Tax Law in Türkiye

Taxation is a core part of doing business in Türkiye, and the system is codified in dedicated statutes that broadly track international norms. This overview sets out how income, expenditure and wealth are taxed, the main vehicles used by foreign investors, and the rules on cross-border payments, financing, treaty relief and disputes. Rates cited below are current figures and are set annually, so the applicable rate should always be confirmed for the relevant tax year before you rely on it.

The Foundation: Residency and Source

Everything in Turkish taxation starts with two questions: are you a resident, and where is the income sourced. Residents (individuals who live in Türkiye or whose centre of interests is here, and companies with their legal or business seat in Türkiye) are taxed on their worldwide income. Non-residents are taxed only on income sourced in Türkiye — for example, profits of a Turkish branch, rent from Turkish property, or fees for services used here.

For a foreign investor, this distinction drives structure. A holding company abroad that simply receives dividends from a Turkish subsidiary is a non-resident facing withholding tax; a locally incorporated company is a resident facing the full corporate regime. Getting the residency map right at the outset avoids surprises later, especially where a double taxation treaty can shift the outcome.

Income Taxes

Personal Income Tax

Under the Income Tax Law (Gelir Vergisi Kanunu), residents pay personal income tax on their net income and gains for each calendar year. Taxable categories include:

• Commercial and agricultural profits
• Salaries and wages
• Income from independent professional services
• Rental income from immovable property and rights
• Income from movable capital (dividends and interest)
• Other earnings and gains, including certain capital gains

Türkiye applies a progressive rate scale, so the marginal rate rises as income increases across defined brackets. Certain items are exempt, including salary up to the statutory minimum wage, and meal and transport allowances within set limits. Many types of income earned by employees are collected at source through withholding, so an individual with only salary income often has no separate return to file.

Corporate Income Tax

Companies are taxed under the Corporate Tax Law (Kurumlar Vergisi Kanunu) on the income categories defined in the Income Tax Law. The general corporate income tax rate is currently 25%, though rates are reviewed annually and can change. Banks, financial institutions, electronic payment institutions and foreign exchange offices are taxed at a higher rate, currently 30%. Reduced rates and incentives may apply to specific activities, such as qualifying export income or manufacturing carried out under an investment incentive certificate. Corporate tax is assessed on accounting profit adjusted for non-deductible expenses and exempt income, so the effective rate a business actually pays depends heavily on how its costs and structure are documented.

Taxes on Expenditure

Value Added Tax (VAT)

VAT is a consumption tax on the supply of goods and services in Türkiye and on imports. It currently applies at 1%, 10% and 20%, with 20% as the standard rate; these rates are set by regulation and can change. Commercial, industrial, agricultural and independent professional activities, together with imported goods and services, fall within its scope. VAT is collected through an input/output mechanism: a business offsets the VAT it pays on purchases against the VAT it charges customers, and remits or reclaims the difference. Exports and many services supplied to non-residents are generally zero-rated, and a reverse-charge obligation can shift the VAT accounting to the Turkish recipient when the supplier is abroad — a point foreign service providers frequently overlook.

A cross-border payment that “feels” tax-free rarely is. Fees, royalties and interest paid out of Türkiye typically attract withholding tax and, for services, a reverse-charge VAT — model both before you agree the price, not after the invoice arrives.

Special Consumption Tax (SCT)

The Special Consumption Tax (Özel Tüketim Vergisi) applies to specific product groups at varying rates, including petroleum products, natural gas, lubricants, solvents, motor vehicles, tobacco, alcoholic beverages and certain luxury goods. Unlike VAT, which applies at each stage of the supply chain, SCT is charged once. For importers and distributors of these goods it can be a substantial cost that needs to be built into pricing from day one.

Banking and Insurance Transaction Tax

Banks and insurers are generally exempt from VAT but are subject to the Banking and Insurance Transaction Tax (BSMV) on the income they generate, such as interest. The standard rate is 5%, with different rates for specified transactions. The applicable rate should be confirmed, as these figures are periodically revised.

Stamp Duty

Stamp duty (Damga Vergisi) applies to a wide range of documents, including contracts, financial statements and payroll records. It is levied either as a percentage of the document’s value or as a fixed amount, depending on the document type, and is often subject to an annual cap. Because a single agreement can trigger duty on multiple signed copies, the way a contract is executed — number of originals, who signs, and where — has a direct cost consequence.

Taxes on Wealth

Turkish wealth taxes include property tax, motor vehicle tax, and inheritance and gift tax. Property tax applies to buildings, dwellings and land held in Türkiye and is paid to the local municipality. Motor vehicle tax varies by the vehicle’s age and engine capacity. Inheritance and gift tax applies on a progressive scale, and non-residents inheriting Turkish assets fall within its scope — a factor worth planning for where family members hold Turkish real estate.

---

Business Vehicles

Türkiye offers several structures for foreign investors, principally:

• Joint stock company (Anonim Şirket / A.Ş.) — minimum capital 250,000 TL
• Limited liability company (Limited Şirket / Ltd. Şti.) — minimum capital 50,000 TL
• Branch of a foreign company
• Liaison (representative) office

Joint stock and limited liability companies are the most common choices, and both offer limited liability, so shareholders are generally protected from company obligations beyond their contributed capital. The A.Ş. is usually preferred where share transfers, outside investment or an eventual sale are anticipated, because its shares transfer more freely and its governance suits larger operations. A branch is treated as a non-resident taxpayer and is taxed only on its Türkiye-sourced income. A liaison office may carry out only non-commercial functions such as market research and cannot generate revenue; breaching that restriction triggers tax liability and can jeopardise the office’s permit.

Vehicle	Tax status	Key point
A.Ş. (joint stock)	Resident — worldwide income	Min. capital 250,000 TL; freest share transfers
Ltd. Şti. (limited)	Resident — worldwide income	Min. capital 50,000 TL; simpler governance
Branch	Non-resident — Türkiye-sourced income only	No separate legal personality from the parent
Liaison office	No commercial activity permitted	Earning revenue triggers immediate tax liability

Choose the vehicle for where the business is going, not just where it starts. Converting a branch or liaison office once revenue flows is far more costly and disruptive than incorporating the right company at the outset.

Financing, Cross-Border Payments and Withholding

A Turkish subsidiary can be funded through equity or debt, and the mix matters for tax. Debt financing is subject to thin capitalization and transfer pricing rules, which limit or disallow interest deductions on related-party loans that exceed statutory thresholds or are not priced at arm’s length. Structuring shareholder funding without regard to these rules can turn what looks like deductible interest into a non-deductible, and even reclassified, distribution.

Payments to non-residents — dividends, interest, royalties and certain service fees — are generally subject to withholding tax, with the rate depending on the type of income. An applicable double taxation treaty may reduce or eliminate that withholding, but relief is not automatic: the recipient usually must provide a certificate of tax residence from its home state, ideally before the payment is made. Miss that step and the payer is left applying the full domestic rate and chasing a refund.

Payroll and Social Security

Employers withhold income tax on salaries and pay social security contributions calculated on payroll, split between employer and employee shares up to a monthly ceiling. Rates and contribution ceilings are revised periodically by the relevant authorities. For a foreign company hiring its first Turkish staff, payroll compliance — registration, monthly declarations and timely payment — is often the earliest and most recurring tax obligation, and getting it wrong carries penalties that compound quickly.

Special care is needed for expatriate staff and cross-border arrangements. Employees seconded to Türkiye, remote workers paid from abroad, and directors who split time between countries can each create a Turkish payroll or permanent-establishment exposure that the group did not plan for. Reviewing employment contracts, assignment letters and the applicable treaty position before staff start work is far cheaper than untangling an assessment afterwards.

Tax Disputes and Compliance

Where a dispute arises, taxpayers may pursue administrative remedies first, including objection and settlement (uzlaşma), and then litigate before the tax courts, with further appeal to the regional administrative courts and ultimately the Council of State. These routes are governed by strict deadlines that run from the date the assessment is served, and missing them can forfeit the right to challenge, however strong the underlying position. Compliance is therefore not just about paying the right amount: taxpayers must keep adequate records, file on time and respond promptly to notices to keep every remedy open.

Turkish tax rules change frequently, and the interaction between domestic law, treaties and incentives rewards planning done in advance. Structuring an investment, a financing arrangement or a cross-border payment efficiently — and defending an assessment when one arrives — calls for tailored advice based on the current legislation rather than last year’s figures.