Tax Services In Turkey

Navigating the tax system in Turkey can be complex, especially for businesses and expatriates unfamiliar with local regulations. Whether you're a corporation, small business owner, or an individual seeking tax assistance, understanding the intricacies of tax services in Turkey is crucial for compliance and financial efficiency. This article explores the types of tax services available, their benefits, and why professional guidance is essential.

Overview of the Tax System in Turkey

Turkey has a detailed tax system comprising various taxes for individuals, corporations, and goods/services, ensuring compliance and financial planning. Key types include:

1. Income Tax

Levied on the income of individuals, including wages, salaries, business income, and other sources of income. Tax rates are progressive, ranging from 15% to 40% based on income levels.

2. Corporate Tax

The standard corporate tax rate applied to the profits of companies established in Turkey or established outside Turkey but generating income through a permanent establishment or branch in Turkey and the following organizations is 25%.

• Funds
• Cooperatives
• Economic organizations belonging to associations or foundations
• Joint Ventures

3. Value Added Tax (VAT)

VAT is a significant source of revenue for the Turkish government and is levied on the supply of goods and services. The standard VAT rate is 20%, with reduced rates of 18%, 8% and 1% applicable to specific goods and services, such as basic food items and medical products.

4. Special Consumption Tax (SCT)

SCT is imposed on certain goods that are considered luxury items or have a high social cost. These goods include petroleum products, vehicles, alcohol, tobacco, and luxury consumer goods. The tax rates vary depending on the type of product.

5. Withholding Tax (WHT)

Withholding tax in Turkey is a mechanism where the tax is deducted at the source of income by the payer, instead of being paid directly by the recipient.This system ensures that the tax authorities receive tax revenue in a timely and efficient manner.

In Turkey, WHT applies at a rate of generally 20% for various types of income, including but not limited to:

• Dividends: 10%
• Interest: 7,5%
• Royalties: 20%
• Rental Income: 20%
• Freelancer Services: 20%
• Employment Income: 15% to 40%

6. Tourism Tax

It is also known as the Accommodation Tax in Turkey, is a relatively new tax introduced to generate . The tax applies to overnight stays in various types of accommodation facilities, including hotels, motels, resorts, holiday villages, and similar establishments.The Tourism Tax rate is set at 2% of the accommodation cost, excluding VAT.

6. Stamp Duty

Stamp duty is applied to a variety of documents, including contracts, pay slips, agreements, financial transactions, and official documents. The rates vary depending on the type of document and the transaction amount.

7. Customs Duties

Customs duties are levied on imported goods. The rates vary depending on the type of product and its country of origin, in accordance with Turkey's trade agreements and customs regulations.

8. Valuable Housing Tax

Valuable Housing Tax, also known as "Değerli Konut Vergisi" in Turkish, is a tax levied on high-value luxury residential properties in Turkey as rates ranking from 0,3% to 1%.

Tax Incentives in Turkey

Turkey offers a range of tax incentives aimed at encouraging both domestic and foreign investment, fostering innovation, and supporting economic growth. Here's an overview of the key programs and benefits available:

1. Investment Incentive Program

The Investment Incentive Program is designed to attract investments across various sectors and regions in Turkey. Benefits include:

• Corporate Tax Reductions: Depending on the region, corporate tax rates can be significantly reduced, sometimes down to 0%.
• VAT Exemptions: Purchases of machinery and equipment related to investments are exempt from Value Added Tax (VAT).
• Customs Duty Exemptions: Imported machinery and equipment used in the investment process are exempt from customs duties.
• Social Security Premium Support: A portion of the employer's social security contributions is covered by the government for a specified period.
• Interest Rate Support: Reduced interest rates are offered on loans to support investment financing.

2. Research and Development (R&D) Incentives

To promote innovation and technological advancements, Turkey offers extensive R&D-related tax benefits:

• R&D Tax Deductions: Up to 100% of R&D expenditures can be deducted from taxable income.
• Income Tax Withholding Incentives: Employees engaged in R&D and innovation activities benefit from reduced income tax withholding.
• Social Security Premium Support: Social security premiums for R&D employees are partially or fully exempted.
• R&D Centers: Companies with designated R&D centers enjoy additional tax reductions and exemptions.

3. Technology Development Zones (Technoparks) Incentives

Companies operating within Turkey's Technoparks benefit from a supportive environment for research, innovation, and software development. Incentives include:

• Corporate Tax Exemption: Income from R&D activities in Technoparks is exempt from corporate tax.
• Income Tax Exemption: Employees in Technoparks are exempt from income tax on their wages.
• VAT Exemption: R&D products and software developed within Technoparks are exempt from VAT.

For more details, explore Technoparks in Turkey.

4. Free Zones (FZ) Incentives

Turkey's Free Zones (FZs) are specialized areas offering tax benefits to encourage export-driven businesses:

• Corporate Tax Exemption: Companies are exempt from corporate tax on income generated through export activities.
• VAT Exemption: Goods and services purchased within the Free Zones are VAT-free.
• Customs Duty Exemption: No customs duties are applied to goods entering or leaving the Free Zones.
• Income Tax Withholding Exemptions: Companies exporting at least 85% of the FOB value of their products benefit from a full exemption on employee income withholding taxes.

5. Strategic Investment Incentives

Strategic investments that significantly impact Turkey's economy, such as infrastructure projects (subways, bridges, highways, dams), qualify for additional support:

• Tax Reductions: Strategic investments receive higher rates of tax reductions.
• Interest Rate Support: Increased interest rate benefits are available for strategic projects.
• Land Allocation: Government land is allocated at reduced costs to support strategic investments.

These tax incentives demonstrate Turkey's commitment to fostering a business-friendly environment and promoting innovation, making it an attractive destination for investment. For businesses and individuals looking to maximize these opportunities, consulting with a tax expert is highly recommended.

Types of Tax Services in Turkey

1. Tax Advisory Services
   • Guidance on tax laws and regulations.
   • Strategic tax planning to minimize liabilities.
   • Advice on cross-border tax implications.
2. Tax Filing and Compliance
   • Assistance with preparing and filing income tax returns for individuals and businesses.
   • Ensuring timely submission to avoid penalties.
   • Managing VAT and withholding tax filings.
3. Corporate Tax Services
   • Calculation and filing of corporate income tax.
   • Assistance with tax audits and inspections.
   • Guidance on mergers, acquisitions, and restructuring.
4. Payroll and Employment Tax Services
   • Managing payroll taxes and employee contributions.
   • Ensuring compliance with Turkish employment laws.
5. VAT Consultancy
   • Support with VAT registration, calculation, and refunds.
   • Assistance with VAT reporting for domestic and international transactions.
6. Transfer Pricing Services
   • Ensuring compliance with Turkey's transfer pricing regulations.
   • Preparing documentation to justify inter-company pricing.
7. Tax Dispute Resolution
   • Representation in disputes with tax authorities.
   • Assistance with appeals and negotiations.
8. Expatriate Tax Services
   • Assistance for foreign nationals with income tax obligations.
   • Advice on double taxation agreements.

Benefits of Professional Tax Services in Turkey

• Compliance with Local Laws: Professionals stay updated on the latest tax regulations, ensuring accurate compliance.
• Minimized Tax Liabilities: Strategic planning helps reduce the overall tax burden for individuals and businesses.
• Risk Mitigation: Proper handling of tax matters reduces the likelihood of disputes and penalties.
• Time and Cost Efficiency: Outsourcing tax services saves time, allowing businesses to focus on growth.
• Reduced Risk of Penalties: Proper filing and adherence to deadlines prevent costly penalties and fines.
• Customized Solutions: Tailored services meet the unique needs of each client, from startups to multinational corporations.

Why Hire a Tax Consultant in Turkey?

Tax laws in Turkey are intricate and frequently updated, making it challenging for non-specialists to navigate. A tax consultant offers:

• Expertise in Turkish tax legislation.
• Guidance on international tax treaties.
• Insights into industry-specific tax regulations.
• Efficient handling of tax audits and disputes.

Hiring a tax consultant is particularly valuable for businesses expanding into Turkey or individuals managing cross-border finances.

Tax Services for Global Companies & Expats in Turkey

For expatriates, Turkey's tax system can be especially confusing. Professional services offer:

• Assistance with registry of legal entity and residency-based tax obligations.
• Guidance on applicable tax treaties to prevent double taxation.
• Help & consulting with filing all tax for expats & global companies earnings.
• Professional support for tax optimization
• Support for full compliance with local regulations
• Avoidance of penalties for non-compliance

Digital Transformation of Tax Services in Turkey

Turkey has embraced digital solutions for tax compliance, including the e-Tax system. Professional tax service providers offer:

• Assistance with e-Invoicing and e-Ledger systems.
• Support for digital VAT & WHT submissions.
• Streamlined integration of business software with government platforms.