Tax Types and Rates for Companies in Turkey. Turkey offers a dynamic and strategically positioned environment for both local and international businesses. Understanding the tax framework is essential for companies operating in or planning to enter the Turkish market. Turkey’s corporate tax system includes several types of taxes levied on companies, which vary depending on the nature of income, the type of company, and specific activities conducted. This article outlines the main tax types and current rates applicable to companies in Turkey, helping businesses navigate their fiscal obligations more effectively.
- Corporate Income Tax (CIT)
The Corporate Income Tax (Kurumlar Vergisi) is the primary tax levied on the profits of companies in Turkey. The standard corporate tax rate has undergone several changes in recent years due to economic policies and budgetary needs.
- Current Rate (as of 2024):
The general corporate tax rate is 25% for 2024. However, the government may apply temporary increases or decreases, and certain sectors may be subject to different rates. - Scope:
The CIT applies to:- Resident companies (incorporated in Turkey) on their worldwide income.
- Non-resident companies on income sourced from Turkey.
- Taxable Income:
Taxable income is calculated by deducting allowable expenses, losses carried forward (up to 5 years), and tax exemptions from the company’s gross income. - Filing and Payment:
Annual tax returns must be filed by the 30th of April following the fiscal year-end. Companies also make advance tax payments quarterly, based on projected income.
- Value Added Tax (VAT)
The Value Added Tax (Katma Değer Vergisi – KDV) is imposed on the supply of goods and services in Turkey, as well as on imports.
- Standard VAT Rate: 20%
- Reduced Rates:
- 10%: For basic foodstuffs, medical products, and some services.
- 1%: For specific agricultural products, newspapers, and certain housing sales.
- Exemptions:
Some transactions, such as exports, international transport, and specific financial services, are VAT-exempt or subject to 0% VAT. - Filing:
VAT returns are filed monthly, by the 26th day of the following month, and payment is due by the same date.
- Withholding Tax (WHT)
Withholding tax is applied to specific payments made by companies to individuals or non-resident entities. It ensures tax is collected at the source of income.
- Applicable Payments and Rates:
- Dividends: 10% (may be reduced under tax treaties)
- Interest: 10%
- Royalties: 20%
- Professional services (non-residents): 20%
- Rent (paid to individuals): 20%
- Tax Treaties:
Turkey has signed numerous double taxation treaties that may reduce or eliminate WHT on cross-border payments.
- Stamp Duty
Stamp duty (Damga Vergisi) is levied on a wide range of documents, including contracts, financial statements, and payrolls.
- Rates:
The rate varies between 0.189% and 0.948% of the document’s value or fixed amounts for certain documents. - Responsibility:
Both parties to a contract may be jointly responsible for payment, although the payment is typically handled by the party initiating the agreement.
- Social Security Contributions
While not a tax in the traditional sense, employers in Turkey are required to make significant contributions to the Social Security Institution (SGK) for their employees.
- Employer Contribution: Approx. 22.5% of gross salary
- Employee Contribution: 14% (withheld by the employer)
- Unemployment Insurance: Additional contributions of 2% (employer) and 1% (employee)
- Incentives:
The Turkish government offers various incentives for hiring certain employee groups or operating in specific regions, reducing the total social security burden for companies.
- Special Consumption Tax (SCT)
Special Consumption Tax (Özel Tüketim Vergisi – ÖTV) applies to specific goods such as petroleum products, motor vehicles, tobacco, alcoholic beverages, and luxury items.
- Rates:
Vary significantly depending on the product category, sometimes exceeding 100% of the product’s value. - One-Time Tax:
SCT is typically applied only once, at the point of first sale or import, rather than throughout the supply chain like VAT.
- Environmental and Other Sectoral Taxes
There are various additional taxes applicable to companies depending on their industry or environmental impact:
- Environmental Cleaning Tax: Paid by companies for waste services based on property size and location.
- Tourism Contribution Fee: Levied on accommodation and tourism service providers.
- Banking and Insurance Transaction Tax (BITT): Financial institutions are subject to this tax on non-interest transactions, with rates varying from 1% to 5%.
Conclusion
The Turkish tax system, while comprehensive and sometimes complex, offers a structured environment for corporate taxation. Businesses operating in Turkey should remain updated on tax legislation changes, as rates and regulations can evolve frequently. Proper tax planning, compliance, and professional advice are essential to managing tax obligations efficiently and avoiding penalties.
Understanding the key types of taxes and their applicable rates allows companies to forecast liabilities, make informed decisions, and optimize their financial performance in Turkey’s growing economy.