Income taxes in Turkey are levied on all income, including domestic as well as foreign individuals and corporations residing in Turkey. Non-residents earning income in Turkey through employment, ownership of property, business transactions, or any other activity which generates income are also subject to taxation, but only on the income earned in Turkey.

1.a.1 Corporate Income Taxes

In Turkey, the basic corporate income tax rate levied on business profits is 20%.
Withholding Taxes On Selected Payments of Resident Corporations
- Dividends are subject to 15%.
- Interest on treasury-bill and treasury bonds derived by resident corporations is

  subject to 10%.
- Interest on other bonds and bills derived by resident corporations is subject to 10%.
- Bank deposits are subject to 15%.
- Profit shares paid by participation banks in consideration of participation account

  are subject to 15%.
- REPO agreements are subject to 15%.


Withholding Taxes On Selected Payments of Non-Resident Corporations
- Dividends are subject to 15%.
- Interest on treasury-bill and treasury bonds derived by non-resident corporations is

  subject to 0%.
- Interest on other bonds and bills derived by non-resident corporations is subject to

  0%.
- Bank deposits are subject to 15%.
- Profit shares paid by participation banks in consideration of participation account

  are subject to 15%.
- REPO agreements are subject to 15%.

 

1.a.2 Individual Income Tax

The personal income tax rate varies from 15% to 35%.
Income tax rates applicable to yearly gross earnings from 2007 are as follows:

INCOME SCALES	YTL RATE (%)
Up to 7,500	15
7,501 - 19,000	20
19,001 - 43,000	27
43,001 and over	35

 

1.b Taxes on Expenditure

1.b.1 Value Added Tax (VAT)

The generally applied VAT rate varies between 1%, 8%, and 18%. Commercial, industrial, agricultural, and independent professional goods and services; goods and services imported into the country and deliveries on goods and services caused by other activities are all subject to VAT.

1.b.2 Special Consumption Tax

There are 4 main product groups that are subject to special consumption tax 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, special consumption tax is charged only once.

1.b.3 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 the banks, for example on loan interest. The general rate is 5%, while interest on deposit transactions between banks is 1% and sales amount from foreign exchange transactions is 0.1%.

1.b.4 Stamp Duty

The Stamp duty applies to a wide range of documents, including contracts, agreements, notes payable, capital contributions, letters of credit, letters of guarantee, financial statements and payrolls. The Stamp duty is levied as a percentage of the value of the document at rates ranging from 0.15% to 0.75%.

1.c Taxes on Wealth

There are three kinds of taxes on wealth:
Inheritance and Gift Taxes, property taxes and motor vehicle tax
Buildings and land owned in Turkey are subject to real estate tax at the following rates:

          • Residences 0.1%
          • Other buildings 0.2%

Chart of Principal Turkish Taxes

2. Tax Incentives

          • Prioritized Development Zones
          • Technology Development Zones
          • Organized Industrial Zones
          • Free Zones
          • Research and Development
          • Educational Corporations
          • Cultural Investments and Enterprises

3. Tax Exemptions and Allowances

VAT exemptions include but are not limited to the following transactions:

          • Export of goods and services
          • Roaming services rendered in Turkey for customers outside Turkey (i.e.
            non-resident customers) in-line with international roaming agreements and which
            have a reciprocity condition in place
          • Petroleum exploration activities
          • International transportation
          • Deliveries made to diplomatic representatives, consulates and international
            organizations with tax exemption status and to their employees
          • The supply of machinery and equipment, including importation to persons or
            corporations that are VAT taxpayers and that have an investment certificate issued              by the relevant authority
          • Services rendered at harbors and airports for vessels and aircrafts
          • Social and other exemptions apply to deliveries made to the government and
            other related organizations for cultural, educational, health and similar purposes
          • Banking and insurance transactions are exempted from VAT as they are subject
            to a separate Banking and Insurance Transactions Tax at the rate of 5 %
          • Tax exemption are provided for earnings derived by corporations from their
            overseas branches and both their domestic and overseas ventures if they meet
            certain conditions
          • Research and Development Allowances
          • Deductions from the tax base of corporations related to certain donations, aid or
            sponsorship expenditures for sport activities