Turkey

It is important to understand the tax system in Turkey. Being aware of your tax obligations will help you stay compliant with the local laws and avoid unexpected liabilities. This section will provide you with an overview of the taxes applicable to succesful CBI applicants, as well as some tips on how to navigate the Turkish taxation system.

Individual Taxation

Income tax in Turkey can come from various sources, including employment income, rental income, and dividends. Your tax liability will depend on your status as a tax resident or non-resident. Tax residents are individuals who reside in Turkey for more than 6 months in a calendar year, while non-residents are those who spend less than 6 months in Turkey per calendar year. Turkey uses a progressive income tax system, with rates ranging from 15% to 40%. 

If you are a tax resident, you will be taxed on your worldwide income, whereas non-residents will only be taxed on Turkish-sourced income. It is essential to declare your income correctly and file an annual tax return, usually due by the end of March of the following year. Ensure that you keep accurate records of your rental income and the necessary expenses to claim deductions when calculating your taxable income.

The tax brackets are as follows:

Up to TRY 32,000 (USD 1126)= 15%

TRY 32,000 to TRY 70,000 (USD 1126 to USD 2465)= 20%

TRY 70,000 to TRY 250,000 (USD 2465 to USD 8800)=27%

TRY 250,000 to TRY 880,000 (USD 8800 to USD 30990)=35%

Over TRY 880,000 (USD 30990)= 40%

Corporate Taxation

The corporate income tax rate in Turkey is 25%. However, for financial sector companies such as banks, companies specializing in financial leasing, asset management firms, and corporations providing insurance services, the corporate tax rate is 30%. Exporters benefit from a 5% reduction in corporate tax on their export income.

Property Taxes 

Owning property in Turkey could lead to different tax implications. Tax rates for residential properties stand at 0.1% of their assessed value, which increases to 0.2% for residences situated within large urban areas. Commercial properties are subject to 0.2% tax, escalating to 0.4% if they are located in major cities. 

Agricultural land is taxed at a rate of 0.2%, with the rate doubling in larger metropolitan regions. Meanwhile, undeveloped land incurs a tax of 0.3%, which rises to 0.6% in big cities. This tax should be paid in two installments, one in May and the other in November. 

Capital Gains Tax

Capital gains arising from the sale of assets – such as property, real estate, or shares – are subject to taxation in Turkey. For Turkish citizens, including those who have acquired CBI, the capital gains tax rates range between 15% and 40%. The amount of the capital gains tax payable from the sale of property is reduced by indexing the capital gain, referencing the Local Producer Price Index (rate of inflation). In 2023, the first TRY 55,000 of capital gains from the sale of most assets is exempt from taxation.

Additionally, many assets that are held for more than five years before being resold can be exempt from paying any capital gains tax on the profit.

Inheritance Taxes

Inheritance tax might apply if you inherit assets as a Turkish citizen. This tax is levied on both domestic and worldwide assets. The inheritance tax rate in Turkey ranges between 1% and 30%, depending on the relationship between the deceased and the heir and the value of the inheritance. It is essential to seek professional advice to understand your inheritance tax liabilities better and plan accordingly.

Free Zone Tax Law

18 active economic Free Zones in Turkey provide residents with an array of tax benefits. 

These include 100% exemption from customs duties, corporate income tax for manufacturing companies, value-added tax (VAT), stamp duty on applicable documents, and real estate tax. 

There is also a 100% exemption from income and corporate taxes granted for designated logistics services provided within the Free Zones, on the condition that these services are intended for export purchases. 

There is a complete waiver of the income tax on the salaries of employees for companies that export goods produced in the Free Zones, amounting to at least 85% of the Free On Board (FOB) value of the goods. Moreover, these companies enjoy unrestricted storage of goods within Free Zones, freedom to transfer points, and tax exemptions on infrastructure, property transactions, and the import of used machinery. 

Complying with Turkey’s Tax Laws

To ensure that you remain compliant with Turkish tax laws, it is highly recommended that you consult with a local tax expert. They will be able to guide you through the complexities of the Turkish tax system, help you avoid potential pitfalls, and capitalize on any available exemptions or benefits. 

So, as an expat with Turkish or dual citizenship, understanding your tax obligations in your new country is crucial. Familiarize yourself with the various taxes applicable to you, plan your finances accordingly, and consult qualified professionals to help you navigate the Turkish tax system.