The tax system in Turkey was developed under the influence of the German tax system, so that both tax systems are basically comparable. Like the German one, the Turkish taxation system is based on annual tax returns, special tax returns and pre-tax returns.
The tax system in Turkey is also divided into three major types of taxes: income tax, expenditure tax and wealth tax. Within these three types of taxes, other types of taxes, duties and special taxes were introduced in Turkey, such as the stamp duty, the special consumption tax and the communication tax. This has resulted in Turkish tax law becoming quite complicated.
The main features of Turkish tax law are briefly summarized below.
Income Taxes (Gelir Vergileri)
Income taxes are regulated differently for private individuals and legal entities. For natural persons it is called income tax. The net amount generated by the taxable person within a calendar year is decisive for the calculation of the tax rate.
With regard to income tax, a distinction is made between unlimited and limited tax liability. Persons who stay in Turkey for more than 6 months in a calendar year are subject to unlimited tax liability. Limited tax liability exists for people who stay in Turkey for less than 6 months – but earn an income from or in Turkey. While the unlimited taxpayers are taxable in Turkey on their entire worldwide income, the limited taxpayers only have to pay tax in Turkey on the income they have earned in Turkey. However, in the case of international income, the respective double taxation agreements must be observed.
The tax rate is between 15 and 35 percent, depending on individual income.
The so-called corporation tax (Kurumlar Vergisi) applies to legal entities. For this purpose, a uniform tax rate of 20 percent of the business profit applies in Turkey. Corporate income tax is also divided into fully taxable and limited taxable.
Expenses Taxes (Gider Vergileri)
Spending taxes are divided into value-added tax, special consumption tax, bank and insurance line tax, and stamp duty.
The VAT rate is between 1 and 18 percent. The standard rate is 18 percent. It should be noted at this point that a refund of VAT paid in Turkey is possible for foreign taxpayers, even if the refund procedure is not entirely straightforward.
The special consumption tax covers luxury goods, products that are harmful to health such as alcohol and cigarettes, and products that are harmful to the environment such as petrol. The importers and manufacturers of the products are liable for tax here, whereby this tax is only levied as a lump sum and pro rata.
The tax on banking and insurance services relates to income from banks such as interest on loans. The standard tax rate is 5 percent. Stamp duty is levied on all legally relevant documents, whereby this tax applies equally to both contracting parties. The tax rate is between 1.89 per thousand and 9.48 per thousand and only applies to forms issued abroad when they are used by a Turkish authority.
Wealth Taxes (Varlık Vergileri)
Wealth tax is divided into inheritance and gift tax, property tax and real estate transfer tax, and motor vehicle tax. The tax rate for inheritance and gift tax is 1 to 10 percent and is to be paid by the heirs or the recipient. Here, however, the allowances must be observed. The property tax for residential buildings is 0.1 to 0.2 percent. The vehicle tax rate depends on the displacement and age of the vehicle and is significantly higher than in Germany.
Please find more informations in our article describing payroll tax in Turkey.