With the Presidential Decision No. 11344, The Withholding Tax Rate Applicable to Progress Payments for Nuclear Power Plant Construction and Repair Works Has Been Reduced From 5% To 1%

With the Presidential Decision No. 11344, The Withholding Tax Rate Applicable to Progress Payments for Nuclear Power Plant Construction and Repair Works Has Been Reduced From 5% To 1%

• 19.05.2026

DECISION

Pursuant to Presidential Decision No. 11344 dated 18 May 2026 and published in the Official Gazette dated 19 May 2026 and numbered 33258, amendments have been introduced to the withholding tax rates determined under Article 94 of the Income Tax Law and Articles 15 and 30 of the Corporate Tax Law. Accordingly, the withholding tax rate applicable to progress payments made to contractors performing nuclear power plant construction and repair works has been reduced from 5% to 1%.

The amendment will be implemented in parallel for income taxpayers as well as resident and non-resident corporate taxpayers, while no changes have been introduced regarding the existing withholding tax rates applicable to other long-term construction and repair works.

The regulation entered into force upon its publication and shall apply to payments made as of the beginning of the month following its publication (1 June 2026).

Pursuant to Presidential Decision No. 11344 published in the Official Gazette dated 19 May 2026, amendments have been introduced to;

• Council of Ministers Decision No. 2009/14592 regarding withholding tax rates under Article 94 of the Income Tax Law

• Council of Ministers Decision No. 2009/14594 regarding withholding tax rates under Article 15 of the Corporate Tax Law; and

• Council of Ministers Decision No. 2009/14593 regarding withholding tax rates under Article 30 of the Corporate Tax Law..

COMPARATIVE TABLE OF THE AMENDMENTS*

Previous Regulation : Income Tax Law Art. 94 – Council of Ministers Decision No. 2009/14592 \nWithholding tax rate applicable to progress payments made for long-term construction and repair works: 5%

Amendment : Presidential Decision No. 11344 introduced amendments to withholding tax rates under Article 94 of the Income Tax Law.

New Regulation : Withholding tax rate applicable to progress payments made for nuclear power plant construction and repair works: 1%

Previous Regulation : Corporate Tax Law Art. 15 – Resident Corporate Taxpayers \nWithholding tax rate applicable to progress payments made to companies engaged in long-term construction and repair works: 5%

Amendment : Presidential Decision No. 11344 introduced amendments to withholding tax rates under Article 15 of the Corporate Tax Law.

New Regulation : Withholding tax rate applicable to progress payments made for nuclear power plant construction and repair works: 1%

Previous Regulation : Corporate Tax Law Art. 30 – Non-resident Corporate Taxpayers \nWithholding tax rate applicable to progress payments made to non-resident corporations engaged in long-term construction and repair works: 5%

Amendment : Presidential Decision No. 11344 introduced amendments to withholding tax rates under Article 30 of the Corporate Tax Law.

New Regulation : Withholding tax rate applicable to progress payments made for nuclear power plant construction and repair works: 1%

* No amendments have been introduced to the existing 5% withholding tax rate applicable to other long-term construction and repair works.

IN SIMPLE TERMS

Following the amendment, the withholding tax imposed on progress payments made to contractors and subcontractors operating within the scope of nuclear power plant construction and repair activities has been reduced from 5% to 1%.

The primary purpose of the regulation appears to be reducing the advance tax burden borne by companies involved in such projects and improving cash flow by decreasing the amount withheld from progress payments.

In practical terms, companies involved in nuclear power plant projects will be able to retain a greater portion of their progress payments at the payment stage, thereby easing pressures on project financing and working capital requirements.

This amendment constitutes an important tax measure that may have significant implications for financing and cash flow management, particularly for companies operating in large-scale energy investments.

In our opinion, considering the high capital requirements, lengthy construction periods, and intensive cash flow demands characterizing the nuclear energy sector, the regulation has the potential to create substantial implications for contractors and subcontractors involved in such projects. In particular, reducing the withholding tax burden in large-scale projects operating on a progress payment basis may positively affect project financing processes and operational cash flow management.

Best regards,