Introduction

Türkiye’s tax system is being harmonized with EU and international standards.
Corporate tax applies to both resident and foreign-invested companies.
As of 2023, the corporate income tax rate is 25%, based on the taxpayer’s accounting period.
This memorandum outlines the key taxes that foreign-invested companies in Türkiye should consider.

Value Added Tax (VAT)

• General rate: 20%

• Reduced rates: 1% and 10% for certain goods/services

• VAT on purchases is input VAT, and VAT on sales is output VAT.

  • If output VAT > input VAT → company pays the difference.

  • If input VAT > output VAT → balance carried forward.

• Refunds are only available in special cases (e.g., exports or incentive projects).

• Reverse charge mechanism: Turkish companies pay VAT on certain payments to foreign suppliers, treating it as input VAT.

Special Consumption Tax (SCT)

Applies once only (unlike VAT, which applies at every stage).
Covers four main product categories:

1. Petroleum and natural gas products

2. Automobiles, aircraft, yachts, etc.

3. Tobacco and alcoholic beverages

4. Luxury goods

This system replaced 16 different indirect taxes to align with EU directives.

Banking and Insurance Transactions Tax (BITT)

• Banks and insurance companies are exempt from VAT.

• They pay BITT at 15% on transaction gains.

• VAT paid on their purchases is non-deductible and treated as an expense.

Property Taxes

Applies to land and buildings based on type and location:

Rates are doubled for properties located in metropolitan municipalities.

Stamp Tax

Applies to documents, contracts, and payrolls, at rates from 0.189% to 0.948%.

• The maximum stamp tax per document (as of Jan 2023): ₺10,732,371.80

• Salary payments: 0.759% of gross salary

• Taxable event: occurs when the document is signed (or when used in Türkiye if signed abroad).

• All signatories are jointly responsible for the payment.

Withholding Tax

Collected at source by the payer for:

• Employee salaries

• Rent to individuals

• Professional service fees

• Royalties, licenses, and service payments to non-residents

Rates may vary depending on tax treaties.
Withholding taxes are reported via monthly tax returns.

Resource Utilization Support Fund (RUSF)

Applied to:

• Imports on credit

• Domestic or foreign loans (except long-term loans over 1 year)
  The rate may be reduced to 0% for financial leasing companies or incentive-based transactions.

Environmental Tax

Collected by municipalities for services like garbage collection.
The taxpayer is the occupant (owner or tenant) of the property.

Bilateral Tax Treaties

Türkiye has tax treaties with 82 countries, including the U.S., Germany, UK, UAE, France, and Japan.
These treaties:

• Prevent double taxation, and

• Allow reduced withholding tax rates on dividends, interest, and royalties,
  if a certificate of tax residence is provided.

Comparative Overview — Entity Types and Taxation

Conclusion

Türkiye offers a comprehensive and evolving tax system aligned with international norms.
Foreign investors benefit from a wide treaty network and equal treatment under Turkish law.
Understanding corporate, indirect, and withholding tax obligations is crucial for compliance and strategic investment planning.

DND Law Firm provides legal and tax advisory services to help foreign investors establish, manage, and optimize their business operations in Türkiye within a secure legal framework.