Foreign Investor Guide
Reference: Presidency of the Republic of Turkey Investment office www.invest.gov.tr
TAX GUIDE
FOREIGN INVESTMENT GUIDE
- BUILDING A BUSINESS
- WORK PERMIT
- RESIDENCE PERMIT
- REAL ESTATE AND CITIZENSHIP ACQUISITION
- COST OF DOING BUSINESS
- INVESTMENT AREAS
- INCENTIVE GUIDE
- TAX GUIDE
- LEGAL GUIDE
7.TAX GUIDE
Turkey has one of the most competitive corporate tax rates among OECD member countries. Turkish corporate tax legislation is clear, objective and regulated with provisions in line with international standards. Turkish tax legislation can be grouped under three main headings:
- Income Taxes
Income taxes included in Turkish tax legislation are personal income tax and corporate tax.
1.1. Personal Income Tax
Real persons' income is subject to personal income tax. Income is the net amount of earnings and revenues earned by a natural person in a calendar year. An individual's income can include one or more of the following income items:
- Agricultural gains
- Commercial gains
- Salaries and wages
- Self-employment earnings
- Real estate capital revenues (rental income)
- Securities income (income from capital investments)
- Other earnings and revenues
Personal income tax rates vary between 15% and 35%. The personal income tax rates applicable for 2019 are as follows:
|
Income Scales (TL) (For Employment) |
Rate (%) |
Income Scales (TL) (For Non-Employment Income) |
Rate (%) |
|
Up to 18,000 |
15 |
18.000’e kadar |
15 |
|
18,001-40,000 |
20 |
18,001-40,000 |
20 |
|
40,001-148,000 |
27 |
40,001-98,000 |
27 |
|
148.001 ve üstü |
35 |
98.001 ve üstü |
35 |
1.2. Corporate tax
In the event that the income elements defined in the Income Tax Law are obtained by the institutions, the taxation is made through the legal personality of these institutions. Corporate taxpayers defined in the law are as follows:
- Capital companies
- Cooperatives
- Public economic institutions
- Economic enterprises belonging to associations and foundations
- Business partnerships
The corporate tax rate levied on commercial profits in Turkey is 20%. The corporate tax rate has been increased to 22% for 2018, 2019 and 2020; however, the Council of Ministers has the authority to reduce the said rate of 22% up to 20%.
- Taxes on Expenses
2.1. Value Added Tax (VAT)
Generally applied VAT rates are 1%, 8% and 18%. All deliveries of goods and services created by importing commercial, industrial, agricultural and independent professional goods and services and entering the country through goods and services and other activities are subject to VAT.
2.2. Special Consumption Tax (SCT)
There are four main product groups subject to SCT at various tax rates:
- Petroleum products, natural gas, machine oils, solvents and solvent derivatives
- Automobiles and other vehicles, motorcycles, planes, helicopters, yachts
- Tobacco and tobacco products, alcoholic beverages
- Luxury goods
Unlike VAT, which is applied on each delivery, SCT is applied only once.
2.3. Banking and Insurance Transaction Tax
Although transactions made by banking and insurance companies continue to be exempted from VAT, these transactions are subject to Banking and Insurance Transactions Tax. This tax is levied on income earned by banks, such as loan interest. The tax rate is generally 5%, but it is 1% for the interest applied in some transactions such as deposit transactions between banks. Since 2008, no tax has been applied to sales amounts from foreign exchange transactions.
2.4. Stamp duty
Stamp duty applies to a variety of documents, including contracts, debt securities, capital affiliates, letters of credit, letters of guarantee, financial statements, and payrolls. The stamp tax is levied at rates varying between 0.189% and 0.948% of the document price, as well as collected as a fixed price (a predetermined price) for some documents.
- Wealth Taxes
There are three types of wealth taxes:
- property tax
- Motor vehicle tax
- Inheritance and gift tax
Buildings, flats and land owned in Turkey are subject to real estate tax at rates varying between 0.1% and 0.6%, and Contribution for the Protection of Immovable Cultural Heritage is paid at the rate of 10% of this tax. Motor vehicle taxes, on the other hand, are collected annually according to the fixed prices determined according to the age and engine volume of the vehicles. Inheritance and gift taxes are collected at the rate of 1-30%.