Turkey Tax Regime

Turkey operates a classical corporate income tax system alongside a progressive personal income tax. Companies outside the financial sector are taxed at a standard 25% rate — financial sector companies at 30% — with a second layer of withholding tax on distributions to shareholders. The regime has modernised rapidly: a 10% domestic minimum corporate tax applies from 2025, the OECD Pillar Two global minimum tax has been legislated with effect from 2024, and inflation adjustment of financial statements has returned to active use in high-inflation years. Administration is heavily digitalised through e-invoicing, e-ledgers and electronic filing, and the treaty network is broad, though rules change frequently by presidential decree and taxpayers must monitor thresholds that are re-indexed each year.

1.1 Sources

Primary legislation includes the Corporate Tax Law (No. 5520), the Income Tax Law (No. 193), the Value Added Tax Law (No. 3065), the Tax Procedure Law (No. 213), the Special Consumption Tax Law (No. 4760) and the 2024 legislation implementing the local and global minimum corporate taxes.

1.2 Recent developments

The headline corporate rate stands at 25% (30% for banks and other financial sector companies). With effect from 1 January 2025, a domestic minimum tax ensures corporate tax is not less than 10% of corporate income computed before most exemptions and deductions, with carve-outs for the domestic participation exemption, emission premiums, technology development zone earnings and qualifying R&D and design allowances. Turkey has legislated the Pillar Two global minimum tax broadly following the OECD Model Rules: an income inclusion rule for years beginning on or after 1 January 2024, an undertaxed profits rule from 2025, and a 15% qualified domestic minimum top-up tax from 2024, with transitional safe harbours; the first GloBE information return (for 2024) fell due in June 2026. Inflation adjustment of the statutory accounts has been applied again in recent years under the Tax Procedure Law where cumulative price-index conditions are met.

Headline statutory corporate income tax rate for a resident company. Where sub-national (state, provincial, cantonal or municipal) corporate taxes apply, the combined rate reported by the OECD is shown. Projected 2026–2028 rates carry the current rate forward unless a change is already enacted or officially scheduled. As-of 2026.

Top marginal statutory personal income tax rate on employment income for a resident individual. Where sub-national (state, provincial, cantonal or municipal) income taxes are a standard part of the system, the combined top rate is shown. Projected 2026–2028 rates carry the current rate forward unless a change is already enacted or officially scheduled. As-of 2026.

2.1 Rates and residence

Corporations — principally the joint stock company (anonim şirket, A.Ş.) and the limited liability company (limited şirket, Ltd. Şti.) — are resident if their legal seat or place of effective management (business centre) is in Turkey, and residents are taxed on worldwide income. Non-resident companies are taxed only on Turkish-source income, such as profits of a Turkish permanent establishment or income from Turkish real estate. The standard corporate income tax rate is 25%; banks, financial leasing, factoring, financing and savings-finance companies, electronic payment institutions, asset management companies, capital-markets institutions and insurers pay 30%. There are no provincial or municipal income taxes on corporate profits. Exporters benefit from a 5-point rate reduction on qualifying export earnings, and certain manufacturers from a 1-point reduction on production income.

From 1 January 2025 a domestic minimum corporate tax applies: liability is computed both under the standard regime and as 10% of corporate income before most deductions and exemptions, and the higher amount is payable. Excluded from the minimum-tax base add-backs are the participation exemption for dividends from Turkish resident entities, emission premium gains, technology development zone earnings and qualifying R&D and design allowances.

2.2 Dividends and participation exemption

Dividends received by a Turkish company from another Turkish resident company are exempt from corporate tax without a minimum holding requirement. Dividends from foreign participations are exempt where the Turkish company has held at least 10% of the paid-in capital of a foreign corporation for at least one year, the foreign profits bear an effective tax burden of at least 15% (20% for companies whose principal activity is finance or insurance), and the dividends are repatriated to Turkey by the filing date of the corporate return; a 50% exemption is separately available for dividends from foreign subsidiaries in which at least 50% of the capital is held, subject to repatriation conditions. Capital gains on the sale of domestic participations held for at least two years qualify for a 75% exemption where the gain is kept in a special equity reserve for five years; the former exemption for gains on immovables has been curtailed for newly acquired property.

2.3 Income determination and deductions

Taxable income starts from the statutory accounts kept under the Tax Procedure Law and the uniform chart of accounts, adjusted for tax. Business expenses are generally deductible; non-deductible items include the corporate tax itself, most penalties and late-payment interest, disguised profit distributions and deemed interest on thin-capitalised debt. Depreciation follows useful lives published by the tax administration (declining-balance permitted at twice the straight-line rate, capped at 50%). Where high-inflation conditions under the Tax Procedure Law are met, balance sheets are subject to inflation adjustment and the adjustment differences are reflected in taxable income under transitional rules. A notional interest deduction is available for cash capital increases (50% of a deemed interest amount on new equity, higher for capital contributed from abroad, limited in duration for recent increases).

2.4 Interest limitation and thin capitalisation

Two restrictions apply cumulatively. First, thin capitalisation: related-party borrowings exceeding three times shareholders' equity (six times for borrowings from related banks and financial institutions) generate non-deductible interest and foreign-exchange losses, with the disallowed interest recharacterised as a deemed dividend subject to withholding. Second, a general financing expense restriction disallows 10% of financing costs (interest, commissions, foreign-exchange differences and similar) attributable to foreign borrowings that exceed the company's equity; banks and financial institutions are outside this rule. There is no EBITDA-based limitation of the EU pattern.

2.5 Losses

Tax losses may be carried forward for five years, provided the losses of each year are shown separately in the returns; there is no carryback (except a limited carryback historically available in liquidation). Losses of foreign branches may be deducted subject to documentation and audit conditions in the source country. Loss carryforwards survive qualifying tax-free mergers and divisions within limits (capped at the equity of the transferring company and subject to continuation of the business for five years).

2.6 Group taxation

Turkey has no fiscal consolidation or group relief regime: each company is taxed on a stand-alone basis, and losses cannot be surrendered between group members. Group relationships matter chiefly for transfer pricing, thin capitalisation and the disguised profit distribution rules. VAT grouping is likewise unavailable, so intra-group supplies are taxable events.

2.7 Controlled foreign companies

CFC rules attribute the profits of a foreign subsidiary to its Turkish corporate shareholders where Turkish residents control, directly or indirectly, at least 50% of the capital, dividend rights or voting power; at least 25% of the foreign company's gross revenue is passive (interest, dividends, rents, royalties, gains and similar income outside commercial, agricultural or professional activity); the foreign entity bears an effective tax burden below 10%; and its gross revenue exceeds the foreign-currency equivalent of TRY 100,000. Attributed profits are taxed at 25% whether or not distributed, with credit for subsequent actual distributions.

2.8 Transfer pricing

Transfer pricing follows the arm's-length principle in Article 13 of the Corporate Tax Law, aligned with the OECD Transfer Pricing Guidelines. Non-arm's-length dealings with related parties constitute disguised profit distribution, triggering both a deduction denial and dividend withholding consequences. Documentation is three-tiered: an annual transfer pricing report (local file), a master file for large taxpayers (assets and turnover of TRY 500 million or more), and country-by-country reporting for groups with consolidated revenue of EUR 750 million or more. Advance pricing agreements — unilateral, bilateral or multilateral — are available, and a 50% penalty reduction applies where documentation obligations are met fully and on time.

2.9 Incentives

The incentive landscape is extensive. Technology development zones (technoparks) offer corporate tax exemption on software and R&D income through 2028, together with wage-tax and social-security support. The R&D and design centre regime under Law No. 5746 grants a 100% additional deduction for qualifying expenditure plus payroll incentives. Investment incentive certificates provide reduced corporate tax on income from qualifying investments (regionally differentiated contribution rates), VAT and customs duty exemption on machinery, and social security premium support; strategic and priority investments obtain the most generous terms. Free zones offer corporate tax exemption for manufacturing profits, and the Istanbul Finance Centre regime provides deductions for qualifying financial-services exports. A 5-point corporate rate reduction applies to export income and 1 point to manufacturing income.

2.10 Pillar Two

Turkey has enacted the global minimum tax for groups with consolidated revenue of at least EUR 750 million in at least two of the preceding four fiscal years, broadly following the OECD Model Rules. The income inclusion rule applies for fiscal years starting on or after 1 January 2024 and the undertaxed profits rule from 2025; a 15% qualified domestic minimum top-up tax (QDMTT) applies from 2024, preserving Turkish taxing rights over low-taxed Turkish profits. Top-up tax arises where the jurisdictional effective rate is below 15%, and Turkey applies the transitional CbCR safe harbours. The GloBE information return is due within 15 months of year-end (18 months for the first year), so the 2024 return fell due in June 2026. Groups relying on technopark, free zone and investment incentives should model the interaction between incentives, the 10% domestic minimum tax and the QDMTT carefully.

2.11 Branch income and reorganisations

A Turkish branch of a foreign company is taxed at 25% (30% financial sector) on branch profits determined under the same rules as subsidiaries. After-tax branch profits remitted to the head office attract a 15% branch remittance withholding tax, subject to treaty reduction. Mergers, divisions, share exchanges and conversions between Turkish resident companies can be effected tax-neutrally under the Corporate Tax Law where assets transfer at book value and the transferee assumes the tax attributes; partial divisions of participations and production facilities are also facilitated. Loss transfer in such reorganisations is capped and conditional, and cross-border reorganisations generally trigger taxation because Turkey has no merger directive equivalent.

3.1 Residence and rates

Individuals domiciled in Turkey, or present in Turkey for more than six months in a calendar year (subject to exceptions for temporary assignments), are resident and taxable on worldwide income; non-residents are taxed on Turkish-source income only. Income tax applies progressively at 15%, 20%, 27%, 35% and 40%, with bracket thresholds re-indexed each year by the revaluation rate and slightly more generous thresholds for employment income; the 40% top rate applies above an indexed threshold in the millions of lira. Employment income of a single employer is largely settled through payroll withholding, with a return required only above high indexed thresholds; the minimum-wage portion of all salaries is exempt from income tax and stamp tax.

3.2 Capital income and real estate

Investment income is heavily withholding-based. Interest on Turkish bank deposits and repos, income from investment funds and gains on listed securities are taxed by final withholding under a temporary regime of the Income Tax Law, at rates set by presidential decree that have varied with maturity and instrument (historically 0–15%). Dividends from Turkish companies bear 15% withholding, and half of the gross dividend is exempt for resident individuals, the balance taxed progressively with credit for the withholding where a return is required. Capital gains on unlisted shares held for more than two years are exempt; gains on real estate held by individuals for more than five years are likewise exempt, shorter holdings being taxed progressively after indexation of cost. Rental income benefits from a small exemption for housing and a lump-sum expense option.

3.3 Social security and payroll

Employees contribute 14% social insurance plus 1% unemployment insurance; employers contribute 20.75% plus 2% unemployment insurance, with a reduction of several points for compliant employers under incentive legislation. Contributions are levied on gross salary up to a ceiling of 7.5 times the gross minimum wage, which is revised at least annually. Payroll withholding covers income tax and stamp tax on wages, remitted monthly through the combined withholding and social security declaration. Severance pay entitlements (one month per year of service, capped) are a significant employer liability and are income-tax exempt within the cap.

3.4 Inbound individuals

There is no net wealth tax. Inheritance and gift tax applies at 1–10% on inheritances and 10–30% on gifts, with indexed allowances and multi-year payment options. Expatriates employed in Turkey are taxed as residents or non-residents under the general rules; wages paid in foreign currency by non-resident employers out of foreign earnings can be income-tax exempt for employees of liaison offices. Turkey taxes foreign nationals only on Turkish-source income where treaty and residence conditions so provide, and totalisation agreements can keep inbound assignees in home-country social security for limited periods.

Withholding is central to Turkish taxation of cross-border payments. Dividends to non-resident companies and to individuals bear 15% withholding. Interest on loans from foreign banks and comparable financial institutions is generally 0%, while interest on other foreign loans is 10%. Royalties and payments for professional services rendered by non-residents bear 20%, and payments under multi-year construction contracts 5%. Turkey's network of over 85 double tax treaties typically reduces dividends to 5–15%, interest to 10% and royalties to 10%; most treaties allow Turkey to tax professional service fees only where presence exceeds 183 days. Relief generally operates by refund or at source with a residence certificate, and the principal-purpose test applies under treaties covered by the multilateral instrument.

Branch remittances to a foreign head office attract 15% withholding on the after-tax profit, mirroring dividend treatment. Payments to residents of jurisdictions on the (still unpopulated) low-tax blacklist can attract 30% withholding under a dormant statutory power. Because royalty and service withholding at 20% frequently exceeds treaty ceilings, refund practice and up-front documentation — tax residence certificates, apostilled and translated — are an important part of cross-border contract management, and payer-side gross-up clauses are common in licence and service agreements.

5.1 General anti-abuse and disguised distributions

Turkey relies on substance-over-form doctrines in the Tax Procedure Law rather than a single codified GAAR: transactions are characterised according to their true economic nature, and sham or artificial arrangements can be disregarded. The two workhorse anti-avoidance regimes are disguised profit distribution through transfer pricing (Article 13) and thin capitalisation (Article 12), both of which recharacterise excess benefits as dividends, with corporate tax, withholding and penalty consequences. Deductions may also be denied for payments lacking documentation or business purpose, and the 10% domestic minimum tax operates as a structural backstop against exemption stacking.

5.2 Exit, CFC interaction and disclosure

There is no general corporate exit tax of the EU pattern, but transfers of assets or of the business centre abroad trigger taxation of accrued gains under liquidation and valuation principles. The CFC regime (section 2.7) and the 15% foreign-tax-burden condition of the participation exemption together discourage the accumulation of low-taxed passive profits offshore. Turkey exchanges information under the OECD Common Reporting Standard and country-by-country multilateral framework, applies the multilateral instrument's principal-purpose test across much of its treaty network, and requires ultimate beneficial ownership notifications to the Revenue Administration. Cash repatriation and asset-peace programmes have periodically offered favourable declaration windows for offshore assets.

6.1 VAT

VAT applies at a standard rate of 20%, with reduced rates of 10% (basic foodstuffs beyond the 1% list, restaurants, medical products and devices, books and similar) and 1% (certain agricultural staples, newspapers, housing within size and value limits, and financial leasing of specified machinery). Registration is mandatory for taxable activity with no threshold; non-resident digital service providers register for VAT No. 3 on B2C electronic services. Reverse charge (VAT No. 2) applies to imported services and specified domestic supplies with partial withholding ratios. Returns are monthly, due by the 28th of the following month. Excess input VAT is carried forward rather than refunded in cash, except for exports, reduced-rate supplies and other listed refund-eligible transactions — making VAT cash-flow planning a distinctive feature of doing business in Turkey.

6.2 Transaction, payroll and other taxes

Special consumption tax (ÖTV) applies at high rates to petroleum products, vehicles, alcohol, tobacco and luxury goods, often dwarfing VAT in those sectors. The banking and insurance transactions tax (BSMV) of 5% applies to financial-sector income in place of VAT, and a foreign-exchange purchase levy can apply at rates set by decree. Stamp tax of 0.948% applies to signed agreements stating a monetary amount (capped per document, with many exemptions), and wages bear stamp tax of 0.759%. Real estate transfers attract a title deed fee of 4% of the sales price (formally 2% each for buyer and seller); annual property taxes run 0.1–0.6% depending on type and location, with a valuable-housing tax on high-value residences. A digital services tax of 5% applies to large digital companies' Turkish revenues (reduced from 7.5% effective 1 January 2026), and inheritance and gift tax, motor vehicle tax, special communication tax and an accommodation tax of 2% complete the picture. There is no net wealth tax.

7.1 Filing, assessment and audit

The tax year is the calendar year; companies may adopt a special accounting period with Ministry approval. Corporate returns are filed electronically, generally by the end of the fourth month after year-end, with tax payable by the filing deadline. Advance corporate tax is declared and paid quarterly at the corporate rate for the first three quarters, creditable against the annual liability. E-invoicing, e-archive invoicing, e-ledger and e-delivery-note obligations cover most of the corporate economy. The statute of limitations is five years from the end of the year in which the taxable event occurred; tax inspections are conducted by the Tax Inspection Board with risk-based selection, and large taxpayers face continuous scrutiny. Withholding, VAT and social contributions run on monthly cycles, making compliance calendars dense.

7.2 Rulings, appeals and penalties

Taxpayers may obtain advance rulings (özelge) from the Revenue Administration that protect against penalties and interest when followed. Assessments can be contested first through administrative remedies — settlement (uzlaşma) before or after assessment, penalty reduction on payment, and the correction/complaint route — or litigated before the tax courts, with appeal to regional courts of justice and, for larger amounts, the Council of State. Tax loss penalties equal 100% of the tax evaded (300% for fraud), late-payment interest accrues at monthly rates set by decree, and voluntary disclosure with regret (pişmanlık) eliminates penalties where tax and interest are paid. Mutual agreement procedures under treaties are available and now codified in the Tax Procedure Law, and periodic restructuring laws have historically allowed disputed and undisputed debts to be settled on favourable instalment terms.

Deadlines falling on holidays roll to the next business day, and the Ministry frequently extends deadlines by circular during force-majeure periods. Because bracket thresholds, ceilings and fixed taxes are re-indexed by the revaluation rate every January, compliance parameters must be refreshed annually.

9.1 Entity choice

The limited liability company (Ltd. Şti., minimum capital TRY 50,000) and the joint stock company (A.Ş., minimum capital TRY 250,000) are the standard vehicles; both are formed quickly through the central trade registry system (MERSIS). The A.Ş. is preferred for share transfers — notarisation is not required and individual shareholders can access the two-year exemption on gains from printed share certificates — and for regulated activities. Branches of foreign companies are taxed like subsidiaries but bear the 15% remittance tax on repatriation; liaison offices may not trade but enjoy payroll tax advantages. Ordinary and limited partnerships are transparent and rare in inbound structuring.

9.2 Structuring and incentives

Inbound groups typically weigh the 25% headline rate against the dense incentive layer: technopark and R&D regimes for technology operations, investment incentive certificates for manufacturing, free zones for export production, and the export and manufacturing rate reductions. Financing structures must respect the 3:1 thin capitalisation ratio and the 10% financing expense restriction, and should prefer foreign bank debt (0% interest withholding) over intercompany loans (10% withholding plus recharacterisation risk). The 10% domestic minimum tax and the QDMTT can claw back incentive benefits for large groups, so effective-rate modelling should be run under all three regimes. Dividend planning must factor in the 15% withholding, with treaty floors of 5% where substance is present.

9.3 Worked effective-rate illustration

A Turkish manufacturing A.Ş. earns EBITDA of TRY 100,000,000, books depreciation of TRY 15,000,000 and net interest expense of TRY 10,000,000, all deductible (equity exceeds foreign borrowings and no related-party debt). Profit before incentives is 100,000,000 − 15,000,000 − 10,000,000 = TRY 75,000,000. Qualifying R&D centre expenditure of TRY 10,000,000 attracts a 100% additional deduction, reducing taxable income to 75,000,000 − 10,000,000 = TRY 65,000,000. CIT at 25% is TRY 16,250,000. The domestic minimum tax base excludes the R&D allowance add-back, so the 10% floor is 10% × 65,000,000 = TRY 6,500,000 — well below the standard liability, so the standard tax stands. The effective rate on pre-incentive profit is 16,250,000 / 75,000,000 = 21.7%. If the after-tax profit were fully distributed to a non-resident parent, 15% dividend withholding would apply, giving a combined burden of roughly 25% + (75% × 15%) = 36.25% before treaty relief (a 5% treaty rate lowers this to about 28.75%).

9.4 Compliance

Budget for monthly VAT, withholding and social security cycles, quarterly advance corporate tax, e-invoice and e-ledger infrastructure from day one, and annual transfer pricing documentation where related-party dealings exist. Statutory books are kept in Turkish and in lira, with inflation adjustment applied when the statutory conditions are met; foreign-currency functional accounting is available only in narrow cases. Large groups add CbCR notifications, master file and Pillar Two data collection. Given the pace of decree-based rate changes — withholding rates on deposits and securities, ÖTV rates and thresholds can change overnight — a standing legal-monitoring process is a practical necessity.