Is the Tax System in Turkey Complicated?
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 have an idea about the Turkish fiscal system. For further and more precise details we would highly recommend to study the official site of the Turkish State.
Generally speaking the tax system in Turkey used to be referred to as quite complicating and troublesome for tax-payers as tax offices in Turkey required them to keep/produce an excessive number of documents to accompany tax statements on a monthly, quarterly and also yearly basis – which is exhausting enough for the taxpayer, on its own. However in recent years the authority has tried its best to make the system much easier for tax-payers.
As for TYPES OF TAXES companies are obliged to pay, the following could be listed as MAIN ITEMS;
Companies pay a tax under the name of CORPORATE TAX which corresponds to 20% over their annual profit before tax. Another tax under the name of INCOME TAX is applied at the stage of profit distribution at a rate of 15% over distributed earnings (after having spared reserve funds).
OTHER TAXES
VAT (Value Added Tax) with a rate of 18% (for most goods and services) over the value of goods and services (with differences). This does not bring a burden to the company as with global practices.
Another type of tax is collected by tax-paying company (on behalf of the tax office, to be further refunded to the office) at source (called stoppage) for services such as rent, labor income (deducted from brut salary by employer) and self-employment income generated by self employed people providing services etc. This type of tax does not bring any burden to the company, either.
IS THE PRACTICE IN TURKEY COMPLICATED?
So far it might sound quite similar to current practices in Europe. However as the state has an issue of confidence with tax-payers, the tax office requires tax-payers to regularly prepare and produce and innumerable number of term reports with and/or on top of above mentioned main statements.
As an example together with the corporate tax statement, income statements and balance sheets should be enough to tax the payer. However, together with the corporate tax statement tax offices require a large number of additional documents having to do with details such as “foreign exchange position of the company, foot note information about income statement and balance sheet, hidden earnings statement, profit distribution form and many more”.
Furthermore, the taxpayer is obliged to keep/produce records about a lot of details pertaining to monthly transactions which in return brings an unbelievable work load to accounting departments. This is not to include work regarding VAT returns which is even multiple times more exhausting.
To cut the story short, accounting professionals in Turkey, have a hard job to do.
THE TURKISH TAX LEGISLATION SYSTEM CAN BE CLASSIFIED AS FOLLOWS
INCOME TAXES
Individual Income Tax
Corporate Income Taxes
OTHERS
Taxes on Expenditure
Value Added Tax (VAT)
Special Consumption Tax (SCT)
Banking and Insurance Transaction Tax
Stamp Duty
TAXES ON WEALTH
FOR DETAILED INFORMATION ABOUT THE TAX SYSTEM IN TURKEY GO TO
http://www.invest.gov.tr/en-US/investmentguide/investorsguide/Pages/Taxes.aspx
TAX INCENTIVES
Effective as of January 1, 2012, the investment incentives system comprises four different schemes.
For detailed information about incentives GO TO
www.invest.gov.tr/en-US/investmentguide/investorsguide/Pages/Incentives.aspx
