A) DIRECT TAXES
The Turkish taxation system contains two main direct taxes; income tax and corporate tax. Individuals are subject to income tax on their income and earnings. Companies are subject to corporate tax on their income and earnings.
1) INCOME TAX
a) Taxation of Income
Income tax is levied on the income of individuals. Partnerships are not accepted separately and each partner is taxed individually on their shares. An individual’s income may contain one or more of the income items listed below:
b) Tax Liability
An individual who is a resident of Turkey is liable to pay for his income worldwide; meaning unlimited liability. A person who stays in Turkey more than six months in a (calendar year) is accepted as a resident of Turkey. On the other hand, a person who stays in Turkey for six months or more for a specific job, business or special purpose is not as a resident. For this reason unlimited tax liability is not applied to them.
c) Income Types
- Business profits
- An individual needs to have a permanent establishment or representative in Turkey, income must be earned through the business and carried out by the establishment or representatives. The taxable income of a business enterprise is the difference between its net assets at the beginning and at the end of a calendar year.
- Wages and salaries
- Employees are subject to income tax. The income contains employee’s salaries and wages as well as associated supplementaries such as allowances, bonuses, commissions, premiums, compensations, etc. They are all subject to income tax.
Income tax rates applied for wages and salaries are as follows:
15% up to 10,000 TL
20% up to 25,000 TL
27% up to 88,000 TL
35% more than 88,000 TL
- Income from independent professional services
Independent professional services means the activity which is done by a person who is self-employed. It includes services of lawyers, doctors, accountants, consultants and engineers. These independent professionals need to get an the “acceptance certificate” for their degree obtained abroad from an the Turkish Council of Higher Education.
- Agricultural incomes
Income derived from agricultural activities are subject to income tax. It contains activities are done on which land, sea, rivers and lakes in forms of cultivating, planting, breeding, fishing, hunting, etc
- Income from immovable property
- Immovable property includes land, buildings and permanent leaseholders rights. Trucks, boats, aircrafts and other transportation vehicles are accepted as immovable property. Rental income from them is subjected to income tax.
- Income from movable property
- Interest, dividend, rent, capital in cash, capital in kind are included in income from movable property and are subjected to income tax.
- Other income and earnings
2) CORPORATE TAX
a) Taxation of Income
Corporate tax is levied on the income and earnings arising from corporation activities. Companies which are subject to corporate tax are listed below:
- Capital companies and similar companies
- Public enterprises
- Enterprises owned by foundations, societies and associations
- Joint ventures
b) Tax Liability
Corporations, which have their legal headquarters located in Turkey or effective management placed in Turkey, are taxed on their income worldwide. They are subjected to unlimited liability.
c) Net Taxable Income
Net income is defined as the difference between the net worth of an asset owned at the beginning and end of a fiscal year. Expenses in Income Tax Law article 40, are allowed to be deducted from revenue. The following expenses may also be deducted in order to determine the tax base:
- Expenses related to the issuance of stock and shares
- Initial organization and establishment expenses
- Expenses incurred for general board meetings, expenses made during mergers, dissolutions and liquidations
- In the case of insurance companies, technical reserves required for the insurance contract still valid at date of inventory
- Profit shares accrued to partners by participation banks for participation accounts
- Profit shares accrued to active partners of partnerships in commendams limited by shares
- Research and development deductions calculated as 40% of new technology and the research expenses realized within business
d) Corporate Tax Return
Every taxpayer must file only one tax return, including corporations. The corporate tax return must be filed by the 25th of the fourth month following the end of the fiscal year and assessed taxes are paid until the end of that month.
In Turkey the corporate tax rate is 20% of corporate earnings.
B) INDIRECT TAXES
In Turkey, VAT is the most important indirect tax. VAT is levied on the supply and importation of goods and services. VAT is applied in different rates of 1%, 8% and 18%. The payment of VAT is made by the 26th of the following month after the current month.
Stamp tax is applied for documents such as agreements, contracts, financial statements, payroll, letter of guarantee, etc. Stamp tax is levied as a percentage of value on the documents.
Disclaimer: The information on this site is provided as a general guide. Information published to YellAli is confirmed by official government departments in Turkey. Whilst every effort is made to ensure that the site is up to date and accurate, information may be subject to change at any time. YellAli does not accept any responsibility or liability for inaccuracies in this information.