Turkey tax system: audit, reporting and optimization of taxation of Turkish companies and individuals: VAT, income tax and capital gains
Basic taxes (briefly)
|Corporate tax (in detail)||The standard income tax rate is 22% (2022)|
|Capital gains tax. Details||Capital gains derived by a company are generally taxable as ordinary income|
|VAT. Details||The standard VAT rate is 18%. Reduced rates of 8% and 1% apply to some goods and services|
|Other taxes||Social contributions, Inheritance and gift tax, Property tax|
|Stamp duty||from 0.189% to 0.948%|
International tax agreement
|Albania, Algeria, Australia, Austria, Azerbaijan, Bahrain, Bangladesh, Belarus, Belgium, Bosnia and Herzegovina, Brazil, Bulgaria, Canada, China, Croatia, Czech Republic, Côte d'Ivoire, Denmark, Egypt, Estonia, Ethiopia, Finland, Former Yugoslav Republic of Macedonia, France, Georgia, Germany, Greece, Hungary, India, Indonesia, Iran, Ireland, Israel, Italy, Japan, Jordan, Kazakhstan, Korea (Republic of), Kosovo, Kuwait, Kyrgyzstan, Latvia, Lebanon, Lithuania, Luxembourg, Malaysia, Malta, Mexico, Moldova (Republic of), Mongolia, Montenegro, Morocco, Netherlands, New Zealand, Norway, Oman, Pakistan, Philippines, Poland, Portugal, Qatar, Romania, Russian Federation, Saudi Arabia, Senegal, Singapore, Slovakia, Slovenia, Somalia, South Africa, Spain, Sudan, Sweden, Switzerland, Syrian Arab Republic, Tajikistan, Thailand, Tunisia, Turkey Republic of Northern Cyprus, Turkmenistan, Ukraine, United Arab Emirates, United Kingdom, United States, Uzbekistan, Viet nam, Yemen|
|Bermuda, Gibraltar, Guernsey, Isle of Man, Jersey|
Personal Income Tax
In Turkey residents are taxed on worldwide income; nonresidents are taxed on Turkish-source income only.
Income tax is levied at progressive rates:
- Income up to 32 000 TRY is taxed at 15%;
- Income from TRY 32,000 to TRY 70,000 is taxed at 20%;
- Income from TRY 70,000 to TRY 250,000 is taxed at 27%;i
- Income from TRY 250,000 to TRY 880,000 is taxed at 35%;
- Income in excess of TRY 880,000 is taxed at a rate of 40%.
Profits from the sale of certain financial instruments, e.g. shares traded on the Istanbul Stock Exchange, may be exempt from taxation / taxed at source at a reduced rate.
As a general rule, half of the dividends from Turkish companies are not taxable.
Reduced withholding tax rates apply to interest income on certain government and corporate bonds.
The withholding tax rate on interest paid on bank accounts varies from 10% to 18% depending on the term and currency of the deposit.
Corporate Income Tax
Turkish companies pay income tax on their worldwide income; foreign companies pay tax on income from sources in Turkey.
The standard income tax rate was 22% in 2018 to 2020, was 25% for 2021, and was reduced to 22% in 2022. For some first-time companies on the Istanbul Stock Exchange, the tax rate is reduced by 2% for the first five years.
Gains from the sale of assets are included in the taxable base. 75% of the gain on the sale of shares may be exempt from tax if the holding is for at least two years and certain other conditions are met. Gains from the sale of shares in foreign companies with an interest of at least 10% when held for at least two years and when certain other conditions are met may be exempt from tax.
Dividends from Turkish companies are not taxable. Dividends from foreign companies may be exempt from taxation if a number of conditions are met: ownership of at least 10%, ownership of at least one year from the date of generation of the proceeds, taxation of the subsidiary at a rate of at least 15% (20% for certain companies), receipt of dividends in Turkey before the date of submission of the tax return for the relevant fiscal year.
A foreign company is recognised as controlled if Turkish residents, companies and individuals own directly or indirectly, individually or jointly, at least 50% of the capital, dividend rights or voting rights.
Undistributed profits of a CFC are included in the tax base of a Turkish resident if at least 25% of the foreign company's income is passive income, company profits are taxed at an effective tax rate of less than 10% and company revenues exceed TRY 100,000.
Withholding tax on income
Dividends are subject to withholding tax at a rate of 15%. Royalties are subject to withholding tax at the rate of 20%. Different tax rates are applied to interest payments. For example, for interest payments on loans from banks, the tax rate is 0%, for other loans is 10%, and for deposits from 0% to 18%, depending on the currency and the length of the deposit.
The tax rates are reduced according to the provisions of double taxation avoidance agreements (DTAs).
The standard VAT rate is 18%.
Reduced rates of 8% and 1% are applied to certain goods and services.
Social contributions are paid on employment remuneration ranging from 119.25 to 894.38 TRY per day.
The normal contribution rates are 20.5% for the employer and 14% for the employee.
For remuneration above TRY 894.38 per day, unemployment insurance contributions are payable. The rates are 2% for the employer and 1% for the employee.
Inheritance and gift tax
In respect of property received by inheritance or gift, tax is payable at rates ranging from 1% to 30%.
Annual property tax is payable on buildings used for residential purposes at a rate of 0.1% and on other buildings at a rate of 0.2%.
For land, the tax rate is 0.3%. In urban areas, the tax rates are doubled.
The tax base is determined according to a special procedure and is indexed.
For residential buildings with a value exceeding 5 million liras, the tax on expensive dwellings is paid at rates ranging from 0.3% to 1%.
Stamp duty is charged on a variety of documents, including agreements and financial statements, at rates ranging from 0.189% to 0.948%.
In general, stamp duty on salaries is charged at a rate of 0.759%. In some cases, levies that are fixed in liras are levied
Double taxation treaties
Turkey has entered into the following tax information exchange arrangements with 109 jurisdictions:
87 DTCs: Albania, Algeria, Australia, Austria, Azerbaijan, Bahrain, Bangladesh, Belarus, Belgium, Bosnia and Herzegovina, Brazil, Bulgaria, Denmark, Egypt, Germany, Georgia, Greece, Hungary, UK, Vietnam, Canada, China, Côte d'Ivoire, Egypt, India, Indonesia, Iran, Israel, Italy, Jordan, Kazakhstan, Kuwait, Kyrgyzstan, Latvia, Lebanon, Lithuania, Luxembourg, Macedonia, Malaysia, Qatar, Spain, Yemen, Malta, Mexico, Moldova, Mongolia, Montenegro, Morocco, Netherlands, New Zealand, Norway, Oman, Pakistan, Philippines, Poland, Portugal, Republic of Korea, Romania, Russian Federation, Saudi Arabia, Senegal, Singapore, Slovakia, Slovenia, Somalia, South Africa, Sudan, Sweden, Switzerland, Tajikistan, Ukraine, United Arab Emirates, United States, Uzbekistan, Ethiopia;
5 TIEAs: Bermuda, Guernsey, Gibraltar, Jersey, Isle of Man.
There are some restrictions on currency transactions in Turkey. In particular, individuals are prohibited from borrowing in foreign currencies, and there are restrictions on Turkish companies borrowing in foreign currencies. Transactions between residents must be carried out in lira.
In addition, a special fee is payable in Turkey in respect of borrowings from abroad. The rate of the fee depends on the currency and term of the loan. The highest rate for loans of up to one year in foreign currencies is 3% of the loan body. This fee does not apply to banks and other financial institutions.
Taxes of Turkey
|Min. rate for corporate tax||22%|
|Capital gains tax||Regular rate|