Türkiye flag Türkiye: Business Environment

Tax rates in Türkiye

Tax Rates

Consumption Taxes

Nature of the Tax
Katma Deger Vergisi (KDV) or Value-Added Tax (VAT)
Tax Rate
General VAT rate in Turkey is increased from 18% to 20%.
This respective standard new rate is applicable as of 10 July 2023.
Reduced Tax Rate
As per the Presidential Decree No. 7346 published in the Official Gazette dated 7 July 2023, general VAT and reduced VAT rate, and VAT rates applicable on certain deliveries have been increased.
General VAT rate in Turkey is increased to 20%, from 18%.
Reduced VAT rate of 8% is increased to 10%. Applicable VAT rate on the deliveries of the cleaning products (except toothbrushes, pastes and dental floss) is now increased from 8% to 20%.
The reduced VAT rate of 1% for basic foodstuffs remains the same.
The respective new rates are applicable as of 10 July 2023. (Source: PwC Tax Summary Turkey)
Other Consumption Taxes
OTV or Özel Tüketim Vergisi is a special consumption tax levied on petroleum products, automobiles and other vehicles, tobacco and alcohol and luxury products. Telecommunication services are subject to a special communication tax (Özel İletişim Vergisi).
Motor vehicle taxes are collected as fixed amounts on an annual basis, calculated from the age and engine capacity of the vehicles.

Return to top

Corporate Taxes

Company Tax
Following the Law number 7456 published in 15 July 2023, the corporate income tax rate has been increased to 25% from 20% for companies other than those in the financial sector.

The corporate income tax rate is reduced by 1% for profits derived exclusively from manufacturing activities and export operations.
Tax Rate For Foreign Companies
Resident companies, with their legal seat or place of management in Turkey, are full taxpayers and are taxed on worldwide income. Non-resident companies are limited taxpayers and taxed only on income derived in Turkey.
Branches are taxed solely on the income derived from activities in Turkey since they are regarded as non-resident entities for Turkish tax purposes. Branch profits are subject to Turkish CIT at the rate of 20%  (same as subsidiaries).
The branch profit transferred to headquarters is subject to dividend withholding tax at a rate of 10%, effective from 22 December 2021 (previously the WHT was 15%). There are tax treaties signed by Turkey that provide withholding rates less than 10% on dividends under certain conditions (applicable subject to the fulfilment of the treaty eligibility conditions).
Capital Gains Taxation

Long-term capital gains of a company are taxed as ordinary income, with an exemption of 75% of capital gains from the sale of shares in domestic participations (provided that the shares have been held for at least two years and the gains from the sale will be kept in a special reserve account for at least five years).
Capital gains from the sale of immovable property held for a minimum period of two years are exempt from tax up to 50%.

A Turkish international holding company can avoid corporate income tax on capital gains from selling foreign participation, as long as the foreign participation has been held for a minimum of two years. To qualify as an international holding company, the Turkish company needs to meet the following criteria:

  • It must be a corporation.
  • At least 75% of its total assets (excluding cash) must consist of foreign participations held continuously for at least one year.
  • It must own a minimum of 10% of the capital of each foreign participation.
  • The foreign participation must be in the form of a corporation or limited liability company.
Main Allowable Deductions and Tax Credits
Expenses that can be deducted from the corporation tax base include ordinary and necessary expenses incurred in the course of general business, real property tax related to business, bad debts, and expenses for research and development. An allowance is available until the end of 2023 to companies that carry out qualifying R&D and design activities (100% of expenditure in addition to a deduction for such expenditure in the statutory accounts). Moreover, 80% of the income tax computed on the wages of R&D and design personnel is exempt from income withholding tax (the rate is increased to 95% for employees with a PhD or master’s degree in fundamental sciences, and 90% for employees with a master’s degree in any field or an undergraduate degree in fundamental sciences). Companies are also exempt from stamp duty on any R&D-related documents and goods imported to this end are exempt from customs duties. In addition, an increase in R&D expenditure compared to the previous year (at least by 20%) gives rise to further deductions.

Start-up expenses are considered deductible expenses as incurred. Moreover, the taxpayer has the option to capitalise such expenses and depreciate them over five years in equal amounts.

Donations to listed charities and for the construction of schools, hospitals, and scientific research organisations are deductible at up to 5% of the company’s gross profit. Under certain conditions, payments for pensions and employee termination benefits are deductible for corporate income tax purposes.

"Strategic" investments (as determined by the government, such as investment in the production of products that rely heavily on imports) give rise to a deduction of up to 100% of corporate tax, along with several other advantages concerning customs duties, employer's social security contributions, etc.

Companies, excluding those in the banking, finance, and insurance sectors, may benefit from a tax incentive called the notional interest deduction when making cash capital contributions. This deduction allows companies to subtract a calculated notional interest, based on their capital amounts contributed after July 1, 2015, from their taxable income. The deduction is equal to 50% of the notional interest calculated on the qualifying capital increase (after accounting for qualifying decreases). However, for capital sourced from abroad, the deduction rate is increased to 75%. The notional interest rate is determined by the annual interest rates announced by the Turkish Central Bank for commercial bank credits.

Tax losses can be carried forward for up to five years. The carryback of losses is prohibited. Charges for royalties and interest paid to foreign affiliates may be deductible for corporate income tax purposes when transfer pricing and thin capitalisation rules are followed.

For further information on available tax incentives, consult the dedicated page on the Revenue Administration portal.

Other Corporate Taxes
Buildings and land owned in Turkey are subject to an annual real estate tax at different rates: 0.2% for buildings, 0.1% for dwellings, 0.1% for land, and 0.3% for building sites (such rates are increased by 100% for buildings and land located within larger cities).
Real estate transfers are subject to a tax calculated as 4% of the acquisition/transfer value, which is split equally between the buyer and the seller.

Stamp tax applies to a wide range of documents, including, financial statements, and payrolls. Stamp tax is levied as a percentage of the value stated on the agreements at rates varying between 0.189% and 0.948%. Salary payments are subject to stamp tax at a rate of 0.759% over the gross amounts.

From 1 March 2020, Turkey levies a "Digital Service Tax" of 7.5% on service providers whose revenue derived from digital services during the previous fiscal year exceeds TRY 20 million in Turkey or EUR 750 million worldwide. The president is authorized to double the rate or reduce it to 1%, depending on the type of digital service.

A banking and insurance transaction tax applies at a general rate of 5% on bank and insurance charges. A Resource Utilisation Support Fund applies on foreign currency-denominated loans at varying rates according to their maturity, as well as on TRY-denominated loans with a maturity of less than a year. Foreign exchange purchases from banks, insurance companies, and foreign exchange offices, are subject to a 0.2% rate.
Other taxes include a tourism share (levied at TRY 2 and TRY 7.5 per TRY 1,000 of total net sales and leasing income) and an accommodation tax (set at 2%, the tax was implemented from 1 January 2023).

Social security contributions for both the employer and the employee total 34.5% of an employee’s salary; 14% paid by the employee and 20.5% by the employer. In addition to social security payments, unemployment contribution is 3% of the salary, 1% for the employee and 2% for the employer. The monthly social security ceiling is TRY TRY 75,060 for the period running from 1 January to 31 December 2023.

Other Domestic Resources
Revenue Administration
Doing Business: Turkey, to obtain a summary of taxes and mandatory contributions

Country Comparison For Corporate Taxation

  Türkiye Eastern Europe & Central Asia United States Germany
Number of Payments of Taxes per Year 10.0 13.9 10.6 9.0
Time Taken For Administrative Formalities (Hours) 170.0 226.2 175.0 218.0
Total Share of Taxes (% of Profit) 42.3 36.5 36.6 48.8

Source: Doing Business, Latest available data.

Return to top

Individual Taxes

Tax Rate

 Income Tax Rate (Employment Income) 2023
TRY 0 to 70,000 15%
TRY 70,001 - 150,000 20%
TRY 150,001 - 550,000 (370,000 for non-employment income) 27%
TRY 550,001 (370,000 for non-employment income) - 1,900,000 35%
Above TRY 1,900,000 40%
Allowable Deductions and Tax Credits
For individual employees, no business deductions are permitted. Contributions to approved pension schemes within Turkey are allowed for deductions.

Donations to specific institutions are tax-deductible. Individuals paying their taxes via annual tax returns can deduct their documented education expenses incurred in Turkey by themselves and their families from income declared on the tax return, up to 10% of the income tax base. Personal insurance premiums (for self, spouse, and/or children) are deductible but are limited to 15% of the individual's monthly gross income and annual minimum wage amount.

For business income, the same general deductions as apply to corporations are available.

Special Expatriate Tax Regime
Individual residents are taxed on worldwide income while non-resident individuals are only taxed on income derived in Turkey. There is no special tax regime for expatriates.
If a foreign national is covered by the social security system of their home country, they are not obligated to pay Turkish social security premiums for a maximum period of three months. However, this exemption is contingent upon providing proof of foreign coverage to the local social security office. In cases where a social security treaty exists between the home country and Turkey, the exemption period may be extended based on the terms of the treaty. In situations where the employee is not subject to foreign social security, they will typically be required to make full contributions to the Turkish social security system.

Return to top

Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
List of Double Tax Treaties signed by Turkey
Withholding Taxes
Dividends: 0% (resident companies)/10% (resident individuals and non-residents); Interest: 0% (residents and for "financial entities")/10% (interest on loan for non-residents); Royalties: 0% (resident companies)/20% (resident individuals and non-residents)
Bilateral Agreement
The United Kingdom and Turkey are bound by a double taxation treaty.

Return to top

Sources of Fiscal Information

Tax Authorities
Overview of Turkey's tax measures in response to Covid-19
Revenue Administration
Other Domestic Resources
Invest in Turkey

Return to top

Any Comment About This Content? Report It to Us.

 

© eexpand, All Rights Reserved.
Latest Update: February 2024

Return to top