INTRODUCTION
For foreign investors, Türkiye has always been a desirable country, ripe for lucrative investments in its industry, agriculture, real – estate and technology and textile markets. These bountiful markets to invest, combined with the competitive currency exchange rates allow more investors to invest in Türkiye, especially in energy, petrochemicals, banking and real – estate markets.
In this article, we will explain the applicable tax regime in Türkiye, and indicate the possible exemptions for the foreign investors where applicable.
TAXPAYERS AND THEIR STATUS
In Türkiye, there are two types of taxpayers. First type is broadly translated to "fully burdened" whereas the second type is " partially burdened."
a. Fully Burdened Taxpayers
In accordance with the Income Tax Law, fully burdened taxpayers are (i) Turkish Citizens and Companies, and (ii) those who act on behalf of the Turkish state in other countries. These taxpayers are taxed on all their income, gained in Türkiye and abroad.
However, as per the terms of the relevant bilateral treaties between Türkiye and other countries regarding prevention out double – taxation, it is possible to deduce the already paid taxes to another country, from the tax that should be paid to Türkiye. The term of such regime is subject to the specific regulations within the bilateral treaty.
b. Partially Burdened Taxpayers
Partially burdened taxpayers are foreign individuals who gain their income within the borders of Türkiye, or whose services end up creating a value in Türkiye. These taxpayers are only taxed for the amount they gain in or from Türkiye
APPLICABLE TAXES
a. Income Tax
All real person taxpayers are subject to income tax. The rate of this tax, calculated based on the yearly total income, is as follow
(i) For Payments and Salaries
15% Until ₺70.000,00
For the first ₺70.000,00, ₺10.500,00; and 20% for the remainder of ₺150.000,00
For the first ₺150.000,00, ₺26.500,00; and %27 for the remainder of ₺550.000,00
For the first ₺550.000,00, ₺134.500,00; and %35 for the remainder of ₺1.900.000,00
For the first ₺1.900.000,00, ₺607.000,00; and %40 for the excess amount.
(ii) For Other Types of Incomes
15% Until ₺70.000,00
For the first ₺70.000,00, ₺10.500,00; and 20% for the remainder of ₺150.000,00
For the first ₺150.000,00, ₺26.500,00; and %27 for the remainder of ₺370.000,00
For the first ₺370.000,00, ₺85.900,00; and %35 for the remainder of ₺1.900.000,00
For the first ₺1.900.000,00, ₺621.400,00; and %40 for the excess amount.
APPLICABLE TAXES
As per the Income Tax Law, there are seven types of income. A taxpayer can be subject to the income tax, due to the income arising from multiple sources, which can be categorized within the different types of income.
(i) Payments and Salaries
This is the primary type of income when income tax is discussed. This type of tax arises out of a salary or regular payment, typically made by the employers to their employees. Even though employee is responsible of paying this tax, as they are the one gaining the income, the employer pays this tax to the Tax Authority on behalf of the employee. Thus, the employees do not need to declare their taxes. However, if an individual receives any other payment or salary other than what their employer is paying, then they are bound to report this income to the tax authority as well.
(ii) Self – Employment
If a taxpayer is self – employed, then this type of income will be gained. For example, those who engage in trade, retail or similar activities are mostly self – employed. In addition, lawyers and similar professions fall into this category most of the time. Income arising from these businesses must be declared by the taxpayer. Certain expenses made towards gaining the income can later be offset from the total taxable amount.
(iii) Commercial Income
If a taxpayer earns a commercial income but is not a corporation that would have been subject to corporate tax instead, then income tax arising from commercial income will be applicable. Certain expenses made towards gaining the income can later be offset from the total taxable amount.
(iv) Securities and Investment
Income derived from the profits of securities and investment, and dividends are subject to the income tax. This tax, if arising from operations in the stock exchange or investment funds, is primarily collected at the source, by application of the withholding tax. Thus, the taxpayer will not need to declare any additional taxes. There are certain exemptions to the taxation as well. For example, having held physical shares of a Joint Stock Company for at least 2 years, allow the owner to sell their shares without paying any taxes.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
