Taxes in Turkey are divided into three main types:
– Income tax.
– Expense tax.
– Wealth and property tax.
1- Income Tax:
Individual Income Tax:
This tax applies to the net income earned by individuals within one year. It encompasses various income sources such as business profits, agricultural profits, monthly wages and salaries, independent service income, income from rented immovable properties, and income from movable properties like financial investments.
Corporate Income Tax:
This tax is paid by companies, associations, public economic institutions, economic institutions owned by institutions and associations, and joint projects. The corporate income tax rate ranges between 20% to 22%, but the Turkish government often adopts the lower rate. The tax rate for corporate income in Turkey is 15% and is paid when distributing profits to individual shareholders.
2- Expense Taxes:
Value Added Tax (VAT):
VAT is applied to commercial, industrial, agricultural, independent craft, and imported services in Turkey. There are three VAT rates: 1%, 8%, and 18%. However, several sectors are exempt from paying VAT, including Turkish exports, services provided to non-resident clients from outside Turkey (subject to reciprocity), manufacturers in free zones, oil exploration activities, services provided to ships and aircraft at ports and airports, imported machinery and equipment for ships and aircraft, transit transport, diplomatic and consular transactions, insurance, and banking transactions. The Turkish government also previously exempted Turkish and foreign property buyers who made purchases through bank transfers in foreign currency from outside Turkey, but this exemption had a time frame that ended in March 2019, and the government may reintroduce the exemption for real estate or other purposes.
Special Consumption Tax: This tax is applied to four categories: petroleum products, vehicles, tobacco and alcoholic beverages, and luxury goods. It is a one-time tax.
Banking and Insurance Transactions Tax:
This tax is calculated on income earned from banks, particularly bank loan interests. The maximum rate is 5%. The interest tax on bank deposit transactions is 1%. In 2008, this tax was abolished for foreign currency exchange transactions.
It is a tax on transactions involving written government documents or papers, usually in the form of a specific fee for affixing a stamp on the document. The documents subject to stamp tax include contracts, payment documents, capital contributions during company establishment, financial and accounting statements (e.g., payroll), letters of credit, and guarantees. The stamp tax rate ranges between 0.189% and 0.948%, which is less than 1% for each document.
3- Wealth and Property Tax:
Property Ownership Taxes: These taxes are related to property ownership and vary based on factors such as property value, location, and type (residential or commercial). Vehicle Taxes: These taxes are applied to vehicles and depend on factors such as the age and engine capacity of the vehicle. The tax amount is determined differently each year. Inheritance and Gift Taxes: These taxes are imposed on inheritances and gifts.