When developing customized business strategies for clients, Bicak carefully factors in tax law implications. Our tax law attorneys work with multinational and domestic companies, their owners and executives, other individuals, and estates to address immediate needs and plan for what lies ahead. In addition to handling all aspects of tax law, we represent clients at every level, and in most types, of disputes with taxing authorities. Clients trust our high-caliber Tax team to guide them through everything from complex corporate transactions and tax disputes, to estate and gift tax avoidance and tax-exempt financing.
In Turkey, the tax system is administered by the Revenue Administration, which is responsible for collecting taxes and enforcing tax regulations. The main types of taxes in Turkey include income tax, expenditure tax, wealth tax, and various other taxes and duties.
The Turkish tax legislation may be classified under three main headings;
The Turkish tax legislation includes two main income taxes, namely personal income tax and corporate income tax.
Personal Income Tax
Real persons’ income is subject to personal income tax. Income is defined as the net amount of all earnings and revenues derived by an individual within a single calendar year. An individual’s income may consist of one or more income elements listed as follows;
- Agricultural profits
- Business profits
- Salaries and wages
- Income from independent personal services
- Income from immovable property and rights (rental income)
- Income from movable property (income from capital investment)
- Other income and earnings
Taxation criteria in Turkey are residency and nationality. According to residency criterion, an individual who has his place of residence in Turkey is liable to pay tax for his worldwide income (unlimited liability). Any persons who remain in Turkey for more than six months in a calendar year are assumed as a resident of Turkey. However, foreigners who stay in Turkey for six months or more for a specific job or business or particular purposes which are specified in the Code are not treated as residents and therefore, unlimited tax liability does not apply to them.
In addition to residency criterion, within a limited scope, nationality criterion also applies regardless of their residency status, Turkish citizens who live abroad and work for government, a governmental institution or a company whose headquarter is in Turkey, are considered as unlimited liable taxpayers. Accordingly, they are subject to the income tax on their worldwide income. Non-residents are only liable to pay tax on their income derived from the sources in Turkey (limited liability). For tax purposes, it is especially important to determine in what circumstances income is deemed to be derived in Turkey.
Corporate Income Tax
In case income elements specified in the Income Tax Law are derived by corporations, taxation is applicable on the legal entities of these corporations. Corporate taxpayers defined in the law are as follows;
- Capital companies
- Public economic enterprises
- Economic enterprises owned by associations and foundations
- Joint ventures
The general corporate income tax rate is 20% in Turkey. However, for the income generated in 2023, the applicable corporate tax rate was increased to % 25.
Companies whose legal or business headquarters are located in Turkey are subject to corporate tax on their worldwide income; described as full liability taxpayers in the legislation. Limited liability taxpayers whose legal and business headquarters are not located in Turkey are taxed on their income derived only in Turkey.
Taxes on Expenditure
Value Added Tax (VAT)
The generally applied VAT rates are set at 1%, 8%, and 18%. Commercial, industrial, agricultural, and independent professional goods and services, goods and services imported into the country, and deliveries of goods and services as a result of other activities are all subject to VAT.
Special Consumption Tax (SCT)
- There are four main product groups that are subject to SCT at different tax rates:
- Petroleum products, natural gas, lubricating oil, solvents, and derivatives of solvents
- Automobiles and other vehicles, motorcycles, planes, helicopters, yachts
- Tobacco and tobacco products, alcoholic beverages
- Luxury products
Unlike VAT, which is applied on each delivery, SCT is charged only once.
Banking and Insurance Transaction Tax
Banking and insurance company transactions remain exempt from VAT but are subject to a Banking and Insurance Transaction Tax. This tax applies to income earned by banks, such as loan interest. Although the general rate is 5%, some transactions, such as interest on deposit transactions between banks, are taxed at 1%. No tax has been levied on sales from foreign exchange transactions since 2008.
Stamp duty applies to a wide range of documents, including contracts, notes payable, capital contributions, letters of credit, letters of guarantee, financial statements, and payrolls. Stamp duty is levied as a percentage of the value of the document at rates ranging from 0.189% to 0.948% or is collected as a fixed price (a pre-determined price) for some documents.
Taxes on Wealth
There are three kinds of taxes on wealth;
- Property taxes
- Motor vehicle tax
- Inheritance and gift tax
Buildings, apartments, and land owned in Türkiye are subject to real estate tax ranging at a rate between 0.1% and 0.6%, while Contribution to the Conservation of Immovable Cultural Property is levied at a rate of 10% of this real estate tax. Motor vehicle taxes are collected on the basis of fixed amounts that vary according to the age and engine capacity of the vehicles each year. Meanwhile, inheritance and gift taxes are levied at a rate of 1% to 30%.
In Turkey, taxation authorities are separated into two main heads as Revenue Administration and Tax Inspection Board. These two authorities are placed under the Turkish Republic Ministry of Treasury and Finance in the organizational chart of Turkey’s administrative system. The Tax Inspection Board has the responsibility for carrying out inspections by its tax inspectors for the taxpayers, whereas the Revenue Administration is responsible for levying and collecting taxes through tax offices.
Specialist tax lawyers
As global and domestic tax law becomes increasingly complicated, compliance becomes ever more pertinent. Individuals and businesses need specialist tax lawyers to provide advice, offer solutions, and in some instances, react to changes brought about by enhanced or revised tax legislation and treaties.
Tax law is central to our core client services at Bicak. Almost every business transaction or personal decision, whether simple or complex, has potentially significant tax consequences. When advising you on your business affairs and personal finances, Bicak offers sophisticated and personalized tax counseling for every aspect of national and local taxes. Bicak’s tax attorneys provide you with the benefit of their knowledge, experience, and important judgment to minimize taxes.
If you have any questions or require tax law advice, please contact a member of our team.