(You may use this link to see a
brief explanation of Tax Incentives in Turkey)
In Turkey multi-tax system is applied. The Turkish tax regime can be
classified under three main headings
I) Income Taxes
Corporate Income Taxes
Individual Income Taxes
II) Taxes on Expenditure
Value Added Tax
Special Consumption Tax
Banking and Insurance Transaction Taxes
Stamp Duty Tax
Special Communication Tax
Tax on Wagering
Tax on Customs
III) Taxes on Wealth
Inheritance and Gift Taxes
Property Tax
Motor Vehicle Tax
I) INCOME TAXES
1) THE INDIVIDUAL INCOME TAX
The Subject and Elements of Income Tax
Income is described as the net amount of profits and earnings obtained by
natural persons in one calendar year. The elements of income are classified in
seven categories. These are;
- Income from commercial activities,
- Income from agriculture,
- Income from professionals,
- Wages and salaries,
- Income from capital investment (interest and dividends),
- Income from immovable assets and rights,
- Other income and earnings.
The Taxpayer of Income Tax
Natural persons who earn one of or all of those kinds of income are subject to
Individual Income Tax. Those people who obtain these kinds of income are
Individual Income Tax payers.
An individual in Turkey is liable for tax on his income as an employee and on
income as a self-employed person. In the case of an individual who answers the
test of a "permanent resident", the tax will be calculated on his
income earned in Turkey and overseas. A foreign resident who is employed in
Turkey pays tax only on his income in Turkey.
To be considered Turkish resident, residence of over 6 months in Turkey
during any calendar tax year must be established. A foreigner who spends less
than a continuous period of six months in Turkey during a calendar year and
whose customary home is not in Turkey or who, although staying for more than six
months, has come to Turkey for a specific and temporary assignment (e.g.
businessman, expert, press or radio, TV correspondent) is regarded as non-resident
and is taxed only on his income from employment in Turkey.
Declaration of Individual Income Tax
In Turkish Tax System taxation of income is based on declaration. There are
three types of tax return.
a) Annual Tax Return
The annual declaration is used for consolidation of the profits and earnings
derived from various sources in the course of one calendar year. An individual
whose income is only from a wage is not obligated to file an annual return. The
employer deducts tax from the employee and transfers it to the tax authority
every month. The annual tax return for each calendar year shall be presented by
the 15th day of the March of the following year. The declarations of those who
permanently leave the country during a calendar year shall be presented 15 days
prior to departure, and in the event of death, within 4 months of the date of
decease.
| Types |
Declaration Time |
| Lump Sum Taxation |
February 15 |
| Others |
March 15 |
| Lump Sum taxes declared with the
other commercial income |
March 15 |
b) Withholding Tax Return
Withholding is defined as a tax return which is used for declaring to Tax Office
total taxes withheld by employers and other people’s withholding taxes
together with their amounts of net taxable income.
Those are required to withhold taxes
- Public administrations and institutions,
- Public commercial concerns and other incorporations,
- Commercial companies and business partnerships,
- Associations, religious and charitable foundations,
- The commercial operations of associations and religious and charitable
foundations,
- Those securing investment funds,
- Tradesman and self-employed individuals who are required to report their true
income,
- Farmers whose agricultural earnings are determined on the basis of a balance-sheet
or an agricultural trading account.
Taxes withheld at source are declared to the tax office by the evening of the
20th day of the following month. These taxes are paid due to the evening of the
26th day of the this month.
c) Special Tax Return
Non-resident taxpayers do not have to give an annual tax return. The special tax
return is used for the reporting of certain profits and earnings by taxpayers
subject to limited tax liability.
2) THE CORPORATE INCOME TAX
The Subject of Corporate Income Tax
Earnings and profits of corporations are the subject of corporate tax. The
elements of income subject to corporate income tax are;
- Income from commercial activities,
- Income from agriculture,
- Income from professionals,
- Wages and salaries,
- Income from capital investment (interest and dividends),
- Income from immovable assets and rights,
- Other income and earnings.
Taxable event is the obtainment of corporate profits/earnings.
Taxpayer of Corporate Income Tax
The following entities are the taxpayers of the corporation income tax.
- Capital companies,
- Cooperative companies,
- State Economic Enterprises (public corporations),
- Economic entities owned by foundations and associations,
- Joint Ventures.
Whether a company is subject to full or limited tax liability depends on its
status of residence. A company, whose statutory domicile or place of management
are established in Turkey (resident company), will have full tax liability; in
this case, worldwide income is taxable. If a non-resident company conducts
business through a branch or a joint venture, it will have limited tax liability;
i.e. fully subject to corporate tax on profits earned in Turkey on an annual
basis. If there is no presence in Turkey, withholding tax will generally be
charged on income earned; for example, for services provided in Turkey. However,
if there is an avoidance of double taxation treaty, reduced rates of withholding
tax may apply.
Corporate income tax is applied at 20 % rate on the corporate earnings.
Taxpayers (except income from commercial activities and agriculture in
limited tax liability) pay provisional tax at the rate of corporate tax, these
payments are deducted from corporate tax of current period.
Declaration of Corporate Income Tax
In general, the Corporate Income Tax is assessed on the basis of the declaration
(tax return) by the person having the responsibility for his taxes.
The Corporate Income Tax declaration can be grouped into 3 categories
a) The Annual Corporate Income Tax Return
The annual tax return is applicable for the reporting of net corporate profits
realized in the course of one accounting period.
The corporate income tax returns are submitted to tax office with which the
taxpayer is associated during the fourth month following the month in which the
accounting period closes. Corporate income taxpayers have to fill and sign their
tax returns and submit them to tax offices between the 1st and 25th days of the
forth month following the close of the related fiscal year. Corporate income tax
can be paid until the end of the month in which the tax return is to be filled.
b) Special Tax Return
Non-resident foreign corporations which have limited tax liability use
special tax return for reporting certain profits and earnings. Special tax
return is given in 15 days from the obtainment of earnings and profits.
c) Withholding Tax Return
Those who are obliged to make tax withholding are required to file a brief tax
return to tax office associated with the place of payment or accrual of the
payments which they have made during the month, or of the profits and revenues
on which they have caused accrual to take place, as well as of the taxes which
they have withheld from these, by the evening of the 20th day of the following
month and they should pay by the evening of the 26th day of this month.
II. TAXES ON EXPENDITURE
1. VALUE ADDED TAX (VAT)
The Turkish tax system levies value added tax on the supply and the
importation of goods and services. The Turkish name for VAT is KDV and is
introduced in 1985.
The Subject of VAT
Transactions carried out in Turkey are the subject of the VAT. Taxable
transactions include the supply of goods and services, importation of goods and
services and other activities. The following transactions carried out in Turkey
are subject to VAT
Supply of goods and services within the scope of commercial, industrial,
agricultural or independent professional activities,
Importation of all kinds of goods and services,
Other activities.
The Taxpayer of VAT
VAT taxpayers are those engaged in taxable transactions, irrespective of
their legal status or nature and their position with regard to other taxes. Withholding
agent are those calculate and pay the tax to the related tax office
on the name of taxpayer.
Tax Rates in VAT
Three different rates are applied to varied goods and services groups in VAT.
| Reduced Rate |
%1 |
List No I dried foods, cotton, wheat, |
| |
%8 |
sheep and cattle, bread, newspaper and magazines,
etc. List No II basic food
items (milk, macaroni, oil,
etc.) and other goods and services |
| General Rate |
%18 |
Goods outside of the Lists I and II |
Declaration of VAT
Taxation in VAT is based on tax returns declared in writing by taxpayers.
Even if they do not have taxable transactions within taxation period they have
to declare tax return.
Taxpayers who are subject to the monthly periods must file and submit their
returns to the related tax office by the evening of the 20Th day of the
following month. For quarterly period, they must file and submit their returns
by the evening of the 20Th day of the following three months.
2. SPECIAL CONSUMPTION TAX
Goods in the Lists attached to the Special Consumption Tax Law are the
subject of the tax. For goods in the Lists, Special Consumption Tax is charged
only once.
There are mainly 4 different product groups that are subject to special
consumption tax at different tax rates
- List I is related to petroleum products, natural gas, lubricating oil,
solvents and derivatives of solvents.
- List II is related to automobiles and other vehicles, motorcycles, planes,
helicopters, yachts.
- List III is related to tobacco and tobacco products, alcoholic beverages
and cola.
- List IV is related to luxury products.
The Taxpayers of the Special Consumption Tax
Taxpayers are different according to the lists. They are;
For List I; manufacturers and importers of the petroleum products,
For List II; merchants of motor vehicles, exporters for using or sellers through
auction
For List III; manufacturers, exporters or sellers through auction of tobacco,
alcoholic beverages and cola.
For List IV manufacturers, exporters or sellers through auction of luxury
products.
3. BANKING AND INSURANCE TRANSACTION TAX
All transactions of banks and insurance companies and bankers are the subject
of the tax. There will be the tax upon the money, which they collect under the
name of interest, commission and expenditure because of the services they
produced on behalf of them.
Taxpayers are banks, insurance companies and bankers. Financing companies,
lenders and factoring companies are also taxpayers.
Taxation period in BITT is each month of the calendar year. Taxpayers declare
their taxable transactions up to the evening of the 15Th day of the following
month.
4. SPECIAL COMMUNICATION TAX
Services of cell phone, cable radio and television broadcasts and
telecommunication are generally the subject of the tax. Taxable event is the
carrying out these services.
Taxpayers are enterprises that present these services.
Taxation period is each month of the calendar year. Taxes collected in each
month are declared and paid by the evening of the 15Th day of the following
month.
5. STAMP TAX
A wide range of documents in the List I attached to the Stamp Tax Law are the
subject of the tax. These documents are related to acts, conclusions, official
reports, papers related to commercial transactions, receipts. When these
documents are prepared, tax arises.
Taxpayers are persons who have signed these documents. Tax is levied as a
percentage of the value of the document. Stamp tax can be paid in four ways by
sticking revenue stamp, by putting printed stamp, in respond of receipt and by
stoppage.
6. CUSTOMS DUTY
Goods imported from abroad are the subject of the tax. Taxable events are
free circulation of goods, registration of customs declaration, and temporary
importation in case of partial exemption.
Taxpayer is principally person who declare to the customs office.
Customs duties are assessed on written declaration by the taxpayer and paid
within 10 days dating from communication.
III. TAXES ON WEALTH
1. INHERITANCE AND GIFT TAX
The transition of goods, which belong to Turkish citizens, and goods, which
are within Turkey from one to another without return, and by inheritance or in
another way are the subject of the tax.
Taxpayer is the person who acquires goods by inheritance or gratuitously.
Turkish citizens who gain possession outside of Turkey without payment are also
subject to this tax.
Inheritance and gift tax is assessed on the declaration submitted by
respondent.
In the case of inheritance, the declaration will be submitted in four months
starting with the date of death as a rule of law. If the death occurs in Turkey
and the taxpayer is outside of Turkey, the declaration period is extended to six
months. In the case of occurrence of death and being of taxpayers outside of
Turkey, the declaration period will be again four months. However, when the
death occurs in a foreign country and the taxpayer is in another foreign country,
the declaration period is extended eight months.
In the case of transmissions by gratuitous, the declaration will be submitted
in one month following the date of acquirement of the properties.
2. REAL ESTATE TAX
a) Building Tax
Buildings in Turkey are the subject of the tax. Taxable events are the
ownership of the building, setting up usufruct or acting as owner of the
building.
Taxpayer is owner of the building, if exist, owner of the usufruct, or if no
one of these exists, person who acts as owner of the building.
Tax assessment is made by the related municipality. The tax is assessed and
accrued upon the annual declaration. The real estate tax is paid in two
installments. The first installment in the months of March, April and May and
the second one in December will be paid.
b) Land Tax
Lands in Turkey are the subject of the tax. Taxable events are the ownership
of the land, setting up usufruct or acting as owner of the building.
Taxpayer is owner of the land, if exist, owner of the usufruct, or if no one
of these exists, person who acts as owner of the land.
Tax assessment is made by the related municipality. The tax is assessed and
accrued upon the annual declaration. The land tax is paid in two installments.
The first installment in the months of March, April and May and the second one
in December will be paid.
3. MOTOR VEHICLE TAX
The subject of the tax is motor vehicle. Taxable event is registration of the
motor vehicles in the traffic, municipality and docks.
Taxpayers are real and legal persons who have motor vehicles that are
registered to their own names in the traffic, municipality and docks register
and the civilian air-vehicle register maintained by the Ministry of
Transportation.
Tax is assessed and accrued annually in the beginning of January. The motor
vehicle taxes are paid in two equal installments, in January and July, every
year.
The Rate of Income –Corporate and Value Added Taxes in the General
Budget Tax Revenues (Thousand TL )
| Years |
Tax
Revenues |
Income
Tax |
The
Rate in Tax Revenues (%) |
Corporate
Income Tax |
The
Rate in Tax Revenues (%) |
Total
VAT (Inside + Import) |
The
Rate in Tax Revenues (%) |
The
Total of IT,CIT and VAT
(%) |
TheRate
inTax Revenue |
| 1993 |
264.273 |
106.661 |
40,4
|
19.132
|
7,2
|
81.877 |
31,0 |
207.670
|
78,6
|
| 1994 |
587.760 |
181.884 |
30,9
|
43.976
|
7,5 |
176.742
|
30,1 |
402.602
|
68,5
|
| 1995 |
1.084.350 |
329.795 |
30,4
|
103.241 |
9,5
|
354.980
|
32,7 |
788.016 |
72,7
|
| 1996 |
2.244.094 |
676.017 |
30,1 |
189.338
|
8,4
|
743.026
|
33,1 |
1.608.381
|
71,7
|
| 1997 |
4.745.484 |
1.500.245 |
31,6
|
396.237 |
8,3
|
1.561.562
|
32,9 |
3.458.044
|
72,9
|
| 1998 |
9.228.596 |
3.481.752
|
37,7
|
748.383
|
8,1
|
2.725.083
|
29,5 |
6.955.218
|
75,4 |
| 1999 |
14.802.280 |
4.936.551
|
33,3
|
1.549.525
|
10,5
|
4.164.334 |
28,1 |
10.650.410
|
72,0 |
| 2000 |
26.503.698 |
6.212.977
|
23,4 |
2.356.787
|
8,9
|
8.379.554 |
31,6
|
16.949.318 |
64,0
|
| 2001 |
39.735.928 |
11.579.424
|
29,1
|
3.675.665
|
9,3
|
12.438.860 |
31,3
|
27.693.949
|
69,7
|
| 2002 |
59.631.868 |
13.717.660
|
23,0 |
5.575.495 |
9,3
|
20.400.201 |
34,2
|
39.693.356 |
66,6 |
| 2003 |
84.316.169 |
17.063.761
|
20,2 |
8.645.345
|
10,3 |
27.031.099 |
32,1
|
52.740.205
|
62,6
|
| 2004 |
101.061.191 |
19.688.330
|
19,5 |
9.619.359
|
9,5
|
34.325.168 |
34,0
|
63.632.857
|
63,0
|
Taxpayer Statistics
The Number of Active Taxpayers in Turkey
| Type
of Tax |
The
Number of Active Taxpayers in 2003 |
The
Number of Active Taxpayers in 2004 |
| Income
Tax |
1.735.722 |
1.774.568
|
| Corporate
Income Tax |
605.020 |
632.093
|
| Income
from Immovable Property |
491.907 |
573.308
|
| Income
Withholding Tax |
2.032.950 |
2.141.913
|
| Corporate
Withholding Tax |
9.048
|
9.014
|
| Value
Added Tax |
2.142.949
|
2.230.815
|
| Lump
Sum Tax |
820.621 |
814.532
|
| Other
Incomes and Earnings |
20.894 |
21.570
|
| Other
Taxes |
2.191.542 |
2.299.810
|
The Number of
Active Taxpayers according to the Types of Corporations
| Type
of Corporation |
Active
|
| Natural
Person |
3.212.471 |
| Limited
Liability Company |
540.153 |
| Ordinary
Partnership |
48.979 |
| Joint
Stock Company |
95.278 |
| Others |
75.303 |
| Cooperative
(Society) |
58.814 |
| General
Partnership |
5.117 |
| Ordinary
Limited Partnership |
526 |
| Shared
Limited Partnership |
56 |
| Total |
4.036.697
|
This document provides a general overview of taxation in Turkey. No rights
may be derived from it.
Revenue Administration
Department of Taxpayer Services
İlk Adım Cad.
06450 Dikmen-ANKARA
TURKEY
https://www.gib.gov.tr
January 2006
(Source: Revenue
Administration web Site)