Turkish corporate tax and business tax rates are low, which is why an increasing number of international companies are choosing to move their headquarters to Turkey. Istanbul in particular, with its position straddling Europe and Asia, has become a hub for companies looking to increase their reach.
What is the corporate tax rate in Turkey?
The tax rate for foreign companies in Turkey is currently 22%.
Companies who are legally headquartered in Turkey are considered full taxpayers, and taxed on their global income.
Non-resident companies are limited taxpayers, taxed only on the income they earn in Turkey.
Branch profit that is transferred to Turkey is subject to a dividend withholding tax, which is 15%. However, there are exceptions to this, for example, tax treaties.
Capital gains tax for businesses in Turkey
A company’s long term gains are taxed as ordinary income, with an exemption of 75% of capital gains from any sale of shares, providing these shares were held for at least two years, and the gains from the sale are held in a reserve account for a minimum of five years.
Capital gains held by a company from the sale of Turkish real estate that has been owned for longer than two years have a 50% tax exemption.
Capital gains from the sale of foreign participations that have been held for two years or more by a Turkey-based international holding company are exempt from corporate income tax.
Deductions on tax for businesses in Turkey
There are several expenses that can be deducted from a company’s tax base:
- Expenses incurred during regular business
- Property tax related to business
- Bad debts
- Research and development expenses.
- Tax breaks for research and development for foreign companies
Up to 50% of employer contributions of staff your company hires for research and development projects are covered by the Turkish government. Companies are also exempt from paying stamp duty on any research and development-related documents, and any import goods related to this are exempt from customs tax.
Other deductible expenses
Expenses associated with starting a business are considered tax deductible. Taxpayers also have the option to spread these deductions over five years in equal measures.
Donations to charity organisations, and money gifted for the construction of educational facilities, hospitals and scientific research entities are deductible at up to 5% of the company’s gross profit. Under some conditions, pension and redundancy payments are also deductible.
Strategic investments determined by the government. For example: these can include investment into the production of products that rely on imports. These can be fully deductible - up to 100%. There are also other incentives for businesses to make strategic investments, these include breaks on customs duties and social security contributions.
Other corporate taxes in Turkey
Property tax: If your company owns property, including residential, commercial or land in Turkey, you will be subject to Turkish real estate tax at varying rates.
Social security: these contributions, for employer and employee, make up 34.5% of an employee’s salary: 14% for employee, and 20.5% for the employer.
Unemployment: this is 3% of the salary: 1% for the employee and 2% for the employer.
Stamp tax: this applies to a variety of documents including financial statements and payrolls. Stamp tax is calculated as a percentage of the value stated on agreements, at rates varying from 0.189% to 0.948%. Salary payments are also subject to this tax, at a rate of 0.759%.
Other taxes: you’re also required to pay capital duty, payroll tax, transfer tax and other taxes related to transactions, such as banking and insurance tax.
We have a specialised team that can answer your questions about corporate tax and business taxes in Turkey. Get in touch with us to find out more.
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