US Corporate Tax Reform 2026: What Turkish Companies Need to Know

The US corporate tax environment in 2026 is shaped by the Tax Cuts and Jobs Act (TCJA) of 2017, subsequent regulatory guidance, and ongoing legislative activity. For Turkish companies with US subsidiaries, branches, or investment structures, understanding the current framework is essential for effective tax planning and compliance.

The TCJA reduced the US corporate income tax rate from 35% to 21% — a flat rate that applies to all C-corporations regardless of income level. For Turkish companies operating through US C-corporations, this rate applies to all US-source taxable income after allowable deductions.

State and local taxes: The federal 21% rate does not include state and local corporate income taxes, which vary by state. New York State imposes a 6.5% corporate franchise tax; New York City imposes an additional 8.85% general corporation tax. Turkish companies with New York operations face a combined effective rate that can exceed 30% before considering deductions and credits.

GILTI is one of the most significant TCJA provisions for Turkish companies with US parent structures or US subsidiaries that own intellectual property.

GILTI applies to US shareholders (including US C-corporations) that own at least 10% of a controlled foreign corporation (CFC). The GILTI inclusion equals the US shareholder's pro-rata share of the CFC's net income above a 10% return on the CFC's depreciable tangible assets.

For Turkish companies with US subsidiaries: If a Turkish parent company has a US subsidiary that is a CFC, the Turkish parent is generally not subject to US GILTI tax (GILTI applies to US shareholders). However, if the US subsidiary has foreign subsidiaries, GILTI may apply at the US subsidiary level.

For US subsidiaries of Turkish parents: US C-corporations that own CFCs (including Turkish operating subsidiaries) may be subject to GILTI on their share of the CFC's income. The effective GILTI rate for C-corporations is 10.5% (after the 50% deduction), rising to 13.125% after 2025.

• High-tax exclusion: Income subject to foreign tax at a rate above 90% of the US corporate rate (18.9%) may be excluded from GILTI
• Substance-based income exclusion: Income attributable to tangible assets in the CFC's country of operation is excluded from GILTI
• Check-the-box elections: Entity classification elections can affect GILTI exposure

BEAT applies to large US corporations (gross receipts over $500 million) that make deductible payments to foreign related parties. The BEAT rate is 10% (rising to 12.5% after 2025) applied to modified taxable income — taxable income before deducting base erosion payments.

For Turkish companies: Turkish companies with large US subsidiaries that make significant payments to Turkish affiliates (royalties, management fees, interest) should assess BEAT exposure.

Transfer pricing — the pricing of transactions between related parties — remains the most significant ongoing compliance challenge for Turkish companies with US operations.

All intercompany transactions must be priced at arm's length — the price that unrelated parties would agree to in similar circumstances. The IRS has broad authority to reallocate income between related parties if intercompany prices do not reflect arm's-length terms.

US transfer pricing regulations require contemporaneous documentation for intercompany transactions. The documentation must:

• Describe the controlled transactions
• Identify the transfer pricing method used
• Explain why the method was selected
• Provide the analysis supporting the arm's-length price

Penalties: Failure to maintain adequate documentation can result in penalties of 20–40% of the transfer pricing adjustment, in addition to the tax owed.

• Management fees: Turkish parent charging US subsidiary for management services
• Royalties: Turkish parent licensing IP to US subsidiary
• Interest: Intercompany loans between Turkish parent and US subsidiary
• Cost sharing: Sharing R&D costs between Turkish and US entities

Each of these transactions requires arm's-length pricing and contemporaneous documentation.

Section 163(j) limits the deductibility of business interest expense to 30% of adjusted taxable income (ATI). For Turkish companies that fund US operations with intercompany debt, this limitation can significantly reduce the tax benefit of the debt financing.

Planning considerations:

• Assess whether the 30% ATI limitation affects US subsidiary interest deductions
• Consider whether equity financing is more tax-efficient than debt for US operations
• Evaluate whether the real property trade or business election is available

US corporations can claim a foreign tax credit (FTC) for income taxes paid to foreign governments, subject to limitations. For Turkish companies with US subsidiaries that also have foreign operations, FTC planning can reduce double taxation.

Key FTC rules:

• FTC is limited to the US tax on foreign-source income
• Separate FTC baskets apply to different categories of income (passive, general, GILTI, BEAT)
• Excess FTCs can be carried back one year and forward ten years

• Bonus depreciation (currently 40% for 2026 under TCJA phase-down)
• Section 179 expensing (up to $1.16 million in 2026)
• Prepaid expenses and accrued liabilities

• Installment sales
• Long-term contract accounting methods
• Deferred revenue arrangements

• Confirm year-end intercompany balances are consistent with transfer pricing documentation
• Make any needed year-end true-up adjustments before December 31
• Ensure intercompany loans bear adequate interest

Our tax attorneys advise Turkish companies on US corporate tax planning, transfer pricing compliance, GILTI and BEAT analysis, and year-end tax strategies. We work with Turkish companies' Turkish tax advisors to develop integrated cross-border tax structures.

This article is for informational purposes only and does not constitute tax or legal advice. Tax law is complex and subject to change; please consult qualified tax counsel for advice specific to your situation.