How to pay a US company legally from Turkey

Quick answer

Paying a US company from Turkey involves navigating the Central Bank of the Republic of Turkey (TCMB) regulations and the US-Turkey tax treaty. The treaty generally provides for reduced withholding tax (WHT) rates, typically 15-20% on dividends and 10% on royalties, with services often exempt. Payments can be made via traditional SWIFT transfers through Turkish banks or increasingly through fintech platforms. Keystone Bridge can assist in optimising payment corridors and ensuring treaty compliance, particularly for complex transactions.

The regulatory picture

Turkey's financial environment is primarily overseen by two key institutions: the Central Bank of the Republic of Turkey (TCMB) and the Banking Regulation and Supervision Agency (BDDK). The TCMB is responsible for monetary and exchange rate policies, managing international reserves, and ensuring financial stability. The BDDK, on the other hand, supervises and regulates banking activities, aiming to maintain the soundness and efficiency of the banking system. Both play crucial roles in facilitating and monitoring international financial transactions.

Turkey maintains a relatively open capital account, allowing for the free movement of capital, though certain foreign exchange controls and reporting requirements exist, particularly for larger transactions. While there are no explicit restrictions on outbound USD payments, banks are required to report foreign currency transfers exceeding USD 50,000 (or equivalent) within 30 days, unless they are related to imports or exports. This is part of broader efforts to monitor capital flows and ensure compliance with anti-money laundering (AML) regulations.

The United States-Turkey Income Tax Treaty is in effect to prevent double taxation and facilitate cross-border trade and investment. Under this treaty, withholding tax rates on certain types of income paid from Turkey to US companies are generally reduced from the statutory rates. For dividends, the treaty typically stipulates a WHT rate of 15% if the beneficial owner is a company owning at least 10% of the voting stock of the company paying the dividends, and 20% in all other cases. For royalties, the WHT rate is generally capped at 10%. Payments for services are typically exempt from WHT under the business profits article of the treaty, provided the US company does not have a permanent establishment in Turkey.

Common mistakes

Entrepreneurs in Turkey often encounter several pitfalls when making payments to US companies:

• Incorrect Beneficiary Details: Errors in SWIFT codes, IBANs, or beneficiary names can lead to delayed or rejected payments, incurring additional fees.
• Overlooking FX Costs: Failing to account for unfavourable exchange rates and hidden fees charged by banks or intermediaries can significantly increase the cost of transfers.
• W-8BEN Forms: Not providing or incorrectly completing the W-8BEN or W-8BEN-E form to the US recipient can result in the application of the default 30% US withholding tax, even if a reduced treaty rate applies.
• Compliance Gaps: Neglecting to understand and adhere to Turkish reporting requirements for outbound foreign currency transfers, especially for amounts exceeding the USD 50,000 threshold.
• Misclassifying Payments: Incorrectly categorising payments (e.g., as services when they are royalties) can lead to incorrect WHT application and potential penalties.

The practical path

Sending payments from Turkey to a US company typically follows these steps:

1. Verify Invoice and US Bank Details: Ensure the US company's invoice is accurate and includes all necessary details, such as the company name, address, invoice amount, and US bank details (bank name, SWIFT/BIC code, account number, and routing number). Double-check these details to prevent errors.
2. Choose a Payment Method:
   • SWIFT Bank Transfer: Traditional banks like Ziraat Bankası, İşbank, Garanti BBVA, and Akbank offer international SWIFT transfers. These are reliable but can be slower and more expensive due to intermediary bank fees and less favourable exchange rates.
   • Fintech Platforms: Increasingly, Turkish businesses are utilising international money transfer platforms such as Wise (formerly TransferWise) or Remitly for more cost-effective and faster transfers. These platforms often provide better exchange rates and transparent fee structures.
3. Initiate the Transfer: Access your chosen bank's online banking portal or visit a branch to initiate the international transfer. For fintech platforms, follow their online instructions. You will need to provide the beneficiary's details, the amount, and the purpose of the payment.
4. Declare and Report (if applicable): For transfers exceeding USD 50,000, ensure your bank is aware of the purpose of the payment to comply with TCMB reporting requirements. Keep all supporting documentation.
5. Retain Records: Keep meticulous records of all transactions, including invoices, payment confirmations, and any correspondence, for audit and tax purposes.

Edge cases

• Large Amounts: For exceptionally large transfers, Turkish banks may require additional documentation regarding the source of funds and the purpose of the payment, in line with AML regulations. It is advisable to inform your bank in advance.
• Existing USD Accounts: If the Turkish entity holds an existing USD-denominated account, payments can be made directly in USD, potentially mitigating foreign exchange risks and conversion fees. However, reporting requirements still apply.
• Payments to Individuals vs. Companies: Payments to US individuals (e.g., freelancers or contractors) may have different tax implications and reporting requirements compared to payments to registered US companies. It's crucial to clarify the recipient's status.
• Sanctions and OFAC: While Turkey is not subject to broad US sanctions, it is always prudent to check the US Treasury's Office of Foreign Assets Control (OFAC) sanctions lists to ensure neither the recipient nor any associated entities are sanctioned, especially for transactions involving specific sectors or regions.
• Capital Controls: Although Turkey's capital account is generally open, the TCMB has historically intervened in foreign exchange markets and implemented measures to manage currency stability. Businesses should stay informed about any new regulations that might impact outbound payments.

When you don't need us

For straightforward, routine payments of smaller amounts to established US vendors with clear invoices and standard banking channels, you may not require specialist assistance. If you are comfortable with your bank's international transfer process, understand the FX implications, and the payment falls well within standard regulatory thresholds, managing the transaction yourself is often feasible.

What we do

Keystone Bridge assists Turkish entrepreneurs by providing expert guidance on invoice structuring, ensuring compliance with the US-Turkey tax treaty to optimise withholding tax, and identifying the most efficient payment corridors. We streamline the process, helping you avoid common pitfalls and navigate regulatory complexities.

For the broader picture on this topic, see our guide on how to pay a US company from your country.

See also

• Best Payment Processors for Non-Residents — Full Comparison For more context, see LLC vs C-Corp for Turkey founders. For more context, see opening a US account from Turkey.