Number Crunch


A rundown of what investors should know about the tax system in Turkey while operating in the country.

With the enforcement of Law No. 4875 in Turkey on June 17, 2003, the country is encouraging further FDI. After years of low FDI levels, Turkey is expected to attract higher figures in 2013 and in coming years due to strong and stable growth and structural changes in the banking, retail, and telecommunications sectors. During 2012 and most recently in May 2013, Turkey’s credit rating was gradually upgraded to investment grade by several international credit rating agencies, thanks to Turkey’s recent and expected future improvements in key economic and public finance figures. This article provides a high-level overview of the major tax and accounting issues for the benefit of potential investors planning to enter the Turkish market.


The New Commercial Code No. 6102 and the Code of Obligations No. 6098 entered into force on July 1, 2012. Under the Commercial Law regulations (including the Code of Obligations), five forms of enterprises have been defined: companies, partnerships, joint ventures, sole traders, and branches. There is a relatively unrestricted investment environment in Turkey for foreign investors, and the procedures to establish foreign capital company are similar to those required for local companies. With the tax exemptions provided to companies in various tax laws, and restructuring tools such as M&As, spin-offs, and share exchanges, company restructuring plays an important role for foreign investors in Turkey.


Corporate Tax

Companies whose legal or business headquarters (as stated in their articles of association) are located in Turkey or whose operations are centered and managed in Turkey are subject to corporate tax on their worldwide income. Turkish tax legislation describes these companies as full liability taxpayers, also known as resident companies.

The taxable income of limited liability taxpayers (non-resident companies or taxpayers other than full liability taxpayers) includes the following:

• Professional fees obtained in Turkey,

• Profits from commercial, agricultural, and industrial enterprises that have an establishment or a permanent representative in Turkey,

• Income derived from the rental of real estate, rights, and movable property in Turkey,

• Income obtained in Turkey from various types of securities, and

The tax rate on the income generated by non-resident entities varies by type of income.

In principle, corporate income is subject to corporate tax at the rate of 20%. Certain corporate income and gains (both for residents and non-residents) are subject to withholding tax. In the presence of a Double Taxation Treaty (DTT), it might be possible to reduce the tax rates or be exempt from taxation in Turkey for income and earnings derived by non-resident individuals.

Corporate income tax is payable until the end of the month in which the tax return was filed (i.e. April, if the fiscal period is the same as the calendar).

The following corporate tax exemptions and incentives could be available for investors:

• Tax benefits and incentives in Technology Development Zones, Industrial Zones, and Free Zones could include total or partial exemption from Corporate Income Tax.

• State aid for R&D activities comprise a mix of reimbursements for certain expenses.

• For those companies certified with a valid investment incentive certificate, the profit gained from these investments will be subject to corporate income tax at reduced rates until the incentive contribution amount as of the accounting period in which the investment operations have been started partly or as a whole.

Value-Added Tax

Value-added tax (VAT) was introduced in Turkey in 1985. The implementation of VAT in Turkey is similar to practices in EU countries. As a rule, the delivery of all goods and services that take place in Turkey are subject to VAT. This means that VAT is payable on every transaction involving production or the performance of a service. Goods and services imported into the country are also subject to VAT. The person liable for the payment of VAT is the one delivering the goods or services, or in case of imports, the importer.

VAT is reported and paid monthly. Each month’s VAT return must be submitted to the tax office by the 24th of the following month. If the return shows VAT payable, that amount must be paid by the 26th of the month that the return is filed. While the VAT rate applied to the majority of products and services is 18%, for a specific list of products and services the VAT rates of 1% and 8% are applied.

Certain transactions stated under the law are exempt from VAT (e.g. the export of goods and services, goods purchased by tourists, international transportation services, and banking and insurance transactions).

The VAT that a taxpayer pays for goods and services purchased (input VAT) can be offset against (deducted from) the VAT received on deliveries of goods and services made (output VAT). When the amount of VAT on sales is greater than the amount on purchases, the taxpayer pays the difference to the tax office. Where the opposite is true, for example, when input VAT is more than output VAT, the difference is not, as a rule (there are exceptions however), refunded to the taxpayer; instead, it is carried forward and can be offset against future VAT collections.

Personal Income Taxes

Individuals who are resident in Turkey are subject to tax on their worldwide income. Non-residents are taxed on earnings and revenues derived in Turkey. Individual income and gains are subject to income tax at progressive tax rates, which vary between 15% and 35%, and are calculated on a cumulative basis. Certain individual (both for resident and non-resident) income and gains are subject to withholding tax. Withholding tax is withheld and filed by the local company, which provides income to resident or non-resident individuals. In the presence of a DTT, it might be possible to reduce the tax rates or be exempt from taxation in Turkey for the income and earnings derived by non-resident individuals.


Turkey has an extensive tax treaty network, which uses the tax exemption method to prevent double taxation. Turkey follows the OECD Model Convention in its treaty negotiations, and has included in all its income tax treaties a mutual agreement procedure.

Today, the number of DTTs effective in Turkey is 78. An updated list of DTTs can be found on the Turkish Revenue Administration website at

In addition, the former Germany DTT was terminated on 21 July 2009. The two countries signed a new treaty in 2011. Even though the treaty was published in the Official Gazette in 2012, it took effect retroactively from January 2011.

There are certain corporate tax exemptions and incentives of the DTTs that may be available for investors, which include:

• Elimination of double taxation on the same income in both countries.

• Elimination of the potential taxation on capital gains resulting from the disposal of shares or assets in Turkey.

• Lower withholding tax rates on dividends and royalties.


Statutory Accounting Requirements

The accrual method of accounting is generally required in Turkey. Accounting practices for businesses, including self-employed individuals engaged in business as well as public and non-public companies, are regulated by the Turkish Commercial Code (TCC) and the Turkish Procedural Tax Law. The Banking Regulation and Supervision Agency (BRSA), the Treasury Undersecretariat, and the Capital Markets Board (CMB) have issued additional regulations that set forth standards for accounting, financial reporting, and auditing for banks, insurance companies, and companies registered on the stock market. They provide the general rules and principles required for maintaining official books of account and set forth a general framework for financial reporting in Turkey.

There are major changes regarding to the accounting requirements for companies in the Turkish Commercial Code No. 6102 (TCC), which came into force on July 1, 2012. According to the TCC, financial statements are required to be prepared in accordance with Turkish Accounting Standards (TMS) published by the Turkish Accounting Standards Board (TMSK), which are in conformity with International Financial Reporting Standards (IFRS) for almost all companies in Turkey to be audited by independent auditing firms.

Statutory Audit Requirements

All joint-stock companies are required to appoint statutory auditors to examine their financial statements on behalf of the shareholders. Audits performed by statutory auditors are limited in nature compared to audits performed in accordance with internationally accepted auditing standards.

One of the important issues introduced by the TCC is a system for the auditing of firms. According to the previous TCC (numbered 6762), the audit was included among the compulsory organs of the firms, and the statutory auditors were not always from the profession and were generally viewed as persons fulfilling a legal requirement. Through the new regulation, it is replaced by the independent audit mechanism, which should be conducted by independent audit firms or by sworn financial advisors (YMM) or independent accounting financial advisors (SMMM). Statutory auditors examine the activities and transactions of the company and report at the general shareholders meeting on the financial statements, the proposed distribution of profits, and the general financial condition of the company. The audit is required to be performed in accordance with Turkish Auditing Standards, which are identical to International Auditing Standards.

Upon the request of any shareholder, special audits are also allowed in the TCC. If the General Assembly accepts the special audit requested by a shareholder, the court appoints a special auditor.


Dividends received by resident companies from other resident companies are not subject to corporate tax. Dividends received from foreign companies are included in taxable income. A withholding tax of 15% is applied to dividends paid by resident corporations to the

• resident individuals,

• resident recipients who are not subject to corporate tax and income tax,

• non-resident individuals,

• non-resident corporations (excluding those receiving dividends through a permanent establishment or permanent representative in Turkey), and

• non-resident recipients who are exempt from corporate tax and income tax.

A branch remittance tax at the rate of 15% applies to profits remitted by non-resident corporations that have a permanent establishment or permanent representative in Turkey to their headquarters.


Incentives and deductions on a regional basis have been provided to various sectors by the Council of Ministers in order to direct disposals to investments that have high value-added. They also increase production and employment, provide continuation to the incentive inclination and sustainable development, support large-scale investments containing technology and R&D that will increase international competitiveness, increase FDI, ameliorate the differences of regional development, and support investments and R&D actions in order to protect the environment. This provides convenience to the goals envisaged in the development plans and annual programs and international treaties other than regulations stated in tax codes.

The current investment incentive system of Turkey is structured in four sub-systems: the general investment incentive system, the regional investment incentive system, the investment incentive system for large-scale projects, and the strategic investment incentive system.

The support instruments to be provided within the framework of various investment incentives systems are shown in the above table.

You may also be interested in...

The Scramble for African Aviation


The Scramble for African Aviation

How did Turkish Airlines become the major player in African aviation in under 20 years?

View More
Turkish Lira Devaluation in 2022


Worst-Performing Currencies of 2022

As high inflation rates persist, many national currencies are struggling with devaluation in 2022.

View More


Top 5 Black Sea Ports

Hard-pressed Harbors in Wartime

View More

Energy & Mining

COVID-19: Energy in Turkey

Global Energy Industry Changing

View More


Turkish Defense: 2020

Turkish Defense Industry in 2020

View More

Real Estate & Construction

Turkish Construction Overseas

Beyond Africa in the 2020s

View More


Secrets of Turkish Tea

World's Biggest Tea Drinkers

View More

Health & Education

Slice of life

Turkey-made medical devices

View More
Eat, pray, love


Eat, pray, love

Turkish tourism

View More
View All Articles