareholder's decision to forgive a loan to the company must be documented through a formal written waiver agreement signed by the shareholder (or by the shareholder's authorized representative under a power of attorney), a board resolution of the company acknowledging the waiver, and an accounting entry correctly reflecting the elimination of the liability. Without this documentation chain, the forgiveness may be challenged by the GİB as an informal gift that generates income rather than a formally structured capital support. In publicly traded companies, a shareholder's forgiveness of a material loan may also constitute a related-party transaction requiring SPK disclosure. Practice may vary by authority and year — check current guidance on the current board resolution format requirements for documenting shareholder debt waivers and on the SPK disclosure requirements for material loan forgiveness transactions in publicly traded Turkish companies.
Intercompany loans in Turkish group structures
A law firm in Istanbul advising on intercompany loans in Turkish holding structures must explain that loans between sister companies (entities owned by the same parent) or between parent and subsidiary that are not direct shareholder loans are nonetheless subject to the same transfer pricing, thin capitalization, and disguised profit distribution rules as shareholder loans — because all of these rules apply to transactions between "related parties" as defined in the Corporate Tax Law, which includes entities in the same corporate group regardless of the specific ownership relationship. A Turkish holding company that provides loans to its operating subsidiaries, or that acts as a cash pool manager within a group, must ensure that each loan is separately documented, separately priced at arm's length, and separately compliant with the thin capitalization threshold applicable to each individual borrower. Practice may vary by authority and year — check current guidance on the current GİB guidance on the transfer pricing requirements for cash pooling arrangements in Turkish holding groups and on the specific documentation required for each pool participant.
An English speaking lawyer in Turkey advising on the interaction between intercompany loans and the Turkish group consolidation rules must explain that Turkish tax law does not currently permit fiscal unity (group taxation) — each Turkish entity in a corporate group is a separate taxpayer, and intercompany transactions must be recognized at arm's length for each entity's tax computation. This means that interest income recognized by the lending entity must be matched by an equivalent interest expense deduction in the borrowing entity's accounts — and the GİB will audit both sides of the transaction, looking for inconsistencies. Foreign groups with Turkish entities must also ensure that their Turkish intercompany loan arrangements are consistent with the group's master file and local file transfer pricing documentation, because inconsistencies between the Turkish local file and the group master file create audit risk across all jurisdictions where the group operates. Practice may vary by authority and year — check current guidance on the current Turkish transfer pricing documentation requirements for intercompany loan arrangements within multinational groups and on the coordination required between the Turkish local file and the group master file for related-party financing arrangements.
A Turkish Law Firm advising on the strategic use of shareholder and intercompany loans for repatriation planning must explain that dividend repatriation from a Turkish company to its foreign shareholder is subject to withholding tax at rates that depend on the applicable DTA — while interest on shareholder loans, if priced at arm's length and within the thin capitalization threshold, may also be repatriated at a withholding tax rate that is different (and sometimes lower) from the dividend rate under the same DTA. This creates a legitimate tax planning opportunity: in some structures, a combination of shareholder equity and shareholder debt — with the debt component sized to remain within the thin capitalization threshold — produces a lower overall tax cost on the economic return than an all-equity structure. However, this planning must be implemented carefully within the rules to avoid recharacterization. The corporate tax lawyer services Turkey framework—covering tax planning and compliance for foreign-owned Turkish companies—is analyzed in the resource on corporate tax lawyer services Turkey. Practice may vary by authority and year — check current guidance on the current DTA withholding tax rates applicable to shareholder loan interest paid to entities from different jurisdictions and on any recently renegotiated treaty provisions affecting the interest withholding rate under Turkey's key tax treaties.
Documentation and audit trail
A lawyer in Turkey advising on the documentation standards for Turkish Revenue Administration audit resilience must explain that the GİB's approach to auditing related-party financing structures is document-centric: auditors look for the written loan agreement, the board resolution authorizing the loan, the bank transfer records showing disbursement, the interest payment records, and the repayment records — and any gap in this documentary chain will be flagged as a basis for challenging the loan's tax treatment. A well-maintained audit file for a shareholder loan should contain: the signed loan agreement; the board resolution or general assembly approval; the TCMB reporting confirmation (for cross-border loans); all bank transfer records for principal disbursements and interest payments; the transfer pricing documentation justifying the interest rate; any amendments to the loan terms with their board approvals; and the annual financial statement disclosures relating to the loan. Practice may vary by authority and year — check current guidance on the current GİB audit procedures for related-party financing transactions and on the specific document retention period applicable to shareholder loan records under Turkish tax law.
An Istanbul Law Firm advising on electronic signature and digital documentation in shareholder loan management must explain that the Turkish Electronic Signature Law (Elektronik İmza Kanunu, Law No. 5070) recognizes qualified electronic signatures as legally equivalent to wet ink signatures for most commercial documents — including loan agreements and board resolutions — providing they are generated by a qualified electronic certificate issued by a recognized Turkish certification service provider. For international shareholder groups where principals may be in multiple time zones, electronic signature solutions can significantly reduce the time required to execute and deliver signed documents. However, certain documents — including notarized authorizations and trade registry filings — still require wet ink signatures or notarially certified electronic processes. Practice may vary by authority and year — check current guidance on the current Turkish notary and Trade Registry acceptance standards for electronically signed shareholder loan agreements and board resolutions and on any specific authentication requirements applicable to electronic signatures on cross-border loan documents.
A Turkish Law Firm advising on the trade registry disclosure obligations for significant shareholder loans must explain that while individual shareholder loans to Turkish companies are not generally required to be disclosed at the Trade Registry, certain consequences of shareholder loans — including capital increases effected through debt conversion, pledges registered over company assets, and amendments to the company's articles of association affecting authorized capital — must be registered and published in the Trade Registry Gazette. For publicly traded companies, the KAP disclosure obligations apply in parallel. For private companies that are preparing for an investment round or exit, the completeness of the Trade Registry record and the consistency between the registry record and the actual shareholding and financing structure is a standard due diligence focus that can slow or complicate transactions if inconsistencies are discovered. Practice may vary by authority and year — check current guidance on the current Trade Registry disclosure requirements applicable to shareholder loan-related corporate events and on the specific timeline for completing each required registration.
Shareholder loan disputes
A law firm in Istanbul advising on shareholder loan disputes must explain that disputes between a shareholder lender and a Turkish company typically arise in one of three contexts: the company refuses to repay on the ground that the loan was equity rather than debt; the company accepts the loan's existence but disputes the interest rate or amount claimed; or an insolvency administrator challenges the loan as a preferential payment or as disguised equity. Each scenario requires a different litigation strategy and a different evidentiary focus. In the recharacterization defense scenario — where the company claims the loan was equity — the shareholder's evidence that the transaction was conducted as a commercial loan (written agreement, defined repayment schedule, interest payments made, enforcement notices sent when payments were missed) is critical. In the interest dispute scenario, the transfer pricing documentation and market benchmark evidence become central. Practice may vary by authority and year — check current guidance on the current Turkish commercial court procedural rules for shareholder loan disputes and on the limitation periods applicable to each type of loan recovery claim.
An English speaking lawyer in Turkey advising on the dispute resolution mechanism in shareholder loan agreements must explain that the choice between Turkish court litigation, domestic arbitration, and international arbitration is a significant strategic decision that should be made at the time of drafting rather than when a dispute arises. Turkish court litigation is appropriate for simpler disputes where the speed and cost of litigation are manageable and where Turkish enforcement of any judgment against the Turkish company is the primary concern. Domestic Istanbul arbitration (İSTAC) or TOBB arbitration may offer faster resolution for more complex disputes. International arbitration (ICC, LCIA, SIAC) is appropriate for large disputes in international financing arrangements where the shareholder lender may want enforcement in multiple jurisdictions. Each choice has different implications for the enforceability of the resulting award in Turkey and abroad. The commercial litigation Turkey framework—covering dispute resolution options in Turkish commercial matters—is analyzed in the resource on commercial litigation turkey. Practice may vary by authority and year — check current guidance on the current Turkish arbitration law provisions applicable to shareholder loan agreements and on the specific enforcement procedures for foreign arbitral awards in Turkish courts.
A Turkish Law Firm advising on pre-dispute risk mitigation strategies must explain that the most effective time to address shareholder loan dispute risk is at the drafting stage — by including clear definition of default events, explicit remedies (acceleration, enforcement of security, set-off rights), a defined notice and cure period, a specific dispute resolution mechanism, and a clear statement of the governing law. A shareholder loan agreement that addresses each of these elements specifically and precisely creates a significantly smaller dispute risk than a bare-bones agreement that relies on statutory defaults. Where a shareholder loan has already been made on inadequate documentation, we recommend a retroactive documentation exercise — executing a properly drafted loan agreement that restates the terms of the historical arrangement, confirmed by board resolutions and accounting entries that align the company's books with the newly documented terms. This is not a cure for all historical risks, but it substantially improves the documentary position for any future dispute or audit. Practice may vary by authority and year — check current guidance on the current Turkish legal standards for retroactive documentation of existing commercial arrangements and on the tax implications of restating historical shareholder loan terms through a new agreement.
How we work
A best lawyer in Turkey structuring a shareholder loan engagement begins with an assessment of the proposed transaction against the four principal compliance frameworks: transfer pricing (is the interest rate arm's length and documented?), thin capitalization (does the loan-to-equity ratio remain within the three-to-one threshold throughout the year?), foreign exchange regulations (does the cross-border loan comply with Decree No. 32 and current TCMB requirements?), and SPK rules (if applicable — does the transaction require independent expert valuation, board approval, and KAP disclosure?). We provide a written assessment of each framework's requirements before drafting the loan agreement, and we coordinate the board approval, documentation, and reporting steps as a sequenced process rather than leaving each step to the client. Practice may vary by authority and year — check current guidance from the relevant Turkish authorities before acting on any assessment, as applicable rules change and must be verified against current official guidance before any transaction is completed.
ER&GUN&ER advises Turkish companies, foreign shareholders, holding groups, and their financing advisors on shareholder loan structuring, transfer pricing documentation, SPK compliance, insolvency-related loan risk, and dispute resolution across all sectors. We work with clients in English throughout the engagement and coordinate with tax advisors, sworn financial advisors (SMMM/YMM), and Trade Registry notaries as required by each mandate. The Istanbul Bar Association at istanbulbarosu.org.tr provides resources for identifying qualified practitioners in corporate finance and tax matters. Practice may vary by authority and year — check current guidance on any recently changed Turkish corporate tax, transfer pricing, or SPK regulations before acting on any information on this page.
Frequently Asked Questions
- Are shareholder loans legal in Turkey? Yes — shareholder loans are legally valid commercial loan transactions, provided they are properly documented and comply with the TBK, TTK, Corporate Tax Law, and applicable SPK rules.
- Must a shareholder loan carry interest? Under transfer pricing rules, yes — an interest-free loan between related parties will be assessed as if it carried the arm's length market rate, with corresponding tax consequences.
- What is the thin capitalization threshold in Turkey? Interest on shareholder loans exceeding three times the shareholder's paid-up equity in the company is treated as disguised profit distribution and is non-deductible for corporate tax purposes.
- Can I convert a shareholder loan to equity? Yes — through the formal capital increase procedure under the TTK, with a sworn financial advisor certificate and Trade Registry registration.
- What withholding tax applies to interest paid to a foreign shareholder? 10% under domestic law, subject to reduction under an applicable Double Taxation Treaty if the lender provides a valid tax residence certificate.
- Do SPK rules apply to shareholder loans in private companies? No — SPK related-party transaction rules apply to publicly traded companies. Private companies are subject to TTK and tax rules only.
- Can a shareholder loan be in foreign currency? Subject to Decree No. 32 eligibility criteria for the Turkish borrowing company and TCMB reporting requirements.
- What happens to a shareholder loan in the company's insolvency? An unsecured shareholder loan ranks as an ordinary unsecured creditor claim — behind secured creditors and employee wage priority claims, but ahead of equity holders.
- Can a forgiven shareholder loan be tax-free? Not automatically — debt forgiveness may be taxable income for the company unless properly structured as a formal capital contribution.
- Is board approval required for a shareholder loan? Yes — a board or management resolution authorizing acceptance of the loan is required under TTK for both joint stock and limited liability companies.
Author: Mirkan Topcu is an attorney registered with the Istanbul Bar Association (Istanbul 1st Bar), Bar Registration No: 67874. His practice focuses on cross-border and high-stakes matters where evidence discipline, procedural accuracy, and risk control are decisive.
He advises individuals and companies across Commercial and Corporate Law, Tax Law, Enforcement and Insolvency, and cross-border documentation matters where procedural accuracy and risk management are decisive.
Education: Istanbul University Faculty of Law (2018); Galatasaray University, LL.M. (2022). LinkedIn: Profile. Istanbul Bar Association: Official website.