Turkey is in the EU customs union for industrial goods but not in its VAT area, banking or legal space, which is why Turkish exporters use a Dutch B.V. as importer of record with an Article 23 licence. Dividends from EU subsidiaries are exempt for Turkish companies holding 10% for a year when the foreign tax is at least 15%. Passive EU companies taxed below 10% fall under the Turkish CFC rule.
What the customs union does and does not solve
Since 1996 Turkey and the EU share a customs union for industrial goods. A Turkish manufacturer can ship goods into the EU without customs duty, with proof of origin. What the customs union does not cover is VAT, banking, legal domicile or agricultural products.
In practice that means every shipment still needs an importer in the EU who pays or defers import VAT, invoices EU customers with EU VAT and holds stock in an EU warehouse. Many EU customers, especially larger retailers and public buyers, also prefer to contract with an EU company and pay into an EU bank account.
That is the role of a Dutch or Luxembourg company: an EU face for a Turkish business. The Netherlands is the usual choice for goods because of Rotterdam and the Article 23 licence; Luxembourg suits holdings, financing and services.
Why Turkish companies go through the Netherlands and Luxembourg
Turkey sits inside the EU customs union for industrial goods but outside its VAT area, its banking system and its legal space. Turkish exporters, manufacturers and tech companies use a Dutch or Luxembourg company to sell, invoice, hold stock and raise money in euros, and a holding to own their European subsidiaries.
The Netherlands
EU importer of record, VAT, Article 23 and Rotterdam logistics.
Both
EU dividends exempt in Turkey at 10% and 15% foreign tax.
Euro banking
EU bank accounts and investors comfortable with Dutch or Luxembourg law.
Schengen
Resident directors avoid visa-driven delays.
The Turkish rules that follow the structure
- Participation exemption. Dividends from foreign subsidiaries exempt for Turkish companies with 10% held for a year, 15% effective foreign tax, and repatriation by the return deadline.
- CFC rule. 50% Turkish control, mainly passive income and foreign tax below 10%: taxed in Turkey.
- Withholding out of Turkey. 15% on dividends, reduced under the treaties with the Netherlands and Luxembourg.
- Corporate tax. 25% in Turkey, so EU profits taxed at 19% to 25.8% are not a rate play but a market play.
- Transfer pricing. Sales from the Turkish factory to the EU company must be at arm's length in both countries.
For a Turkish exporter, the Dutch company is not about tax. It is about the customer never noticing the border.
How Turkey taxes the European side
Turkish corporate tax is 25%. Profits taxed in the Netherlands at 19% to 25.8%, or in Luxembourg at about 24%, therefore do not create much of a rate difference. The point is market access, not tax.
Dividends paid by the EU company to a Turkish parent are exempt in Turkey if the parent has held at least 10% for a year, the EU company bears at least 15% effective tax and the dividend arrives in Turkey by the tax return deadline. A passive EU company taxed below 10% falls under the Turkish CFC rule instead.
A Turkish textile manufacturer opens a Dutch B.V. with a resident director, imports finished goods under an Article 23 licence, sells to EU retailers with Dutch VAT and OSS for consumers, and pays dividends to the Turkish parent once a year.
Check your Turkish structure
The result updates with each answer.
Check your Turkish structure
Five questions. You see the Turkish rules that apply and where the structure is exposed.
An EU entity solves VAT and import.
Unlock the Turkish dividend exemption.
For passive EU companies.
Avoid visa bottlenecks.
Turkish companies in the Netherlands and Luxembourg: frequent questions
Are dividends from a Dutch or Luxembourg subsidiary exempt in Turkey?
Yes, for a Turkish company holding at least 10% for a year, if the subsidiary bears an effective tax of at least 15% and the dividend is brought to Turkey by the tax return deadline.
Does Turkey have CFC rules?
Yes. A foreign company controlled 50% or more by Turkish residents, earning mainly passive income and taxed below 10%, has its profits taxed in Turkey.
What is the Turkish dividend withholding tax?
15% since December 2024 on dividends paid by Turkish companies to individuals and non-residents, reduced by treaty.
Why do Turkish exporters set up in the Netherlands?
For an EU importer of record, VAT registration, import VAT deferral under an Article 23 licence, EU contracts and banking, and an EU face for customers. The customs union removes duties on industrial goods but not VAT or paperwork.
Do directors need visas?
Turkish directors need Schengen visas for board meetings; a resident director in the Netherlands or Luxembourg keeps decisions and banking simple.