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Turkey

Financial Year – 1 January – 31 December
Currency – Turkish lira (TRY)

Corporate Tax Summary

Residence – A company is resident in Turkey if its legal seat or place of management is in Turkey. Note that there is no distinction between CIT and VAT registration in Turkey. Therefore, corporations or permanent establishments (PEs) are liable for all taxes (e.g. CIT, VAT, withholding tax (WHT), stamp tax) once they are registered for tax purposes in Turkey.

Basis of Taxation – Resident companies with unlimited liability are taxed on worldwide income; non-resident companies are subject to tax only on Turkish source income. In general, branches are taxed in the same way as subsidiaries.

Reference
Corporate Income Tax Rate (%)22%CIT rate is 22% for 2018, 2019, and 2020. The increase also applies to the advance tax filings to be made in respect of the years concerned.
Branch Tax Rate (%)22%Turkish branches of foreign companies are liable to corporation tax at the rates that apply to Turkish resident companies.
Withholding Tax Rate:
Dividends – Franked0%Dividend distributions to resident entities and branches of non-resident entities are not subject to WHT.
Dividends – Unfranked15%Dividend distributions to individuals, and to non-resident persons who are shareholders, are subject to WHT at a local rate of 15%. This rate may be reduced for non-resident shareholders in the presence of a tax treaty.
Dividends – Conduit Foreign IncomeN/A
Interest10% – 18%Interest on loans payable to a foreign state, international institution, or foreign bank or a foreign corporation that qualifies as a “financial entity” is subject to a 0% withholding tax. A 10% rate applies to interest paid on loans from other non-resident entities, unless the rate is reduced under a tax treaty.

Interest on time deposits: 10%-18% (WHT on interest income derived from time deposits dependent on the currency (i.e. Turkish lira or foreign currency deposits) and the maturity.

Royalties from Intellectual Property20%A 20% withholding tax is imposed on royalties paid to a non-resident, unless the rate is reduced under a tax treaty.
Fund Payments from Managed Investment Trusts
Branch Remittance Tax15%A 15% withholding tax is levied on after-tax branch profits remitted to a head office, unless the rate is eliminated under a tax treaty.
Net Operating Losses (Years)
Carry Back0
Carry Forward5

Individual Tax Summary

Residence – Individuals who are in Turkey for a continuous period (including temporary absences) of more than six months in any calendar year are deemed to be
resident for tax purposes. However, foreign individuals who are on assignment in Turkey for a specific business project or mission, or those in Turkey for holiday, health care, or educational purposes are not regarded as resident, even if they stay for more than six months.

Basis of Taxation – Residents are taxed on worldwide income; non-residents are taxed only Turkish source income.

Filing Status – Each individual must file an individual income tax return; joint assessment is not permitted. However, certain exemptions are available.

Personal Income Tax Rates

Taxable IncomeTax Payable – ResidentsTax Payable – Non Residents
Up to TRY 22,00015%15%
TRY 22,001 – TRY 49,000TRY 3,300 + 20%TRY 3,300 + 20%
TRY 49,001 – TRY 120,000TRY 8,700 + 27%TRY 8,700 + 27%
TRY 120,001 – TRY 600,000TRY 27,870 + 35%TRY 27,870 + 35%
TRY 600,001 and overTRY 195,870 + 40%TRY 195,870 + 40%

These income tax brackets apply to the income of individuals, other than salary income, earned as from 1 January 2020.

For Salary Income

Taxable IncomeTax Payable – ResidentsTax Payable – Non Residents
Up to TRY 22,00015%15%
TRY 22,001 – TRY 49,000TRY 3,300 + 20%TRY 3,300 + 20%
TRY 49,001 – TRY 180,000TRY 8,700 + 27%TRY 8,700 + 27%
TRY 180,001 -TRY 600,000TRY 44,070 + 35%TRY 44,070 + 35%
TRY 600,001 and overTRY 191,070 + 40%TRY 191,070 + 40%

It should be noted that the income tax brackets are adjusted (increased) annually.

Turkey taxes its residents on their worldwide income, whereas non-residents are taxed on Turkish source earnings only. Income tax is levied on taxable income at progressive rates after certain deductions and allowances. There is no special tax regime for expatriates.

Taxation of certain income from certain financial instruments is carried out in the form of withholding tax (WHT), and the rates are 0%, 10%, 15%, or 18%, depending on the type of income and instruments.

Goods and Services Tax (GST)

RateStandard VAT rate is 18 %

Reduced rate: 0% / 1% / 8%

The standard rate is 18%, with reduced rates of 8% applicable to basic foodstuffs, pharmaceutical products, and other items, and 1% for certain farm products and certain machinery/equipment acquired under finance leases. Printed books, journals, and newspapers are exempt from VAT, but online sales of newspapers, magazines, and electronic books are subject to 18% VAT. Certain supplies are exempt. Reverse charge VAT at 18% is applied to payments made to non-residents for professional services, the use of intangibles (e.g. royalties, licenses, or know-how), and on the sale of such rights.

Taxable TransactionsVAT is imposed on the supply of most goods and the provision of services.

VAT is a transaction based, value added tax on the inputs and outputs of an organisation’s business activities. VAT is charged at each step in the supply chain, with VAT- registered entities including VAT in the price of the ‘taxable’ goods and services that they supply.

Generally, entities that are registered for VAT purposes can claim a credit for the VAT paid on their inputs acquired for use in their enterprise. However, in certain circumstances this is limited to the extent that they are making ‘taxable supplies’.

VAT is also collected at the point of import. The VAT rate is the same rate as the one that is applied for transactions in the country of origin.

RegistrationThere is no turnover threshold for VAT registration in Turkey. Any person or entity engaged in an activity within the scope of the VAT law must notify the local tax office where its place of business is located or, if there is more than one place of business, the same tax office at which the business registered for income/corporation tax purposes. A foreign business with no establishment in Turkey but that sells goods located in Turkey must appoint a tax representative (agent) to register for VAT. Direct registration is not possible. Such businesses must use the reverse change mechanism for charging VAT.
Filing and PaymentVAT payments are due monthly. VAT returns must be filed with the local tax office by the 26th day of the following month, and VAT is payable by the 26th day of the month in which the return is submitted.

Other Taxes Payable

TaxReference
Payroll TaxThere is no payroll tax other than the income tax, social security premium contributions, and stamp tax on salary income.
Stamp DutyStamp tax applies to a wide range of documents, including contracts, agreements, letters of credit, letters of guarantee and financial statements. Stamp tax is levied as a percentage of the value of the document at rates ranging from 0.189% to 0.948%. If the agreement has no monetary value, a fixed fee applies. A stamp tax of 0.759% applies on the gross amount of salary on payroll.
Land TaxProperty Transfer Tax: A property transfer tax of 4% is levied on the purchaser and the vendor on the sale of real estate.

Annual Property Tax: 0.1% – 0.6% is payable on land and buildings.

Special Consumption Tax (OTV):
There are four main product groups that are subject to special consumption tax at different tax rates, depending on the GTIP numbers (tariff numbers):

  • Petroleum products, natural gas, lubricating oil, solvents, and derivatives of solvents.
  • Automobiles and other vehicles, motorcycles, planes, helicopters, yachts.
  • Tobacco and tobacco products, alcoholic beverages.
  • Luxury products.

Unlike VAT, which is applied on each delivery, special consumption tax is charged only once.

Social Security Premiums:
Social security premiums for both the employer and the employee total 34.5% of an employee’s salary; 14% for the employee and 20.5% for the employer. In addition to social security payments, the unemployment contribution is 3% of the salary; 1% for the employee and 2% for the employer.

In case of a regular on time payment of social security administration (SGK) premiums, there is 5% discount on the employer contribution.

Banking and Insurance Transactions Tax (BITT):
The transactions performed by licensed banks and insurance companies are generally exempt from VAT but are subject to BITT at a rate of 5% in general, which is due on the gains of such corporations from their transactions.

Gift and Inheritance Tax:
The tax is from 1% – 30% of the value of the asset. It is paid over 3 years, with two payments being made each year.

Last updated: 03.07.2020

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