Nuclear plant construction tax withholding rate cut to 1%

A Presidential Decree has reduced the tax withholding rate applied to progress and payment claims for nuclear power plant construction and repair works to 1 percent. The measure was published in the Official Gazette on May 19, 2026, and assigns responsibility for enforcement to the Treasury and Finance Minister.

The decision, numbered 11344, amends the annexes to relevant provisions of the Income Tax Law and the Corporate Tax Law to specify that payments made under multi-year nuclear construction and repair contracts will be subject to a special 1% withholding. Other multi-year construction and repair activities that fall outside the scope of the change will continue to carry the existing 5% withholding rate. The Official Gazette publication sets out the legal text and implementation framework for the amendment.

Practically, lowering withholding on contractor payments eases the immediate tax burden on main and subcontractors and improves short-term cash flow for firms in the project supply chain. For capital-intensive projects such as nuclear plants, reduced withholding can lower financing and liquidity pressures during construction, potentially accelerating progress on site. Market observers note this could provide tangible relief to construction firms and equipment suppliers involved in large-scale energy projects.

The move aligns with earlier policy steps that applied a 1% withholding to certain strategic transport infrastructure projects in March 2025, indicating a broader policy trend to use tax-withholding adjustments as an investment incentive for strategic infrastructure. While the immediate fiscal impact may include lower stopaj (withholding tax) receipts, policymakers expect investment acceleration and consequent indirect tax revenue gains over the medium term.

Analysts say the magnitude of the economic effect will depend on contract structures, the share of payments to subcontractors, and how quickly implementing guidance from tax authorities clarifies the scope of covered payments. In the near term, contractors' cash management should improve; longer-term outcomes hinge on whether the policy spurs faster project completion and broader industrial activity tied to nuclear construction. Investors and corporate finance teams will monitor further guidance from the Treasury and the Revenue Administration to quantify the measure's impact on company cash flows and project economics.