Taxes in Turkey

Taxes in Turkey

Turkey is one of the countries that is very organized in terms of tax-collecting, and anyone who resides in Turkey should be fully and adequately aware of the tax law in Turkey and know accurate information and details about this subject because of its importance in case you want to invest, reside, own or start an economic activity or trade, it is useful to be familiar with the tax law in Turkey so that you can organize your affairs well.

Do foreigners have more taxes in Turkey than Turks?

This is a rumor that we hear constantly and every now and then, and it is normal in any country that any economic activity is taxed but distinctive in Turkey that taxes on foreigners are the same as those imposed on Turks without any increase.

In the Turkish tax code, you can start a business, own real estate, or any other business and only the normal taxes paid by Turkish citizens are paid if they do the same business or business activity.

In Turkey sometimes foreign investors are forced to have some simple additional costs in exchange for translating some documents, the costs of taking an interpreter, the need for intermediaries and experts residing in Turkey, or the need to employ Turks within the institutions they own, and these things are not classified under the terms of the tax law in Turkey, but are needs that you may or may not need depending on your ability to do your things alone or depending on the nature of your investment activity.

Are taxes in Turkey more than in Europe?

Tax rates in Turkey are very competitive compared to many European countries and America, and according to the OECD classification, taxes in Turkey are competitive and encouraging to invest.

It is worth mentioning that Turkey enjoys a clear and transparent tax law which gives you reassurance, ease in legal procedures, trust, and security. Taxes in Turkey are objective, logical and in line with international laws and standards of taxation.

From time to time, Turkish law is subject to amendments and reductions, either permanent or temporary, to encourage foreign investors.

Types of taxes in Turkey

Taxes in Turkey have three types and are branched out by several forms of taxes.

• Income taxes
• Expenditure taxes
• Wealth and property taxes

Here are the broader details about the types of taxes in Turkey:

Income taxes

Income taxes are divided into two parts:

• Individual income tax
• Corporate income tax

Income taxes in Turkey also focus on two key points:

• Income elements and resources
• Net income

Per capita income tax in Turkey

The amount of net earnings and returns earned per person within one year is determined.

The following is a list of per capita income items for which taxes are calculated in Turkey:

• Commercial profits
• Agricultural profits
• Salary or monthly wage
• Income independent services (not restricted by a fixed salary)
• Income from immovable property proceeds (rental properties)
• Income from proceeds of movable property (financial investments)
• Other gains and returns

For Turks and foreigners residing in Turkey for more than six months during the year, income, and earnings elements inside and outside Turkey are calculated for individual taxes.

Those living outside Turkey, whether Turkish or foreign, who do not spend six months during the year inside the country, are only accountable to their sources of income within Turkey.

Per capita income tax is calculated if the monthly per capita income exceeds 14,800 Turkish Lira.

The value of the per capita income tax in Turkey ranges from 15 to 35% of the value of income.

The following is a table of taxes in Turkey on individual income:

Corporate income Tax

If the income comes from companies or institutions in Turkey, the legal entities that represent the company are taxed, and taxes in Turkey for corporate income are calculated according to the following list:

• Companies
• Associations
• Public economic facilities
• Economic establishments owned by institutions and associations
• Joint ventures

The rate of income tax on the profits of commercial companies is between 20 and 22%, but the Turkish government often adopts the lowest percentage.

The tax rate on the income of companies residing in Turkey is 15%, paid when dividends are distributed to individual shareholders of the company.

Non-resident companies in Turkey are also subject to a 15% income tax and are paid when transferring profits to headquarters within Turkey.

This tax applies only to profits after distribution or transfer and the capital is not included in the calculation of the tax value, but only profits are.

Expenditure taxes

• VAT (Value Added Tax):
• VAT in Turkey applies to goods and services of an independent commercial, industrial, agricultural, artisanal nature, goods and services supplied from outside Turkey “imports”, deliveries of goods and services.
• VAT in Turkey, has three rates: either 1%, 8% or 18%
• There are privileges on VAT in Turkey and exemptions on several types, including:
• Goods and services exported from Turkey (export abroad)
• Roaming services within Turkey are provided to non-resident customers from outside Turkey, but provided reciprocity by the resident country, in accordance with international roaming agreements.
• Manufacturers within free zones
• Oil exploration activities
• Port and airport services for ships and pilots
• Imported machinery and equipment in the range of (investment certificate)
• Transit
• Deliveries of goods and services carried out by diplomats and representatives of foreign embassies, provided there is reciprocity with this country, as well as with respect to international organizations, they are subject to tax exemption along with their employees.
• Insurance and banks’ transactions.

At the end of 2018, the Turkish government exempted Turkish and foreign real estate buyers who purchase real estate through bank transfer in foreign currency outside Turkey, and the exemption was for a temporary period that expired in March 2019. The Turkish government may reapply the exemption again for real estate or other sectors to encourage investors and its need for foreign currencies.

VAT tax applies to every delivery of goods and services.

SCT tax for private consumption:

There are 4 basic groups of products subject to private consumption tax and at different tax rates, these groups are:

• Petroleum products (petroleum derivatives, lubricants, solvents and derivatives, natural gas)
• Mechanical vehicles of all kinds: cars, motorcycles, airplanes, helicopters, and yachts.
• Tobacco and alcoholic beverages
• Recreational products

Private consumption tax is paid only once.

Banking and insurance tax:

This tax applies to income earned by banks, particularly interest on bank loans.

The maximum tax on insurance and banking transactions is up to 5%

Interest tax on bank deposit transactions is 1%

There has been no tax in Turkey on foreign exchange transactions since 2008

Stamp tax

From taxes on transactions containing written documents or papers, this tax is often a specific fee for a stamp attached to the document.

This tax applies to many documents: contracts, payment papers, capital contributions during the establishment of a company, financial and accounting statements such as payroll and wages, some letters in stamp taxes such as letters of credit, guarantee, etc.

The stamp tax is calculated either at a fixed and fixed rate for certain documents, or at a value of between 0.189% and 0.948% (i.e. less than 1%) 

Wealth and property taxes in Turkey

Turkey has three types of wealth taxes:

• Property taxes
• Car taxes
• Inheritance and donation taxes

Here are some details about Turkey’s wealth and property tax rates:

The rate of car taxes in Turkey relates to 2 points:

• The age of the car
• Engine power

The value of the tax is determined differently each year.

Tax incentives in Turkey

Since the beginning of 2012, Turkey has introduced a tax incentive system to encourage foreign and Turkish investment, and the distinctive investment tax incentives in Turkey apply to Turks and foreigners alike.

Turkey has four different tax incentive systems:

• International system
• Regional system
• Wide range system
• Strategic system

Real estate taxes in Turkey

The system of real estate taxes on investors in Turkey is one of the most important points to consider if you are about to invest in Turkey, especially since Turkey is one of the most competitive countries in tax rates among OECD countries, and the investment and tax laws in Turkey are simple and clear, in addition to being in line with international standards, as well as achieving equal treatment among all investors, whether Turkish or foreign citizens.

Regulatory laws relating to the promotion of investments, particularly real estate in Turkey, have also provided incentives for investors, such as the law passed by the Turkish Parliament to eliminate any additional taxes on foreigners when buying a property other than those paid by both the Turkish and the foreign.

In general, Turkey is one of the most tax-riddled countries, and we will review in clear points the most important types of real estate taxes in Turkey and its rate and when to pay:

Tabu transfer tax

There is a tax due when the property is changed and must be paid when the tabu title deed is registered, which is estimated at 4% of the value of the property declared and specified in the tabu and paid by both the seller and the buyer equally, but mostly the buyer pays it in full.

Property profit tax in case of resale

If you own a property in Turkey and decide to sell it 5 years before the date of purchase registered in the title deed, then you will have to pay a tax determined by the amount of profit you made from this property, and the profits are calculated by subtracting the price at which you bought the property fixed in tabu, and above the original price is considered profits and subject to tax as follows. :

• If the profits are less than 6800 Turkish Lira no tax will be charged
• If the value of profits from 7000-8000 Turkish Lira the tax is 15%
• If the value of the profit of 8000-18,000 Turkish Lira 25% tax is calculated
• If the value of profits is higher than 18,000,000-40,000 Turkish Lira tax is calculated at 27%
• Profits of more than 40,000 Turkish Lira and above is charged at 35%

This is in relation to the tax on profits from the resale of the property five years before the date of purchase, but in the case of five years the profit tax is not calculated which guarantees you a more profit margin.

Annual tax on all types of real estate in Turkey

• Residential real estate is paid a tax of 1% per annum.
• Commercial real estate is paid 4% tax per annum.
• Land with permission to build commercial buildings 6% per annum
• Agricultural land 0.2% per annum

Earthquake insurance tax

Turkey has two types of property insurance:

Compulsory and non-compulsory insurance and compulsory insurance only is earthquake or disaster insurance in general, known as DASK, and this tax amount must be paid after the title deed is registered in your name, its value depends on the size of the property, and must be renewed every year.

Monthly revenue tax

It relates to water, electricity and gas subscriptions and must be paid only once, in addition to other internet and television expenses, which are fully optional. You must also pay some small monthly fees, for cleaning, security and maintenance services provided by the residential complex. This amount is determined by the complex management after the completion of the project delivery.

KDV

This tax is calculated from the price of the property in the market, which ranges from 1% to 18% as the type of property and its location and the level of construction and the price of one meter of the land on which the property is built all these reasons affect the determination of the value of vat, as this value is not calculated from the total area of the property but from the net area, and this real estate tax is paid once when buying a property in Turkey

For nearly a year and a half, Turkey has seen the elimination of KDV on foreigners who buy property in Turkey and transfer the price of the property in dollars or euros from outside Turkey, like the treatment received by Turkish expatriates.

Unfortunately, this exception is over, but we expect such exceptions to return in later periods, as Turks understand the exceptions to turkey’s property taxes increase the desire of foreign buyers to own property in Turkey.