TURKISH TAX SYSTEM

In this article we will give you the main structure of the Turkish tax system for foreigners that wish to invest in Turkey and get more information about Turkey. To be able to understand the Turkish tax system we should know the types of the taxes obtained by the Turkish government.

What are the main taxes collected by the Turkish government?

1. Taxes on income / earnings: Income Tax. Corporation tax.
2. Taxes on expenses: Value Added Tax (VAT). Special Consumption Tax. …
3. Taxes on wealth: Property tax. Motor vehicle tax (MTV) …
4. Other Taxes (Local Government Taxes): Announcement and advertising tax.
5. Stamp duty
6. Bank Insurance and Transaction Tax (BITT)

Taxes on Income

Taxes on income in Turkey consist of income tax and corporate tax.

In income tax, while the incomes of real persons are taxed within the framework of certain rules; In corporate tax, capital companies, cooperatives, business partnerships, economic enterprises affiliated with associations and foundations and economic public institutions are taxed based on their incomes.

Taxes on Wealth

Taxes on wealth in Turkey are divided into three according to the taxed wealth element. These are; real estate tax, motor vehicle tax, inheritance and gift tax.

Taxes on Expenditures

Taxes collected on expenditures in Turkey are very diverse. The most well-known ones are value added tax (VAT) , special consumption tax, stamp duty tax, games of chance tax, banking and insurance transactions tax, special communication tax, entertainment tax, environmental cleaning tax, customs taxes, etc. .

You have come to settle in Turkey and consequently you purchased a property. How does the taxation of that property works?

When you are purchasing the property (either flat, villa, land or etc ) the Turkish government charges 2% of the sale value as the sale tax. This tax is collected by the government at the time of the sale.

After the purchase process is finalised, then your property is subject to annual property tax. This will be collected by the relevant municipality tax office.

You want to sell your property in Turkey. What type of taxes you should be aware of?

When selling a property in Turkey you will need to be aware of “income tax”. This is a typical capital gains tax which exists in most countries. So, this tax will be calculated based on the sale value and difference since you have purchased the property. However, if you are selling after 5 years of ownership, you will be exempted of the “income tax” of your property sale.

You have opened a bank account in Turkey and you have invested some funds into your bank account; is this subject to any type of tax?

You funds which are in your bank account are not subject to taxation. However depending on the amount you deposit to your account Turkish Government may ask you information about the source of your funds. This is requested to prevent money laundering.

When you turn your funds into savings/time deposit account, The bank will make a calculation of the taxable amount and at the end of the deposit time, this income tax will be collected at source (which means by the bank before making interest payment to you)

To protect the value of the Turkish Lira recently ( on 30/09/2020 ) a law has been implemented about the reduction of the stamp duty costs of the savings/time deposit accounts for TL.

While the rate of 15 percent in savings/time deposit accounts up to 6 months was reduced to 5 percent, the rate from 12 percent in term accounts up to 1 year (including 1 year) was reduced to 3 percent, and the withholding rate from 10 percent in accounts with a maturity of more than 1 year was reduced to 0 percent, while Inflation The withholding tax rate of 0 percent remained the same for accounts with a variable interest rate of more than 1 year depending on the rate.

The duration of the withholding tax reduction on deposit account interests and dividends were extended to 31^st of May. According to the Turkish President’s decision published in the current issue of the Official Gazette, the duration of the withholding tax reduction, which is expected to expire 1^st of May,20201, has been extended to 31^st of May,2021.

You can see the up-to-date tax amounts below based on the deposit term:

When selling a property in Turkey you will need to be aware of “income tax”. This is a typical capital gains tax which exists in most countries. So, this tax will be calculated based on the sale value and difference since you have purchased the property. However, if you are selling after 5 years of ownership, you will be exempted of the “income tax” of your property sale.