Under Turkish law, individuals' incomes are taxed based on the revenues and annuities earned within a calendar year. According to the Income Tax Law (the "ITL"), income is business profits; agricultural profits; salaries and wages; income from independent personal services; from immovable property and rights (rental income) from immovable property (income from capital investment); and other income and earnings.

  1. Taxpayers

There are two kinds of taxpayers: (i) resident (full) taxpayers and (ii) non-resident (limited) taxpayers. Resident taxpayers are real persons residing in Turkey or staying in Turkey over six months within one calendar year. Resident taxpayers are taxed over their entire income generated both in Turkey and abroad.

Real persons not residing in Turkey are considered non-resident taxpayers and are taxed exclusively over their income generated in Turkey. As an exception, a non-resident person's length of stay in Turkey may exceed six months if these persons are in Turkey for a definite and specific duty or job, or remain in Turkey for over six months due to compelling circumstances, such as illness.

  1. Applicable rates

Taxable bands and applicable progressive rates for the 2015 tax year commencing from January 1, 2015, are:

Taxable Bands

Rate /Amount (For most types of income)

Up to TRY 12,000

15%

TRY 29,000

For the first TRY 12,000

TRY 1,800

For the remaining part

20%

TRY 66,000

For the first TRY 29,000

TRY 5,200

For the remaining part

27%

For employment income up to TRY 106,000

For the first TRY 29,000

TRY 5,200

For the remaining part

27%

For amounts greater than TRY 66,000

For TRY 66,000

TRY 15,190

For amounts greater than TRY 66,000

35%

For employment income greater than TRY 106,000

For the first TRY 106,000

TRY 25,990

For the remaining part

35%
  1. Exempted income and exceptions

Major exceptions and exemptions under the ITL are as follows:

  1. TRY 3,300 (for 2015) of the annuities generated from real property assets leased as residence is not subject to income tax.
  2. 50% of dividends derived from any type of share certificate or participation certificate of a Turkish company or 50% of the dividends a Turkish company grants to the chairman and board of directors members are not subject to income tax.
  3. Salaries that employers who generate no commercial income in Turkey, such as liaison offices, pay to their employees in foreign currency from revenue they have generated abroad are not subject to income tax.
  4. Household employees, payments made for education and internship, compensation and assistance paid with death, disability, illness or unemployment, assistance paid to children, aid or assistance granted for disability or death during military service, and bonuses granted as incentives, are exempt.