Comprehensive Guide to VAT and Taxation for Foreign Companies in Turkey
Here is an article about Acounting management in Turkey regarding taxes.
As a foreign citizen who is resident in Turkey or is considering establishing a project in Turkey, you will be liable for some taxes for foreigners in Turkey, which are required by Turkish law for foreigners residing in Turkey. Residency means that you are permanently resident in Turkey for more than 6 months of the calendar year. Learn more from us about the different types of tax for foreigners in Turkey, which are imposed on foreign nationals in Turkey.
In this chapter, we will explain the types of tax in Turkey for foreign citizens.
Different types of tax for foreign nationals in Turkey
Taxes imposed on foreigners in Turkey can be classified into three main categories, as listed below
Taxes on income.
Tax on expenditures.
Income tax on foreign nationals in Turkey
There are two categories of tax:
Personal and corporate income tax in Turkey
Personal income tax
This is a type of tax in Turkey for foreign nationals, imposed on a person’s actual earnings, the person’s income being calculated in such a way as to include all revenues and gains during the year, and it is examples of the person’s Profits and Gains that are subject to the income tax:
Salaries and wages.
Independent personal service income.
Income from real estate rights and property (rental income).
income from movable assets (investment income).
Registration of other benefits.
Income tax is imposed on the income of those residents who stay in Turkey for more than 6 months a year, and on their income earned inside and outside Turkey.
Non-residents (who stay in Turkey for fewer than 6 months) are taxed solely on their income and earnings gained in Turkey.
Income tax in Turkey for foreigners depends on the different income groups and the different types of income, both earned income and income from inactivity.
We can see that:
|Salary tax scale||Scale of earned income||Tax scale for persons not in gainful employment||Tax|
|13.001 to 30.000||20%||13.001 to 30.000||20%|
|30.001 to 110.000||27%||30 001 to 70 000||27%|
|110 000 and more||35%||70.001 and more||35%|
Company income tax
According to Turkish legislation, income tax in Turkey for foreign nationals is 20% on the profits of enterprises in Turkey.
The following taxes are collected at source on payments made to companies based in Turkey:
Tax on distributable profits 15
Tax on interest on firm licenses 5
Bank custody account 10% -18
Tax on repurchase contracts 15
Withholding tax on transfers made by companies not located in Turkey:
Tax on distributed income 0
Tax on interest on firm licences and bonds 5
Tax on bank deposits 10% -18
Tax on repurchase transactions 15
The law defines corporate taxpayers as follows:
Public economic organisations.
Economic entities held by organisations and institutions
If their commercial and legal status is not defined as resident or non-resident in Turkey, they are deemed to be non-residents and are taxed only on income they earn in Turkey.
the legal status of the company: this is the place specified in the agreement under which the company was set up
The company’s business headquarters: this is the place where most of the commercial activities and their management are conducted.
Export taxes for foreigners in Turkey
TAXES IN TURKEY AT THE EXPENSE :
This is divided into 4 types of tax:
Value added tax (VAT).
Special consumption tax.
Insurance and banking transaction taxes.
VALUE ADDED TAX (VAT) :
It is 1%, 8% and 18% and is applicable to goods, commercial services, industry, agriculture, goods and services that are imported into the country and to the delivery process of goods and services for other activity.
There are a wide range of exceptions to value added tax (VAT):
Goods and services destined for export.
roaming services provided in Turkey to non-resident clients in compliance with international roaming accords requiring reciprocity between Turkey and other countries.
Manufacturing services for third parties to customers in free trade zones.
Oil exploration operations.
Port and airport services for ships and aircraft.
supply of machinery and equipment under the investment incentive document
transit traffic (transit freight).
supplies of goods and services to diplomatic missions and consulates, subject to reciprocal arrangements between the two countries.
banking and insurance transactions subject to tax on insurance transactions and taxes
Special tax on consumption :
4 main groups of products are covered by a special duty for foreigners in Turkey.
Petroleum products, natural gas, lubricating oil, solvents and solvent derivatives.
Cars, motorbikes, aeroplanes, helicopters, yachts and other vehicles.
Tobacco and its derivatives, as well as alcoholic beverages
Special consumption taxes in Turkey for foreigners are charged once.
Tax on Insurance and Banking
This tax applies to some transactions that are exempt from VAT, for example
Banking revenues, in particular interest on loans, 5%.
Bank deposit operations 1%.
Foreign exchange transactions are not subject to tax.
The last type of tax in Turkey for foreign nationals that is imposed on expenditure, this type of tax is applied to a large group of documentation, for instance:
Contracts, payment documents, capital contributions, letters of accreditation, declarations of guarantee, financial statements and payslips.
The rate of stamp duty is a proportion of the value of the document itself, and the percentage varies between 0.189% and 0.948%, and there are some documents to which flat-rate taxes are levied.
WEALTH TAXES IN TURKEY :
There are three categories of wealth tax:
Inheritance and donation tax: ranging from 1% to 30%.
Property tax: As a foreign resident in Turkey, if you own buildings, flats or land in Turkey, you are taxed at a rate of 0.06% – 0.1%.
This is in addition to the cultural property conservation tax, which stands at 10% of the value of the property tax,
Property certificate withdrawal fees have very recently been reduced from 4% to 3% pursuant to the 2018 tax changes.
Vehicle tax: this is a tax imposed on cars and other vehicles, with fixed amounts varying each year depending on the age of the car and its cylinder capacity. For cars used for commercial business, the taxes applicable to them (2018 tax changes) have been reduced from 18% to 1%. For cars under “1300CC”, the price is lowered by 15 points.
And to encourage investment, tax incentives have been introduced for investments:
It was introduced on 1 January 2012 and comprises four different plans. It does not distinguish between local and foreign investors and is applicable to:
Technological development areas.
Organised industrial zones.
Research and development.
Private educational establishments.
Cultural projects and investments.
Granting of credits.
Turkish incentives for the international maritime sector.