Tax laws in Türkiye

Tax laws in Türkiye

Table of contents

The Turkish government uses tax revenue to stabilize the Turkish economy. Given the lack of natural resources such as oil and gas in Turkey, the country strictly enforces tax laws. Turkey, which is one of the most tourist-rich countries in the world, encourages many people to immigrate, invest and buy property in Istanbul with its attractions. People who have lived in Turkey for more than 6 months are considered residents of Turkey. Taxation is one of the important issues for people who work, live and invest in Turkey.

They immigrate to Turkey, so it is essential to know the tax laws in Turkey. In November 2019, the tax laws in Turkey underwent changes that were implemented in 2020. The rest of this article discusses the updated tax laws in Turkey.

Tax laws in Türkiye

Types of taxes in Türkiye

Prices of villas and apartments in Istanbul

As mentioned, tax revenue is one of the important economic sectors in Turkey. In detail, in Turkey, like in many countries, different taxes are applied, but these taxes can be divided into three main branches, which are applied directly and indirectly.

  • Income Tax: Every Turkish citizen must pay taxes according to their salary and income. Income tax includes personal income tax and corporate income tax.
  • Expense tax: This type of tax is imposed indirectly, for example, on the sale of goods and the provision of services, and is usually presented as a percentage of the price of the service. Value-added tax, banking and insurance transaction tax, and stamp duty fall into this category.
  • Property tax: This type of tax is based on assets such as real estate, vehicles, inheritance tax, and the like.
  • Rental Tax: Rental tax in Turkey, or stoppage in Turkey, is the responsibility of tenants who use the rented property to earn income.

Personal income tax in Türkiye

Turkish banks. Property taxes in Türkiye

Individuals and companies resident in Turkey are required to pay taxes on their domestic and foreign income. Non-residents in Turkey are also required to pay taxes on income they earn only from within Turkey, such as employment income, property ownership, and other items.

People who live in Turkey for less than 6 months are considered non-residents. Individual income of each person can be based on employee salaries, business income, agricultural income, investment income, income from property such as rent and other income.

According to the new Turkish tax laws enacted in 2020, the income tax rate for each Turkish individual varies from 15% to 40% based on income. The two tables below show the personal income tax rates based on employment and other income.

Income based on salary

Taxable income (lira)Tax rates in Türkiye
0 – 22,00015%
22,000 – 49,00020%
49,000 – 180,00027%
180,000 – 600,00035%
>600,00040%

Corporate Tax in Türkiye

Opening a bank account in Türkiye Istanbul. Tax laws in Türkiye

In Turkey, all companies, including commercial companies, partnerships, investment companies and other companies, are required to pay taxes on their income. In Turkey, the corporate tax rate was 30% in the past, but this amount has been reduced and the corporate tax rate between 2018 and 2020 is 22%.

According to the law, the president and ministers can lower this rate to 20%. Also, profits of subsidiaries transferred to the parent company are subject to a 15% tax. In addition, capital gains from the sale of foreign participations held for at least two years by an international holding company resident in Turkey are exempt from corporate income tax. Also, according to agreements between Iran and Turkey, bilateral companies are only required to pay taxes in one of the countries.

Property Tax in Türkiye

Property taxes in Turkey are usually divided into three types: real estate taxes, motor vehicle taxes, and gift and inheritance taxes. Since acquiring Turkish residency through property purchase has become very popular in recent years, property taxes in this country are of great importance to immigration applicants. Real estate taxes range from 0.1% to 1% depending on the type of property and its area; however, properties located in important and cultural areas are subject to taxes that are several times higher. In general, vacant land tax for construction purposes is 0.3%, residence tax is 0.1%, and land and common buildings tax is between 0.1% and 0.2%.

Also, agricultural land tax is set at 0% to support production. In case of buying and selling property, tax is also paid by the buyer and seller. According to the tax laws, the tax on luxury houses is determined based on the price of different tax rates. Houses over 5 million liras are considered luxury houses in Turkey.

Luxury home taxes in Türkiye

Home valueTax rate
5 – 7.5 million liras0.3%
7.5 – 10 million liras0.6%
بیش از 10 میلیون لیر1%

Digital Services Tax in Türkiye

According to the tax laws in Turkey, a tax is introduced as Digital Services Tax (DST), the rate of which is 7.5%. However, the President has the authority to reduce the rate to 1% or double the 7.5% rate, depending on the type of service, separately or on an integrated basis. Taxpayers with global income exceeding 750 million euros and local income exceeding 20 million Turkish Liras are subject to DST. According to the law, income from the provision of the following services is subject to DST:

  • Various digital advertising services (including services such as advertising control and service performance, data transfer and user management services, and technical services for advertising delivery)
  • The sale of any audio, visual or digital content on digital media and services provided on digital media for listening to, viewing, playing or recording or use thereof on digital media (including computer programs, applications, music, films and games).
  • Services for the provision and operation of digital media in which users may interact with each other (including platforms that enable the sale of goods or services among users)
  • Intermediary services provided in the digital environment for the above services are also subject to DST.
  • The tax base for DST is the income from the provision of the relevant services in the relevant tax period. The tax period for DST is the one-month periods of the calendar year.

Value Added Tax and Specific Consumption Tax

Buying an apartment in Istanbul, Türkiye

Tax Laws in Turkey: Goods and services of professional trade, industry, agriculture and related goods, as well as all services and goods imported into the country and the delivery of goods and services as a result of other activities are all subject to VAT. The VAT rates are 1%, 8% and 18% depending on the type of goods and services.

There are also 4 main product groups in Turkey that are subject to special consumption tax rates at different rates. Unlike VAT, which is charged on each delivery, special consumption tax is charged only once. These 4 groups are:

  1. Petroleum products, natural gases, oils, solvents and their derivatives
  2. Cars and other vehicles, motorcycles, airplanes, helicopters and motorboats
  3. Tobacco and tobacco products, alcoholic beverages
  4. Luxury goods

Other tax laws in Türkiye

Transactions of banking and insurance companies are still exempt from VAT but are subject to the banking and insurance transaction tax. This tax is levied on income earned by banks, such as interest on loans. Although the general rate is 5%, some transactions, such as interest on deposit transactions between banks, are taxed at 1%. According to the new tax laws in Turkey, the transaction rate of banking and insurance companies applied to transactions carried out in foreign currency has increased from 0.1% to 0.2%. The President has the authority to increase the applicable rate by up to 10 times.

The rate of the hospitality and hosting service tax in hotels, hostels, guesthouses, campsites and other services provided during the stay (food and entertainment, swimming pool, sports facilities, etc.) is applied at a rate of 2% on accommodation services; however, this rate is temporarily 1% until December 31, 2020.

Stamp duty is levied on a wide range of documents, including contracts, notes payable, capital contributions, letters of credit, letters of guarantee, financial statements and payroll. Stamp duty is collected as a percentage of the value of the document at rates ranging from 0.189% to 0.948% or, for some documents, as a fixed price and a predetermined price.

Motor vehicle tax is collected based on fixed amounts that vary each year depending on the year and engine capacity of the vehicle; inheritance and gift taxes are also applied at rates ranging from 1% to 30%. Inheritance tax can be paid in installments over 3 years, the tax year or fiscal year starting on January 1 and ending on December 31 of the same year. A special tax period is also available with the permission of the Ministry of Finance.

Turkish legal experts and lawyers and immigration lawyers in Turkey (4k Group), relying on their legal and immigration knowledge as well as their many years of valuable experience, are proud to provide the best consulting services to our dear compatriots.

 

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