Tax laws Turkey
Turkey's taxation system is multifaceted, encompassing various taxes administered by both central and municipal authorities. The primary legislative framework governing taxation is the Tax Procedure Law, which outlines the rights and obligations of taxpayers.
Key Components of Turkey's Tax System:
Income Taxes:
Individual Income Tax:
- Rates: Progressive rates ranging from 15% to 40%, depending on income brackets.
- Residency: Residents are taxed on worldwide income, while non-residents are taxed only on Turkish-source income.
Corporate Income Tax:
- Rate: A standard rate of 20% applies to corporate profits.
- Taxable Entities: Includes corporations, cooperatives, and certain joint ventures.
Taxes on Expenditure:
Value Added Tax (VAT):
- Rates: Varying rates of 1%, 8%, and 18% apply to different goods and services.
- Scope: Applicable to industrial, commercial, agricultural, and professional activities.
Special Consumption Tax (SCT):
- Scope: Levied on specific goods such as petroleum products, automobiles, tobacco, and luxury items.
- Rates: Differ based on the product category.
Banking and Insurance Transaction Tax:
- Scope: Applied to transactions and services performed by banks and insurance companies.
- Taxpayers: Banks, bankers, and insurance companies.
Stamp Duty:
- Scope: Covers various documents including contracts, letters of credit, and financial statements.
- Rate: Generally ranges from 0.89% to 0.948% of the document's value.
Taxes on Wealth:
Inheritance and Gift Tax:
- Scope: Applies to Turkish citizens with international assets and foreigners with permanent residency in Turkey.
- Rates: Progressive rates ranging from 1% to 10% for gifts and 10% to 30% for inheritances.
Property Tax:
- Scope: Levied on buildings and lands in Turkey.
- Rates: Range from 0.1% to 0.3%, with higher rates in metropolitan areas.
Motor Vehicle Tax:
- Scope: Applies to vehicles registered in Turkey, including cars, motorcycles, and aircraft.
- Assessment: Calculated annually, with payments due in two installments (January and July).
Recent Developments:
Tax Adjustments: In December 2024, the Turkish government announced tax hikes on fuel and tobacco products. Treasury and Finance Minister Mehmet Şimşek assured that these increases would not impede the country's inflation objectives for 2025.
Inflation Accounting for Banks: Turkish banks have requested permission to apply inflation-adjusted accounting for the 2025 fiscal year to mitigate tax liabilities, given the country's high inflation rates.
Defense Fund Contributions: A proposal has been submitted to generate $2 billion annually for the national defense industry fund. This includes additional taxes on certain transactions and luxury items.
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