Turkey-Tax-System-Guide

Tax System in Turkey

Turkey, with its dynamic economy and strategic location, has become an important trade center for both local and international businesses. In this evolving business environment, an understanding of Turkey’s tax system is vital for businesses. Tax legislation presents many opportunities and challenges for both local and foreign businesses. This guide aims to comprehensively address the key elements of the tax system in Turkey, its current regulations, and implementation processes.

Knowing about the tax system in Turkey enables businesses to plan their finances more effectively, fulfill their tax obligations accurately, and take advantage of potential tax benefits. This guide is designed as a resource to clarify the complex issues surrounding the tax system in Turkey and guide businesses through the process.

  1. Income Tax

Income Tax in Turkey

Income Tax is a type of tax that individuals and institutions in Turkey are obliged to pay to the government from their income. Income Tax was introduced in Turkey in 1934 and is governed by a tax law that is constantly updated and regulated. Here is comprehensive information about Income Tax in Turkey:

Who Pays Income Tax?

Individuals: Individuals residing in Turkey and having income from Turkey are obliged to pay Income Tax. Individuals’ income can come from a variety of sources, such as salary, rental income, income from self-employment activities, etc.

Corporations: Companies operating in Turkey pay a type of Income Tax under the name of corporate tax. Corporate Income Tax is deducted from the profits of companies.

Income Tax Brackets

Income Tax in Turkey is applied in different brackets according to the income level. The higher the income, the higher the tax rate. As of 2023, the income tax brackets are as follows:

0 – 24.000 TL: %15

24.001 – 78.000 TL: %20

78.001 – 180.000 TL: %27

180,001 TL and above: 35%

These tranches are calculated and declared based on your annual earnings.

Declaration Period and Tax Return

Income Tax in Turkey is declared annually. The declaration period starts from January and continues until the end of March each year. During this period, individuals and corporations declare their earned income, expenses, tax deductions, and other tax benefits. The tax return is filled in electronically through the website of the Revenue Administration or through authorized financial advisors.

Income Tax Deductions and Exemptions

Income Tax in Turkey is subject to some discounts and exemptions. For example, if you are raising your children, you may be able to get a child discount. In addition, there are situations where expenses such as pension contributions and some donations can also be tax-deductible.

Filing an Income Tax Return

The Income Tax Return is filed by the end of March, when the filing period ends. You must complete your declaration completely and accurately and submit it within the specified time. You can fill out and submit a declaration online or through a financial advisor.

Paying Taxes

You must pay your tax debt calculated as a result of the Income Tax Return to the relevant banks or tax offices within the payment period. If you don’t make your tax payments within the specified timeframe, you may face late interest and penalties.

Tax Administrative Jurisdiction

You can apply to the Tax Administrative Courts for the resolution of disputes related to Income Tax.

Its Administrative Courts make decisions on tax issues and protect the rights of the parties. The tax administrative judicial process is important for taxpayers and aims to ensure fairness in cases of unfair taxation.

Tax Administrative Judicial Process

Appeal: Taxpayers can file an appeal against the Revenue Administration regarding tax transactions or accrued tax debts. If the appeal is rejected or there is no result, the right to file a lawsuit arises.

Filing a Lawsuit: If the objection is not accepted or does not yield results, taxpayers can file a lawsuit with the Administrative Courts to initiate the administrative judicial process. The process of filing a lawsuit can be done through a lawyer or by the taxpayer in person.

Court Process: Once the court process begins, the parties present their evidence, and the court makes a decision to resolve the income tax dispute. Court decisions are final and determine the outcome of the dispute.

Termination of Income Tax Liability

When a person working in Turkey moves abroad or stops earning income, he can terminate his Income Tax liability. This process is carried out by applying to the relevant tax office. When the obligation is terminated, tax returns and payments cease.

  1. Corporate Income Tax

Corporate income tax is a tax levied on the profits of companies. The standard corporate tax rate is 20%, but it may be lower in some industries and companies that benefit from investment incentives. You should also consider issues such as filing a corporate tax return and filing a corporate tax return.

Businesses and companies in Turkey are obliged to pay taxes on their earnings. One of the taxes paid by businesses is Corporate Tax. Corporate Income Tax covers profits from commercial, industrial and agricultural activities. This guide aims to provide basic information about Corporate Tax in Turkey.

What is Corporate Tax?

Corporate Income Tax is a type of tax paid by companies or businesses established in Turkey on their earnings. The tax is declared and paid by the taxpayer at the end of each year. The Corporate Tax rate is determined annually by the Grand National Assembly of Turkey. Tax rates can vary across different industries and earning brackets.

Who is a Corporate Taxpayer?

When a business or company is established in Turkey, income or corporate tax liability begins. Corporate Taxpayers can be:

Business Enterprises: Joint stock companies, limited liability companies, cooperatives, and other commercial enterprises can be Corporate Tax payers.

Associations and Foundations: Associations and foundations that  generate income may also be subject to Corporate Tax.

Foreign Companies: Foreign companies operating in Turkey can also be Corporate Tax payers.

Public Institutions and Entities: Public institutions and entities that meet certain conditions may also be subject to Corporate Tax.

Corporate Tax Reductions and Incentives

Businesses in Turkey can benefit from tax breaks or incentives when they meet certain conditions. Here are some common incentives:

Investment Incentives: Tax deductions and incentives provided for investments to be made in certain regions or sectors.

Research and Development (R&D) Incentives: Tax advantages and incentives are offered to businesses that carry out R&D activities.

Employment Incentives: Tax benefits for new hired employees.

Investment Discount Certificate: Businesses that meet certain conditions can benefit from tax advantages by obtaining an investment discount certificate.

  1. Value Added Tax (VALUE ADDED TAX)

VALUE ADDED TAX is a tax levied on the sale of goods and services. The standard VALUE ADDED TAX rate is usually 20%. However, different rates or exclusions may apply to some products and services. It is important to understand issues such as VALUE ADDED TAX refund, VALUE ADDED TAX filing and VALUE ADDED TAX exemption.

Value Added Tax (VALUE ADDED TAX) is a type of tax added on top of the goods and services consumed in Turkey. VALUE ADDED TAX collected by businesses is paid to the state. This tax is levied at the point where goods and services gain value at each stage and reach the end consumer. Here is detailed information about Value Added Tax in Turkey:

VALUE ADDED TAX Rates

VALUE ADDED TAX rates in Turkey are different for different categories of goods and services. The VALUE ADDED TAX rates valid as of 2022 are as follows:

Overall Rate: 20%

Exception VALUE ADDED TAX: 0% (goods and services exempt from VALUE ADDED TAX)

Preferential VALUE ADDED TAX Rates: 1% and 10% (Low rates applied in certain sectors)

VALUE ADDED TAX LIABILITY

Businesses engaged in commercial activities in Turkey are subject to VALUE ADDED TAX liability. Businesses that are not VALUE ADDED TAX payers do not calculate VALUE ADDED TAX and cannot deduct VALUE ADDED TAX. Being a VALUE ADDED TAX payer is provided by the fact that the business exceeds a certain turnover or applies voluntarily.

VALUE ADDED TAX Deduction Right

VALUE ADDED TAX taxpayers can deduct the VALUE ADDED TAX they pay for the goods and services they buy from their businesses from the VALUE ADDED TAX calculated for the goods and services they sell. In this way, businesses only pay the tax to the government for the amount of the net VALUE ADDED TAX.

VALUE ADDED TAX REFUND

If businesses have paid more VALUE ADDED TAX in their VALUE ADDED TAX returns, they can recover this overpayment in subsequent periods or at any time by requesting a VALUE ADDED TAX refund. This alleviates the VALUE ADDED TAX burden of businesses.

VALUE ADDED TAX Taxpayer Groups

VALUE ADDED TAX payers in Turkey are grouped into three main groups:

Normal VALUE ADDED TAX Payers: Businesses engaged in commercial activities are included in this group. Businesses both collect (receive from customers) and pay (pay to suppliers) VALUE ADDED TAX in purchase and sale transactions.

Small Taxpayers: Individuals or businesses that are considered small taxpayers according to the Income Tax Law are included in this group. Small taxpayers may be exempt from the obligation to pay VALUE ADDED TAX if they meet certain conditions.

VALUE ADDED TAX Liability Exemption: Some sectors and activities are exempt from VALUE ADDED TAX and businesses carrying out these activities may not be VALUE ADDED TAX payers. For example, such as health care and educational activities.

VALUE ADDED TAX EXCEPTIONS

Some of the goods and services that are exempt from VALUE ADDED TAX in Turkey are as follows:

Healthcare and medicines

Education and training services

Utilities

Insurance transactions

Financial transactions

Second-hand real estate sales

Exported goods and services

VALUE ADDED TAX Deduction Right

VALUE ADDED TAX taxpayers can deduct the VALUE ADDED TAX they pay in purchase and sale transactions. For example, a business can deduct the VALUE ADDED TAX it pays when buying goods from the VALUE ADDED TAX of the goods it sells. In this way, businesses only pay the net VALUE ADDED TAX amount to the state.

VALUE ADDED TAX Refund and Incentives

If businesses determine that they have paid excess VALUE ADDED TAX in their VALUE ADDED TAX declaration, they can deduct this overpayment in the following periods or request a refund. In addition, there are various incentives and exemptions provided to VALUE ADDED TAX payers. Especially investment incentives and regional incentives.

VALUE ADDED TAX Exemption

Some businesses or activities may receive a VALUE ADDED TAX exemption when they meet certain requirements. Thanks to this exemption, they can avoid the obligation to pay VALUE ADDED TAX. However, in order to obtain an exemption, it is necessary to meet certain conditions.

VALUE ADDED TAX Audits and Implementation

The institution that supervises and regulates the VALUE ADDED TAX application in Turkey is the Revenue Administration. Businesses are obliged to submit VALUE ADDED TAX declarations regularly and these declarations are submitted electronically. The Revenue Administration ensures tax compliance by conducting audits and imposes penalties on businesses that violate obligations.

These details will help you better understand the complexity and operation of VALUE ADDED TAX in Turkey. Each business has different obligations and advantages related to VALUE ADDED TAX, so it is important to seek professional support from an accountant or tax advisor.

Summary of Our Tax Journey in Turkey

This guide provides a journey to understand Turkey’s complex and dynamic tax system. Understanding the tax obligations and opportunities as part of doing business in Turkey is vital for businesses. Our guide has covered topics such as tax laws, filing processes, accounting standards, and tax planning in detail, and has provided the information and strategies needed to navigate the tax system in Turkey.

The tax system in Turkey presents both challenges and opportunities for local and international businesses. Understanding this system is critical for protecting the financial health of businesses, ensuring regulatory compliance, and taking advantage of potential tax benefits. Our guide is designed to make this complex process more understandable and help businesses manage their tax liabilities effectively.

We hope that this guide will provide local and foreign businesses planning to do business in Turkey with an in-depth understanding of tax legislation and practices. In addition, we aim to enable businesses to make their tax planning more effective, to facilitate compliance processes and to minimize financial risks.

Finally, the tax system in Turkey is constantly evolving and changing. Therefore, keeping up with current developments and adapting to changes in this area is a constant necessity for businesses. We hope this guide will guide you through your decision-making processes in tax matters in Turkey and contribute to the successful growth of your business.

Tax System in Turkey

Turkey, with its dynamic economy and strategic location, has become an important trade center for both local and international businesses. In this evolving business environment, an understanding of Turkey’s tax system is vital for businesses. Tax legislation presents many opportunities and challenges for both local and foreign businesses. This guide aims to comprehensively address the key elements of the tax system in Turkey, its current regulations, and implementation processes.

Knowing about the tax system in Turkey enables businesses to plan their finances more effectively, fulfill their tax obligations accurately, and take advantage of potential tax benefits. This guide is designed as a resource to clarify the complex issues surrounding the tax system in Turkey and guide businesses through the process.

  1. Income Tax

Income Tax in Turkey

Income Tax is a type of tax that individuals and institutions in Turkey are obliged to pay to the government from their income. Income Tax was introduced in Turkey in 1934 and is governed by a tax law that is constantly updated and regulated. Here is comprehensive information about Income Tax in Turkey:

Who Pays Income Tax?

Individuals: Individuals residing in Turkey and having income from Turkey are obliged to pay Income Tax. Individuals’ income can come from a variety of sources, such as salary, rental income, income from self-employment activities, etc.

Corporations: Companies operating in Turkey pay a type of Income Tax under the name of corporate tax. Corporate Income Tax is deducted from the profits of companies.

Income Tax Brackets

Income Tax in Turkey is applied in different brackets according to the income level. The higher the income, the higher the tax rate. As of 2023, the income tax brackets are as follows:

0 – 24.000 TL: %15

24.001 – 78.000 TL: %20

78.001 – 180.000 TL: %27

180,001 TL and above: 35%

These tranches are calculated and declared based on your annual earnings.

Declaration Period and Tax Return

Income Tax in Turkey is declared annually. The declaration period starts from January and continues until the end of March each year. During this period, individuals and corporations declare their earned income, expenses, tax deductions, and other tax benefits. The tax return is filled in electronically through the website of the Revenue Administration or through authorized financial advisors.

Income Tax Deductions and Exemptions

Income Tax in Turkey is subject to some discounts and exemptions. For example, if you are raising your children, you may be able to get a child discount. In addition, there are situations where expenses such as pension contributions and some donations can also be tax-deductible.

Filing an Income Tax Return

The Income Tax Return is filed by the end of March, when the filing period ends. You must complete your declaration completely and accurately and submit it within the specified time. You can fill out and submit a declaration online or through a financial advisor.

Paying Taxes

You must pay your tax debt calculated as a result of the Income Tax Return to the relevant banks or tax offices within the payment period. If you don’t make your tax payments within the specified timeframe, you may face late interest and penalties.

Tax Administrative Jurisdiction

You can apply to the Tax Administrative Courts for the resolution of disputes related to Income Tax.

Its Administrative Courts make decisions on tax issues and protect the rights of the parties. The tax administrative judicial process is important for taxpayers and aims to ensure fairness in cases of unfair taxation.

Tax Administrative Judicial Process

Appeal: Taxpayers can file an appeal against the Revenue Administration regarding tax transactions or accrued tax debts. If the appeal is rejected or there is no result, the right to file a lawsuit arises.

Filing a Lawsuit: If the objection is not accepted or does not yield results, taxpayers can file a lawsuit with the Administrative Courts to initiate the administrative judicial process. The process of filing a lawsuit can be done through a lawyer or by the taxpayer in person.

Court Process: Once the court process begins, the parties present their evidence, and the court makes a decision to resolve the income tax dispute. Court decisions are final and determine the outcome of the dispute.

Termination of Income Tax Liability

When a person working in Turkey moves abroad or stops earning income, he can terminate his Income Tax liability. This process is carried out by applying to the relevant tax office. When the obligation is terminated, tax returns and payments cease.

  1. Corporate Income Tax

Corporate income tax is a tax levied on the profits of companies. The standard corporate tax rate is 20%, but it may be lower in some industries and companies that benefit from investment incentives. You should also consider issues such as filing a corporate tax return and filing a corporate tax return.

Businesses and companies in Turkey are obliged to pay taxes on their earnings. One of the taxes paid by businesses is Corporate Tax. Corporate Income Tax covers profits from commercial, industrial and agricultural activities. This guide aims to provide basic information about Corporate Tax in Turkey.

What is Corporate Tax?

Corporate Income Tax is a type of tax paid by companies or businesses established in Turkey on their earnings. The tax is declared and paid by the taxpayer at the end of each year. The Corporate Tax rate is determined annually by the Grand National Assembly of Turkey. Tax rates can vary across different industries and earning brackets.

Who is a Corporate Taxpayer?

When a business or company is established in Turkey, income or corporate tax liability begins. Corporate Taxpayers can be:

Business Enterprises: Joint stock companies, limited liability companies, cooperatives, and other commercial enterprises can be Corporate Tax payers.

Associations and Foundations: Associations and foundations that  generate income may also be subject to Corporate Tax.

Foreign Companies: Foreign companies operating in Turkey can also be Corporate Tax payers.

Public Institutions and Entities: Public institutions and entities that meet certain conditions may also be subject to Corporate Tax.

Corporate Tax Reductions and Incentives

Businesses in Turkey can benefit from tax breaks or incentives when they meet certain conditions. Here are some common incentives:

Investment Incentives: Tax deductions and incentives provided for investments to be made in certain regions or sectors.

Research and Development (R&D) Incentives: Tax advantages and incentives are offered to businesses that carry out R&D activities.

Employment Incentives: Tax benefits for new hired employees.

Investment Discount Certificate: Businesses that meet certain conditions can benefit from tax advantages by obtaining an investment discount certificate.

  1. Value Added Tax (VALUE ADDED TAX)

VALUE ADDED TAX is a tax levied on the sale of goods and services. The standard VALUE ADDED TAX rate is usually 20%. However, different rates or exclusions may apply to some products and services. It is important to understand issues such as VALUE ADDED TAX refund, VALUE ADDED TAX filing and VALUE ADDED TAX exemption.

Value Added Tax (VALUE ADDED TAX) is a type of tax added on top of the goods and services consumed in Turkey. VALUE ADDED TAX collected by businesses is paid to the state. This tax is levied at the point where goods and services gain value at each stage and reach the end consumer. Here is detailed information about Value Added Tax in Turkey:

VALUE ADDED TAX Rates

VALUE ADDED TAX rates in Turkey are different for different categories of goods and services. The VALUE ADDED TAX rates valid as of 2022 are as follows:

Overall Rate: 20%

Exception VALUE ADDED TAX: 0% (goods and services exempt from VALUE ADDED TAX)

Preferential VALUE ADDED TAX Rates: 1% and 10% (Low rates applied in certain sectors)

VALUE ADDED TAX LIABILITY

Businesses engaged in commercial activities in Turkey are subject to VALUE ADDED TAX liability. Businesses that are not VALUE ADDED TAX payers do not calculate VALUE ADDED TAX and cannot deduct VALUE ADDED TAX. Being a VALUE ADDED TAX payer is provided by the fact that the business exceeds a certain turnover or applies voluntarily.

VALUE ADDED TAX Deduction Right

VALUE ADDED TAX taxpayers can deduct the VALUE ADDED TAX they pay for the goods and services they buy from their businesses from the VALUE ADDED TAX calculated for the goods and services they sell. In this way, businesses only pay the tax to the government for the amount of the net VALUE ADDED TAX.

VALUE ADDED TAX REFUND

If businesses have paid more VALUE ADDED TAX in their VALUE ADDED TAX returns, they can recover this overpayment in subsequent periods or at any time by requesting a VALUE ADDED TAX refund. This alleviates the VALUE ADDED TAX burden of businesses.

VALUE ADDED TAX Taxpayer Groups

VALUE ADDED TAX payers in Turkey are grouped into three main groups:

Normal VALUE ADDED TAX Payers: Businesses engaged in commercial activities are included in this group. Businesses both collect (receive from customers) and pay (pay to suppliers) VALUE ADDED TAX in purchase and sale transactions.

Small Taxpayers: Individuals or businesses that are considered small taxpayers according to the Income Tax Law are included in this group. Small taxpayers may be exempt from the obligation to pay VALUE ADDED TAX if they meet certain conditions.

VALUE ADDED TAX Liability Exemption: Some sectors and activities are exempt from VALUE ADDED TAX and businesses carrying out these activities may not be VALUE ADDED TAX payers. For example, such as health care and educational activities.

VALUE ADDED TAX EXCEPTIONS

Some of the goods and services that are exempt from VALUE ADDED TAX in Turkey are as follows:

Healthcare and medicines

Education and training services

Utilities

Insurance transactions

Financial transactions

Second-hand real estate sales

Exported goods and services

VALUE ADDED TAX Deduction Right

VALUE ADDED TAX taxpayers can deduct the VALUE ADDED TAX they pay in purchase and sale transactions. For example, a business can deduct the VALUE ADDED TAX it pays when buying goods from the VALUE ADDED TAX of the goods it sells. In this way, businesses only pay the net VALUE ADDED TAX amount to the state.

VALUE ADDED TAX Refund and Incentives

If businesses determine that they have paid excess VALUE ADDED TAX in their VALUE ADDED TAX declaration, they can deduct this overpayment in the following periods or request a refund. In addition, there are various incentives and exemptions provided to VALUE ADDED TAX payers. Especially investment incentives and regional incentives.

VALUE ADDED TAX Exemption

Some businesses or activities may receive a VALUE ADDED TAX exemption when they meet certain requirements. Thanks to this exemption, they can avoid the obligation to pay VALUE ADDED TAX. However, in order to obtain an exemption, it is necessary to meet certain conditions.

VALUE ADDED TAX Audits and Implementation

The institution that supervises and regulates the VALUE ADDED TAX application in Turkey is the Revenue Administration. Businesses are obliged to submit VALUE ADDED TAX declarations regularly and these declarations are submitted electronically. The Revenue Administration ensures tax compliance by conducting audits and imposes penalties on businesses that violate obligations.

These details will help you better understand the complexity and operation of VALUE ADDED TAX in Turkey. Each business has different obligations and advantages related to VALUE ADDED TAX, so it is important to seek professional support from an accountant or tax advisor.

Summary of Our Tax Journey in Turkey

This guide provides a journey to understand Turkey’s complex and dynamic tax system. Understanding the tax obligations and opportunities as part of doing business in Turkey is vital for businesses. Our guide has covered topics such as tax laws, filing processes, accounting standards, and tax planning in detail, and has provided the information and strategies needed to navigate the tax system in Turkey.

The tax system in Turkey presents both challenges and opportunities for local and international businesses. Understanding this system is critical for protecting the financial health of businesses, ensuring regulatory compliance, and taking advantage of potential tax benefits. Our guide is designed to make this complex process more understandable and help businesses manage their tax liabilities effectively.

We hope that this guide will provide local and foreign businesses planning to do business in Turkey with an in-depth understanding of tax legislation and practices. In addition, we aim to enable businesses to make their tax planning more effective, to facilitate compliance processes and to minimize financial risks.

Finally, the tax system in Turkey is constantly evolving and changing. Therefore, keeping up with current developments and adapting to changes in this area is a constant necessity for businesses. We hope this guide will guide you through your decision-making processes in tax matters in Turkey and contribute to the successful growth of your business.