Legal and Tax Differences between Remuneration, Attendance Fee and Dividend Paid to a Company Shareholder

The Legal Basis of the Payment Must Be Determined First

A company shareholder may hold several capacities at the same time:

• Shareholder,
• Employee under an employment contract or a service relationship,
• Member of the board of directors in a joint-stock company,
• Manager in a limited liability company,
• A person providing consultancy or independent professional services to the company,
• A creditor who has lent money to the company.

Each of these capacities is subject to a different payment regime. The payment document, the corporate body resolution, the contract, the payroll, the bank description and the accounting entry must all show the same legal basis.

What Is Remuneration?

Remuneration (ücret) means the money and benefits provided to a person who works for an employer and is attached to a specific workplace, in return for service. Where a company shareholder actually works as a general manager, engineer, sales manager, physician or in another role, a service relationship separate from the capacity of shareholder may arise.

Which Documents Are Needed for Remuneration?

• A service or employment contract,
• A job description,
• The appointment and remuneration resolution of the competent body,
• Payroll and income tax withholding,
• Review of the social security status,
• A payment through the bank with a description,
• An analysis of remuneration consistent with comparable terms.

Where the shareholder does not provide a genuine service to the company or the amount paid is excessive compared with comparable terms, criticism as to deduction of the expense and transfer pricing may arise.

Taxation of Remuneration

Remuneration payments are subject to the progressive tariff under the remuneration provisions of the Income Tax Law; they are assessed by the employer for income tax withholding and stamp tax purposes. An obligation to file an annual return may arise where remuneration is received from more than one employer or the annual limits are exceeded.

For the company, remuneration that is genuine, work-related, documented and consistent with comparable terms may, as a rule, be taken into account as an expense in determining corporate earnings. However, a high payment to a shareholder or related person contrary to comparable terms carries the risk of disguised profit distribution through transfer pricing under Article 13 of the Corporate Income Tax Law.

What Is an Attendance Fee?

An attendance fee (huzur hakkı) is the payment made to members of the board of directors of a joint-stock company, or to persons serving in a company body, for their meeting, management and supervisory duties. In practice it may be arranged as a fixed monthly payment, a fee per meeting, a gratuity or a share of profit.

Under Article 394 of the Turkish Commercial Code (TCC), members of the board of directors of a joint-stock company may be paid an attendance fee, remuneration, a gratuity, a bonus and a share of the annual profit, provided that the amount is determined by the articles of association or by a general assembly resolution. In a limited liability company, managers' remuneration is determined within the non-transferable powers of the general assembly.

Body Resolution for the Attendance Fee

In a payment of an attendance fee, the following:

• The duty and the term,
• The gross or net amount,
• Whether it is monthly or per meeting,
• The start and end dates of the payment,
• Who bears the tax and other deductions,
• The gratuity or success criteria,

must be stated clearly in the resolution.

Whether a person may vote on a resolution concerning his or her own remuneration must be examined separately under the provisions on exclusion from voting and conflict of interest, according to the type of company and the specific resolution.

Taxation of the Attendance Fee

Under GVK Art. 61, payments made to the chair and members of the board of directors, auditors, liquidators and similar persons by reason of those capacities are treated as remuneration. In the ruling of the Revenue Administration (GİB) on attendance fee payments made to shareholders of limited liability companies as well, it was explained that these payments must be subject to withholding as remuneration.

Therefore the attendance fee:

• Is taxed under the income tax tariff,
• Is assessed in terms of the payroll and the withholding/premium and service declaration,
• May be an expense for the company if it is genuine and consistent with comparable terms,
• Is not a distribution subject to dividend withholding.

What Is a Dividend?

A dividend (kâr payı) is the return for the shareholder's shareholding, not for services rendered to the company. For a dividend to be distributed:

1. Annual financial statements prepared in due form must exist,
2. Distributable profit for the period or free reserves must exist,
3. Statutory reserves must have been set aside,
4. The competent general assembly must have adopted a profit distribution resolution,
5. The principle of equal treatment and the provisions of the articles of association must have been observed,

are required.

Even if the company has made a profit, a shareholder's withdrawal of money from the company account without a general assembly resolution is not a dividend distribution.

Taxation of Dividends

On dividends distributed by fully liable corporations to natural-person shareholders, a tax withholding at the rate of 15 percent is generally applied. For shareholders with limited liability and residents of foreign countries, double taxation treaties must be examined separately.

For fully liable natural persons who receive dividends from a fully liable corporation, half of the dividend is exempt from income tax within the framework of GVK Art. 22. If the amount remaining after the exemption exceeds the declaration threshold of the relevant year, it is included in the annual income tax return; the whole of the withholding made at the time of distribution is set off against the calculated tax.

A dividend is not an expense for the company. It is paid as a distribution of equity after corporate income tax has been calculated on corporate earnings and the statutory conditions have been completed.

Basic Differences between Remuneration, Attendance Fee and Dividend

Legal Basis

• Remuneration: An actual employment or service relationship.
• Attendance fee: A management or company body duty.
• Dividend: Shareholding and distributable profit.

Company Body Resolution

• Remuneration: A resolution of the competent body according to the type of company, and a contract, are required for the assignment and the determination of remuneration.
• Attendance fee: Determined by the articles of association or by a general assembly resolution.
• Dividend: A general assembly profit distribution resolution is mandatory.

Tax Nature

• Remuneration and attendance fee: Remuneration income, the progressive income tax tariff and remuneration withholding.
• Dividend: Movable capital income, distribution withholding and the declaration/exemption system.

Deduction from Corporate Earnings

• Remuneration and attendance fee: May be treated as an expense if genuine, work-related, documented and consistent with comparable terms.
• Dividend: Not an expense; distributed from after-tax profit.

How Is It Assessed for Social Security (SGK) Purposes?

Treating a payment as remuneration and the person's insured status under 4/a or 4/b are not the same question. The social security status is determined according to the type of company, the shareholding, membership of the board of directors, the genuineness of the service relationship and the start date of the insurance.

Within the framework of Law No. 5510:

• Shareholders of limited liability companies,
• Shareholders of joint-stock companies who are members of the board of directors,

are generally regarded as insured under 4/b. The situation of a member of the board of directors in a joint-stock company who is not a shareholder, or of a person who also works in the company under a service contract, may be assessed differently.

Paying a shareholder under the name of an "attendance fee" does not by itself create 4/a insured status. On the other hand, disregarding the payroll and premium obligations when paying a person who has an actual service relationship is also risky. The person's SGK status must be checked separately before each payment.

Are Remuneration and Attendance Fee Subject to VAT?

Remuneration and attendance fees paid within a genuine employment/service relationship are not subject to VAT because of their nature as remuneration income. However, if the shareholder provides independent consultancy or independent professional services to the company, the payment may be of the nature of professional or commercial earnings rather than remuneration; VAT, a self-employment receipt or an invoice may then come into play.

What decides the matter is not the name of the contract but dependence, work organization, risk, continuity and the actual manner of working.

The Risk of Excessive Remuneration and Attendance Fees

Where the remuneration paid to a shareholder or manager:

• Is disproportionate to the company's financial strength,
• Exceeds the comparable fee for the service,
• Is not based on a genuine service,
• Is aimed at presenting a profit distribution differently from a tax standpoint,
• Erodes the profit rights of a minority shareholder,

transfer pricing, disguised profit distribution, annulment of the general assembly resolution and manager liability may come into play.

The reason for a remuneration increase should be documented with the scope of duties, performance, market data and the company budget.

Regular Withdrawal of Money Instead of a Dividend

A shareholder's monthly withdrawal of money from the company account is not automatically remuneration, and an advance is not automatically a dividend. If the payment has no legal basis, disputes may arise over the shareholder current account, lending to the shareholder, disguised profit distribution or the irregular use of company assets.

A dividend advance, by contrast, is subject to the conditions in the TCC and the Communiqué on the Distribution of Dividend Advances. An off-the-record practice such as "we will set it off against the profit at year-end" is not a dividend advance.

How Should the Correct Payment Process Be Established?

For Remuneration

1. The genuine duty and service relationship are determined.
2. The contract and job description are prepared.
3. A resolution of the competent body is adopted.
4. The SGK status is checked.
5. Payroll, withholding and the bank payment are carried out.
6. A comparable remuneration file is kept.

For an Attendance Fee

1. The articles of association and the authority of the body are examined.
2. A general assembly resolution is adopted.
3. The gross/net amount and the period are determined.
4. Remuneration withholding and payroll procedures are carried out.
5. The SGK status is assessed separately.

For a Dividend

1. The financial statements and distributable profit are determined.
2. Statutory reserves are set aside.
3. The general assembly adopts a profit distribution resolution.
4. Share ratios and privileges are taken into account.
5. The 15 percent withholding and treaty provisions are assessed.
6. A bank payment with a description is made to the shareholders.

Additional Checks for Foreign Shareholders

When a payment is made to a foreign natural or legal person shareholder, the following:

• A certificate of residence,
• The double taxation treaty,
• The beneficial owner,
• The creation of a workplace or permanent representative,
• Transfer pricing,
• Foreign exchange and bank documents,

must also be examined separately. The 15 percent rate under domestic legislation may be applied at a lower rate when the treaty conditions are met.

Conclusion

Remuneration, attendance fee and dividend are not payment labels that can be used in place of one another. Remuneration rests on an actual service, an attendance fee on a management/company body duty, and a dividend on shareholding and distributable profit.

The safe practice for a company is to determine the reason for the payment in advance, adopt the right body resolution, document the comparable fee, examine the SGK status separately, make the tax withholding correctly and ensure that bank/accounting records have the same legal nature.

Frequently Asked Questions

Can a company shareholder receive both remuneration and a dividend?

Yes. The shareholder may receive remuneration for a genuine service and a dividend because of shareholding. The legal and tax documents of the two payments must be kept separate.

Is an attendance fee a dividend?

No. An attendance fee is a payment made for a management or company body duty and treated as remuneration for income tax purposes.

Is a general assembly resolution required for an attendance fee?

In a joint-stock company, under TCC Art. 394, the amount must be determined by the articles of association or by a general assembly resolution. In a limited liability company, the general assembly has the authority to determine the manager's remuneration.

What is the dividend withholding rate?

Since 22 December 2024, the general rate is 15 percent. For foreign shareholders, the double taxation treaty and special exemptions are examined separately.

Is the whole dividend shown in the annual return?

For fully liable natural persons, half of the dividend is exempt. The remaining amount is declared if it exceeds the annual declaration threshold; the distribution withholding is set off against the calculated tax.

Can every remuneration paid to a company shareholder be booked as an expense?

No. The service must be genuine, the payment work-related and documented, and the amount consistent with comparable terms.

Is SGK premium deducted from an attendance fee?

The person's 4/b status by reason of the type of company and shareholding, and whether there is also a service contract, are assessed. The name of the payment alone does not determine the result.

Can a company distribute a dividend without making a profit?

A dividend cannot be distributed unless there is distributable profit of previous years or free reserves and a general assembly resolution has been adopted. Payments in the nature of a return of capital may be unlawful.

Sources

1. Turkish Commercial Code No. 6102, in particular Arts. 394, 408, 507-519 and 616. Source

2. Income Tax Law No. 193, Arts. 22, 61, 75, 86, 94 and 103. Source

3. Corporate Income Tax Law No. 5520, in particular Arts. 6, 13 and 15. Source

4. Law No. 5510 on Social Insurance and General Health Insurance, Art. 4. Source

5. Revenue Administration (GİB), ruling on attendance fees paid to shareholders of limited liability companies. Source

6. Revenue Administration (GİB), 2026 Movable Capital Income Tax Guide. Source

7. Presidential Decision No. 9286, dividend withholding rate as of 22.12.2024.