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Corporate Tax in Turkey

Corporate Tax in Turkey

Updated on Tuesday 23rd June 2020

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Turkey is an attractive country for foreign investors due to its appealing tax regime which has one of the most competitive taxes in countries in the OECD (Organization for Economic Cooperation and Development) region. Foreign investors have to pay 22% for the corporate tax, according to the Corporate Tax Law No. 5520 that came into force in 2006 and changed the legislation from 1949. If you would like to know more about the tax structure of Turkey, you can talk to one of our Turkish lawyers for legal advice.
 

Short facts about corporate tax in Turkey

 
The tax legislation in Turkey has become simpler in recent years, aligning with international standards and regulations. A company based in Turkey must pay the corporate tax calculated on its income all around the world, while a firm with economic activity in this country but registered elsewhere will pay the corporate tax only on the income obtained in Turkey.The corporate tax represents one of the main taxes included in the direct taxation system in Turkey. A company is required to pay the corporate tax on its profits, but partnerships are exempt from corporate tax.
 

Is the corporate tax the same for foreigners?

 
Yes, the corporate tax rate is the same for residents and non-residents in Turkey. Foreign investors should know that companies in Turkey are limited or unlimited as taxpayers. For the unlimited ones (with the registered office in Turkey), the corporate tax is calculated on their total income obtained all over the world, while the limited taxpayers are charged only for their income obtained in Turkey. If a company has subsidiaries in Turkey, they are unlimited taxpayers, but if it has branches – these are regarded as limited taxpayers. Here is an infographic with extra details:
 
5 things to know about corporate tax in Turkey1.png
 

Double taxation treaties signed by Turkey

 
For foreign entrepreneurs, it is very important to know if there is any treaty for avoiding double taxation that has been signed between Turkey and the foreign country the investor is based. Entrepreneurs from countries that signed a double taxation treaty with Turkey are required to pay the withholding tax for payments abroad at a low rate.
 
The following countries have signed double taxation treaties with Turkey: Albania, Algeria, Austria, Azerbaijan, Belarus, Bangladesh, Belgium, Bulgaria, Czech Republic, Croatia, China, Denmark, Egypt, Estonia, Finland, France, Germany, Greece, Hungary, India, Indonesia, Israel, Italy, Japan, Jordan, Kazakhstan, Kyrgyzstan, Kuwait, Latvia, Lithuania, Luxemburg, Macedonia, Malaysia, Moldova, Mongolia, Netherlands, Norway, Pakistan, Poland, Romania, Russia, Saudi Arabia (for air transportation activities), Singapore, Slovakia, Slovenia, South Korea, Spain, Sudan, Sweden, Syria, Turkish Republic of Northern Cyprus, Tajikistan, Thailand, Tunisia, Turkmenistan, Ukraine, United Arab Emirates, UK, USA, Uzbekistan.
 

Corporate tax reduction prospects

 
According to recent information in this matter, the Turkish Council of Ministers is authorized to reduce the corporate tax rate to 20%. For the moment the corporate tax rate remains at 22% for this year, with the possibility of being reduced starting with 2021. If you want to start a business in Turkey and need to know the tax regime in this country, we kindly recommend you talk to one of our Turkish attorneys and find out all the details. Our team can also represent your company in Turkey and can help you with the registration formalities of a firm.
 

What is the VAT in Turkey?

 
Besides the corporate tax rate which is one of the most important taxes in Turkey, one must pay attention to the VAT applicable to goods and services meant for sale purposes. The standard VAT rate is set at 18% for most products available for sale on the market, while low rates apply to other categories of goods and services. If you want to register your company for VAT in Turkey, you can talk to our Turkish lawyers.
 

Other tax facts in Turkey

 
The Special Consumption Tax or SCT is applied to automobiles, tobacco products, natural gas, petroleum products, solvents, alcoholic beverages, and luxury products, to name a few. Compared to the VAT, the Special Consumption Tax is charged only once, on each delivery. There are other tax facts to consider when deciding on business in Turkey:
 
  1. The Banking and Insurance Transaction Tax (5% Rate) replaces the VAT for banking and insurance companies in Turkey.
  2. Property taxes, inheritance and gift tax, property taxes apply in Turkey, and range between 0.1% and 30% rate.
  3. The stamp duty ranges between 0.189% and 0.948% and applies to capital contributions, letters of credit, contracts, financial statements, notes payable, etc.
  4. The individual income tax ranges between 15% and 35%, depending on the generated income.
 
The tax regime in Turkey can be explained by one of our Turkish lawyers, so feel free to get in touch with us at any time. You can solicit legal advice for employment contracts in your firm.
 

Can I ask for tax minimization in Turkey?

 
Yes, one of our lawyers in Turkey can tell you all you need to know about tax minimization instruments that can be adopted in your firm. A tax advisor can propose you pay the credits in advance for tax reductions. Charity is also a solution for company owners interested in cutting the taxes in the firm because tax deductions apply. If you would like to know more about the available tax minimization tools for your firm in Turkey, feel free to talk to our Turkish lawyers.
 

Making investments in Turkey

 
Turkey provides excellent business and development conditions to both local and foreign entrepreneurs who want to generate money in a wide range of sectors and industries. With a great and well-developed infrastructure in both Asia and Europe (Turkey is found on two continents), sea openings and ports at the Black Sea, Aegean Sea, Marmara Sea, and the Mediterranean Sea, Turkey has excellent business collaborations with countries worldwide. Sectors like automotive, manufacturing, construction, energy, and tourism provide full potential in terms of business and investments. Even the tobacco industry is prolific, the country being the third-largest tobacco exporter in the world. The tourism sector is quite prolific in Turkey, and it represents one of the main engines of the country’s economy if the verify the figures:
 
  • Turkey was the 6th most preferred tourist destination in the world in 2018;
  • In the same year, Turkey registered 46 million visitors;
  • According to Forbes, Turkey ranks 8th among the top 10 most visited countries in the world.
 
 
The following numbers show the business and economy direction of Turkey:
 
 
  • Around USD 134 billion was the total FDI stock for 2018 in Turkey;
  • Turkey ranks 33rd out of 190 economies in the world, according to the 2020 Doing Business report issued by the World Bank;
  • Azerbaijan was the largest investor in Turkey for January, February and March 2019;
  • The improved tax structure in Turkey helped the country attract more foreign investors in recent years, according to statistics.
 
If you need to know more about the corporate tax in Turkey, you may contact our lawyers in Turkey who will also help you with the company formation procedures. Our law firm in Turkey is at your disposal with complete legal services if you are interested in doing business in this country.