Published On: Thu, Sep 21st, 2017

A brief look at the “Turkish Tax System”

This short article is meant to provide a brief idea for those who might be interested in doing business in Turkey and would like to be in the picture about the TURKISH TAX SYSTEM IN GENERAL. For further and more precise details we would highly recommend to study the official site of the Turkish State.

The Turkish tax regime is an important part of the economy and can be divided into three main categories:

Income Taxes, such as Individual Income Tax and Corporate Income Tax
Taxes on Expenditure, such as Value Added Tax, Banking and Insurance Transaction Tax or Stamp Tax
Taxes on Wealth, such as Property Tax or Inheritance and Gift Tax


An individual is subject to the income tax on his income and earnings. The rules of taxation for individual income and earnings are provided in the Income Tax Law 1960 (ITL).

Liability: Individuals who are resident in Turkey are subject to tax on their worldwide income and they are regarded as “full tax liable” in Turkey.

Nonresidents are taxed only on earnings and revenues derived in Turkey and they are regarded as “limited tax liable” in Turkey.

Residents include individuals with legal permanent residence in Turkey and those who reside in Turkey for more than six months during one calendar year (Provisional absence shall not interrupt the continuity of residing in Turkey).

In addition to residency criterion, within a limited scope, nationality criterion also applies regardless of their residency status, Turkish citizens who live abroad and work for government or a governmental institution or a company whose headquarter is in Turkey, are considered as unlimited liable taxpayers. Accordingly, they are subject to the income tax on their worldwide income.

Disregard the six-month rule in item above has a special exception that applies to expatriates such as businessman, scientists, experts, employees of governments or journalists who come to Turkey to perform temporary and pre-defined work as well as those who have arrived for the purpose of education, medical treatment, rest and travel. Such persons will still be considered as non-resident even if they stay in Turkey longer than six months in a calendar year.

Generally, if an individual is a non-resident of Turkey under these rules, he will also be a non-resident for purposes of the application of Turkey’s tax treaty network. This may affect the taxation of non-Turkish income in the source country.


Turkey has a unitary tax system under which income derived from different sources is aggregated and tax due is computed on the total aggregate income. Tax is imposed on a calendar year basis in Turkey. Income derived in Turkey by residents and non-residents are categorized into seven categories.

These seven categories are:

  1. Business income
  2. Agricultural income
  3. Salary and wage income
  4. Self-employment earnings
  5. Revenues from immovable properties
  6. Income from capital investments
  7. Other earnings and gains (i.e. capital gains)

Residents who have full tax liability status in Turkey are taxed on their income derived both in Turkey and outside Turkey.

The sources of income in Turkey for “limited liable taxpayers”(non-residents) are determined as follows:

Business profit: Income derived from every kind of business through a permanent establishment or permanent representatives in Turkey, is considered as income derived in Turkey.

Agricultural income: Income arising from agricultural activities carried out in Turkey is considered as derived in Turkey.

Wages and Salaries: Fulfillment of the following conditions indicates that the wage income is acquired in Turkey for individuals with limited liability:

– If the employment service is performed in Turkey or,
– If the services are “evaluated” in Turkey.

An employment service will be considered as having been evaluated in Turkey, if the salary amount is paid in Turkey or it is booked as cost or expense by the Turkish entity.

Income from Independent Personal Services: Independent personal services must be performed or accounted for in Turkey.

If the self-employment activities are performed in Turkey or the self-employment activities are evaluated in Turkey, this indicates that self-employment earnings are acquired in Turkey for individuals with limited liability.

Services which are rendered by resident and/or nonresident individuals are subject to withholding tax of 20% and the recipient of the services files a WHT return to the tax office on behalf of the professionals. If the service provider is nonresident, provisions of DTTs are taken into consideration. Provisions of DTTs might prevent taxation of such income in Turkey.

Income from Immovable Property: Revenues acquired from rental of immovable properties and rights by their owners, by their holders, by those holding easement and usufruct rights or by their tenants are taxable in Turkey (if the immovable property is located in Turkey or if such properties and rights are used or evaluated in Turkey).

Property and rights which are subject of rental income are defined in Article 70 of Income Tax Law. They are mentioned as;

– Land, building, mineral water and underground water sources, mines, stone pits, production places of sand and gravel, brick and tile fields, saltworks and their component parts; • Large fishing net fields and fishponds;

– Component parts of immovable properties leased separately and all their installations, inventory stock and flooring;

– Rights registered as immovable property;

– Searching, operating and franchise rights and their licenses, patent right, trademark, commerce title, any kind of technical drawing, design, model, plan and cinema and television films, audiotapes and videotapes, a secret formula acquired in industry, commerce and science or rights as right of usage or privilege of usage on a production method;

– Copyrights,

– Ships and shares of ship and all the motorized shipment and unloading vehicles;

– Motorized transfer and draw-frame vehicles, any kind of motorized vehicle, machine and installation and their appurtenance.

– Rights considered as immovable must be used or accounted for in Turkey. Rental income derived by resident and nonresident individuals from immovable assets and royalties for patents and rights are subject to WHT at a rate of 20%. This WHT may be eliminated or reduced under applicable DTTs if the income is derived by non-resident individuals.

Other Income and Earnings: The activities or transactions generating for other income, specified in the Income Tax Act, must be performed or accounted for in Turkey. The following types of income are included in investment income;

– Dividends from all types of share certificates

– Earnings arising from participation shares

– Profits distributed to the chairman and members of the board of directors of companies

– Interest income derived from public and private bonds and treasury bills

– All interest income (Time deposits, repo and others)

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