TAXATION IN TURKEY
Individual Income Tax
Individuals are obligated to declare all their income earned in a calendar year to the tax Office in the following year. However, there are some minor exceptions, such as salaried employees in a single workplace. A cash basis is applied to the income of individual, they must have received the income in cash or cash equivalents to pay tax. For example, professions such as doctors, lawyers, accountants or architects, who are individual taxpayer, will not declare this as income in the income tax return of that period, if they have not received the fee for the service within the calendar year.
For individual taxation in Turkey, graduated income tax is applied than fix rate. Taxation rates are different between income from wages and non-wages.
Individual income tax rates for 2021 are as follows:
| Tax Brackets for Non-Wage Income||Tax Brackets for Wage Income||Rate (%)|
|Up To 24.000 TRY||Up To 24.000 TRY||15|
|Between 24.000 TRY and 53.000 TRY||Between 24.000 TRY and 53.000 TRY||20|
|Between 53.000 TRY and 130.000 TRY||Between 53.000 TRY and 190.000 TRY||27|
|Between 130.000 TRY and 650.000 TRY||Between 190.000 TL and 650.000 TRY||35|
|More Than 650.000 TRY||More Than 650.000 TRY||40|
For Example: The income tax of a person who has an annual wage of 100.000 TRY is a follow:
Tax Brackets for Wage Income
Up to 24.000 TRY
Between 24.000 TRY and 53.000 TRY
Between 53.000 TRY and 190.000 TRY
All incomes of legal entities are subject of corporate tax legislation. Corporate taxpayers defined in the law are as follows:
Capital Companies, cooperatives, Public Economic Enterprises, Economic Enterprises Belonging to Associations, Foundation and business partners. The corporate tax rate levied on business profits is 20% in Turkey.
Dividend payment to individual shareholders is subject to withholding tax of 15%. Withholding tax is calculated and deducted on dividend by company and pays the withholding tax to tax Administration on behalf of the shareholders. While declaration of income, tax exemption is applied to 50% of the income earned from the dividend.
While calculating the income tax amount for dividend, taxable base is 50% of the gross dividend. Withholding tax which is paid by the company is deducted from the tax amount calculated according to the income tax brackets. the net amount after this calculation, is the tax to be paid or to be refunded.
Capital gains arising from the transfer of company’s shares are subject to tax. However, the taxation of these varies depending on whether of the share transfer is a real person or a company, how long it is held and some additional conditions.
Capital gains from limited company shares is subject to tax and it is calculated according to graduated income taxation.
If capital gains from joint-stock company meet the following conditions, capital gains are not subject of taxation:
- &The company whose shares are sold must be a “joint-stock Company”.
- &Share certificate must be physically printed.
- &The person selling the shares must have held these stocks for 2 full years.
For legal entities:
There is no distinction whether the sold shares belong to a joint stock company or a limited company. Although all capital gains of legal entities are subject of taxation, there is only one exception to this.
If capital gains belong which shares have been held at least 2 years, 75% of capital gains is subject of tax exception. For this reason, corporate tax is calculated only on 25% of capital gains.
Real Estate Sales Profit
Profit from the sale of real estate is subject to income tax and is taxed according to the income tax brackets for real persons. However, If the income from real estate sales made after 5 full years from the date of real estate purchase is subject to tax exemption. So, tax will not be paid.
For legal entities:
The sales profit of real estates registered in the company’s assets are subject to corporate tax. However, if all of the following conditions are met, 50% of the profit obtained is within the scope of exemption in the calculation of corporate tax.
- &Must be registered in company assets for at least 2 full years from the date of purchase.
- &This sales profit obtained by the company must be kept in a fund account within equity for at least 5 years from the year following the year of sale.
Others Tax Matters
There are different exceptions and exemptions for income and corporate tax and other rent, royalties and other similar income. There are many more tax and social security exemptions and exemptions in technoparks, free zones, certain cities and geographical regions in the country, depending on the sectors in which the companies operate, the amount and nature of the investment.
TAXATION IN TURKEY
Taxes on Expense
Value-Added Tax (VAT):
Generally applied VAT rates; 1%, 8% and 18 %. Commercial, industrial, agricultural and independent professional goods and services; All deliveries of goods and services created through goods and services that have been imported and entered the country and other activities are subject to VAT. All of the companies operating in Turkey is the corporate taxpayers. In addition, business have to pay their VAT declarations for each month until the 26th of the next month.
Special Consumption Tax (SCT)
There are four main product groups subject to SCT at various tax rates:
- &Petroleum products, natural gas, machine oil, solvents and solvent derivatives
- &Automobiles and other vehicles, motorcycles, planes, helicopters, yachts
- &Tobacco and tobacco products, alcoholic drinks
- &Luxury Consumption Goods
- & Unlike VAT, which is applied on each delivery, SCT is applied only once.