TAX CONSULTATION IN TURKEY

Turkish tax system – what taxes do individuals pay in Turkey

All tax issues in Turkey are handled by the tax office – the Turkish Revenue Administration ( TRA ). It is here that you should apply to obtain a Tax Resident Certificate of the country and submit a Declaration. TRA also calculates penalties for late payment of taxes and resolves controversial tax issues.

Reference: Turkey has concluded more than 80 Double Tax Treaties, which allow foreign citizens and companies to apply the DTT and pay taxes in only one state.

Income tax in Turkey in 2022

The most important tax that local residents and tax resident foreigners will have to pay in Turkey is the income tax. These deductions to the budget are applied to such types of profits as:

• salary ;
• rendering professional services ;
• rental of real estate, aircraft, yachts, etc.;
• dividends, interest, royalties ;
• pension.

The income tax rate for individuals in Turkey is progressive and depends on the amount of annual profit. The minimum income tax for individuals in Turkey is 15%, and the maximum is 40% (assigned with an annual income of more than 880,000 TL ).

Capital gains tax in Turkey

Such tax is paid on profit generated in the course of a certain transaction. For example, capital gains tax on the sale of real estate – from 15% to 40%. Payment occurs within 15 days after receipt of income.

Tax on interest and dividends in Turkey

Interest tax is charged at a rate of 0 to 15%. For non-resident investors, the maximum rate applies. In other cases, the rate depends on the maturity of deposits – the longer the maturity, the lower the tax.

Dividend tax in Turkey is charged only on 1/2 of the total amount at a rate of 10%. If the income from dividends and income from other sources of citizens in the aggregate is more than 70,000 TL, then such profit is subject to declaration.

Customs duties

Starting from May 2022, the customs duty for individuals in Turkey will be charged at a rate of 30% for goods with a value of 150 € or more imported from a country outside the EU.

Also in Turkey, many categories of goods are not subject to duties, the import of which is allowed in limited quantities.

What you can take with you to Turkey and not get on duty at customs:

• Unlimited money in any currency. However, it is important to understand here that it will be possible to take back FROM Turkey without confirmation and declaration of no more than 5,000 US dollars. According to the unspoken rule, when crossing the Turkish border, it is better to declare the currency, which at the time of entry is more than 10,000 US dollars. Otherwise may arise questions on the source of such amounts.
• Sports equipment, but only one, maximum two per person – glider, boat, tent (2 pcs), flipper, wetsuit, etc.
• Electronics are available for transportation across the Turkish border, also one unit per citizen.
• Jewelry – at least as much, but with a total value of 15,000 USD or equivalent.

Reference: in order not to attract the attention of regulators and tax officials, we advise you to take care of a bank account in Turkey or an international payment system in advance. Thus, you can store assets in any currency and always have access to them, regardless of the country of residence.

Property taxes in Turkey for individuals and companies

Transport tax – the duty of individuals and legal entities that own land, air, or water transport. The tax rate is calculated according to the year of manufacture of equipment, weight, cost, and other criteria. Payment occurs twice a year in January and July.

VAT when buying a new car from a manufacturer and/or dealer, paid in Turkey by all buyers except foreigners who have a work permit.

Corporate tax in Turkey

What taxes do local and foreign business founders have to pay in Turkey in 2022? According to current regulations, all companies operating or registered in the territory of the Turkish state are required to pay taxes:

• local legal entity ;
• foreign companies ;
• cooperatives ;
• state enterprises, foundations, and associations;
• joint companies.

The income tax for companies in Turkey in 2022 is 23%. The deadline for filing a tax return is April 30 of the year following the reporting period.

Value Added Tax (VAT) was established in Turkey for exporters and importers at a standard rate of 18%, which can be reduced to 1% and 8% for certain types of goods/services. Banks and insurance companies in Turkey do not pay VAT but are required to pay taxes on banking and insurance transactions at a rate of 5%.

Capital gains tax in Turkey for companies is set at 23%.

Consumption tax ( Special Consumption Tax, SCT ) was established for certain groups of goods – oil and gas products, vehicles, alcoholic and carbonated products, and certain consumer goods (furs, household appliances, caviar, etc.). SCT rates change every month and in 2022 for spirits and beer they are 65% and for cigarettes 80%.

Gambling tax in Turkey provided for companies that have chosen this niche. The rate is floating and distributed by areas of activity – 5%, 7%, and 10%.

Taxes for sole proprietors in Turkey

What taxes do individual entrepreneurs in Turkey or self-employed citizens pay? In 2022, taxes for sole proprietorships and LLCs in Turkey are similar. However, IP ( Ger ç ek Ki ş i Tacir ) is a natural person in one person who does not keep accounts and does not have a legal address of the company. And an LLC in Turkey is a common organizational and legal form of activity with shareholders and a founder (there can also be only one person).

As for taxes, an individual entrepreneur in Turkey pays:

• value-added tax (VAT), which may be levied at a rate of 0%, 1%, 10% or 18%;
• income tax at a rate of 23% (in 2022).

Stopaj , Stopaj in Turkey

Separately, it is worth mentioning the withholding tax in Turkey ( Stopaj / Stopaj ). What is this tax and who pays it? Let’s look at examples.

Storage – came from French and means “advance deduction/payment.” In simple words, Stopaj is withholding tax until the final income is received, whether it is a salary or rent payment.

Example :

• An employer can deduct the Stoppage when paying an employee’s salary and contribute income tax to the tax amount on behalf of the employee BEFORE issuing earnings. In this case, the deduction is a withholding tax ( Stoppage ). In this situation, the employee does not have to declare anything on his own.
• If the employer does NOT deduct the Stoppage from the salary, then the employee is obliged to pay income tax on his own.

What income is subject to withholding tax ( Stopaj ) in Turkey is determined by law. When and where going on retention tax BEFORE receiving profit :

• salary ;
• payments to self-employed citizens ;
• rental payments per real estate ;
• dividends ;
• interest on deposits.

Example – What is a Rental Stoppage?

The tax on holding when renting real estate in Turkey is NOT paid by the landlord, but by the LESSEE BEFORE transferring money for rent to the owner of the object. The standard Stoppage rate in Turkey for property rentals is 20% of the gross rent.

Who is exempt from taxes in Turkey – benefits for companies

Foreign companies whose income comes from foreign sources pay taxes only on income from sources in Turkey.

Local companies in Turkey are taxed on all profits, including those from foreign sources.

To take advantage of tax incentives, the government of the Turkish state offers to open a business in SEZs (free economic zones), of which there are 18 in the country. Benefits registration companies in the SEZ of Turkey :

• exemption from income and corporate taxes;
• no stamp duty or property tax.

Duties of the tax lawyer of Prikhodko & Partners JSC include:

• Tax advise in Turkey;
• accrual taxes in Turkey ;
• Preparation of tax documents in Turkey;
• tax representation in Turkey;
• Settlement of tax disputes in Turkey.