Turkey Investor Guide 2020 – Tax Rates

What are the tax rates applied in Turkey in 2020 for individuals and entrepreneurs? As in other countries, timely payment of taxes is a mandatory requirement for individuals and legal entities of the Republic of Turkey, and failure to comply with the requirements leads to sanctions, fines and additional financial burden.

Currently, when many borders worldwide are partially closed, you can still relocate to Turkey for permanent residence or register a business through Istanbul. We understand that coronavirus cannot last forever anyway, and it’s better to take care of your assets and future today. 

That is why our international offshore portal offers remote customer service during the pandemic, as well as ensures legal and investment support in Turkey. 

Turkey Investment Guide – taxes for businesses and individuals in 2020

The principle of the tax system of Turkey can be summarized as follows:

• Who are considered as taxpayers? – all Turkish citizens, including foreign nationals residing in the country based on a residence permit for a period exceeding six months.
• Non-residents are required to pay income tax received only in the host country (Turkey).
• The main taxes are applied on profit, wealth and indirect taxes.

In 2020, a tourist tax was introduced in Turkey, and some rates were also revised.

Due to quarantine driven by coronavirus in 2020, tax holidays were envisaged in Turkey for a number of investors, companies and organizations, as announced by the president of the country, Erdoğan, in March 2020. However, the pandemic will last (according to most expert estimates) for another couple of months, and after its over, all tax and other regimes will restore to the normal schedule and terms.

In order to prepare in advance for moving to Turkey for permanent residence and doing business in this jurisdiction, you should study all legislative norms, including those pertaining to taxes and customs duties. 

Important! Handling tax issues in Turkey, as well as the timely submission of declarations and financial statements, is the key component of any business. In order not to violate the established rules, to receive a tax deduction and grow your assets, it is recommended to use the help of accounting professionals from our specialized companies in Istanbul, Ankara and other cities of Turkey by writing to: [email protected].    

Turkey Investment Guide – Income Tax

Income tax in Turkey is levied on individuals and businesses.

Personal Income Tax in Turkey in 2020

The income tax on residents of the country is applied on the individual income received in the country or any foreign state. Income is defined as the net sum of all income and earnings by an individual during one calendar year and may derive from one or more sources:

1. Agriculture
2. Profit from doing business 
3. Salary
4. Independent individual services
5. Income from the sale and rental of real estate.
6. Income from movable property – investments with subsequent sale.
7. Other income and earnings.

Important! Residents of Turkey are required to pay tax on any income received in any country in the world. Non-residents of the country are required to pay tax to the Turkish state treasury based on the results of activities that are geographically linked to the Turkish Republic. For income from transactions outside the jurisdiction, foreign nationals are accountable in their country.

Since 2020, Turkey has established the following income tax rates:

Comparison table of income tax in different countries of the world:

Corporate Income Taxes in Turkey

The corporate income tax in Turkey in 2020 is regulated by the Law on Corporate Income Tax and is applied to legal entities and any business entities. 

Who are considered as corporate entities under the Turkish legislation?

• JSCs, CJSCs, LLCs
• Cooperatives and partnerships
• All legal forms of business, including state-owned enterprises.
• Business corporations 
• Foundations, associations, subsidiaries and joint ventures established by several founders, including foreign investors.

In 2020, the corporate income tax rate in Turkey is 22%. Reduced rate applies in exceptional cases, if the income is linked to investments in specifically designated sectors of the economy or regions.

Turkey Investment Guide – Indirect Taxes

This category of taxes includes VAT, tax on banking and insurance, stamp duty, as well as special consumer tax introduced in 2020.

Value Added Tax (VAT) in Turkey 2020

Goods, services, including those imported into the country as a result of other activities, are subject to VAT at the rate of 1%, 8% and 18%. Value added tax in Turkey applies to all commercial activities, including the agricultural industry. The only exception applies to exports where there is no VAT.

Also, activities subject to said tax rates include oil refining, development and production, aircraft and sea vessels servicing, as well as transit traffic. The standard rate is 18%, but it can be lower, depending on the fulfillment of additional conditions at the place of business and the scope of the company.

Bank and insurance tax (Turkey 2020)

According to Turkish laws, financial institutions of jurisdiction, including banks and insurance companies, do not have to pay VAT, but are required to pay tax on banking and insurance operations in a timely manner. The tax applies to income derived from the organization at a rate of 1% to 5% (loans, stocks, accounts, etc.). 

A reduced rate of 1% applies to deposit operations between banking institutions. 

Since 2008, in Turkey, sales tax on foreign currency transactions is not levied.

Capital gains tax in different countries:

Special Consumption Tax (SPT)

In 2002, a special consumer tax was introduced in Turkey, which replaced the six previously applied taxation regimes. The government made a resolution to simplify tax legislation and replaced 6 mandatory contributions with one that affects 4 groups of the economy:

1. Natural gas and petroleum products, solvents and lubricants (oils)
2. Automotive, motor transport, airplanes and other aircrafts, as well as yachts
3. Tobacco and alcohol products 
4. Items of luxury 

Unlike standard VAT, special consumer tax is levied once a year, in accordance with the rates established in the Law on SCT. The Council of Ministers has the authority to change rates within the limits specified by law.

Stamp duty in Turkey in 2020

The stamp duty rate is set for different groups of documents, including contracts, letters of credit and payment orders. Depending on the cost of the document, the rate varies from 0.189% to 0.948% or at a fixed amount at a predetermined price.

Turkey Investment Guide – Wealth Tax

In the context of the “wealth tax”, the Turkish authorities imply real estate, transport, inheritance or property received as a gift. 

Real Estate and Land Tax in Turkey 2020

If you buy real estate in Turkey in exchange for citizenship , as well as become the owner of an apartment for a residence permit or purchase a land plot in the property, you will have to pay tax. The tax rate in case of real estate varies from 0.1% to 0.6% and depends on the estimated value of the apartment/plot. If the investment was made to acquire cultural values, then the rate goes up to 10%.  

You should also bear in mind that in the Republic of Turkey real estate is additionally taxed at the stage of the transaction of sale:

• 65% of the property price for the buyer
• 65% must be paid by the seller.

Vehicle Tax in Turkey in 2020

The tax rate on cars and motor vehicles depends on the power and the age of the vehicle the car or a motorcycle. The Vehicle Tax in Turkey changes annually.

Inheritance tax in Turkey

Another type of luxury tax- registration of an inheritance or receiving property as a gift. In any case, the new owner will have to pay from 1% to 30% to the treasury of the country.

Investment Guide for Tax Rates in Turkey in 2020 – Conclusion

Despite the protracted crisis associated with the virus all over the world, the government in Turkey continues to be loyal and cares primarily for its citizens. As it comes to taxes, this jurisdiction treats foreign citizens and local entrepreneurs on equal footing, which cannot be said about some states of the European Union.

Our professional consultants at OffshoreProGroup are ready to assist you in registering a company in Turkey, opening a bank account, handling formalities with tax and customs services, as well as obtaining citizenship by investments and other immigration options.

You can get a free consultation on all issues from our online consultants, by phone and mail: [email protected].