TURKISH TAXATION SYSTEM
At Ozm-Consultancy, we understand the importance of complying with local tax regulations to avoid any potential risks for your business. Below is a brief overview of the Turkish taxation system, which we hope will be helpful to you.
1-Corporate Income Tax
The basic corporate income tax rate in Turkey is 20%, which is levied on business profits. This rate is applied on the taxable income calculated after deducting allowed expenses from the company’s annual revenue. Taxpayers pay provisional tax at the rate of corporate tax quarterly (on year-to-date profit), and these payments are deducted from the corporate tax of the current period. Withholding taxes on dividends for resident corporations is 10%.
2-VAT (Value Added Tax)
The Turkish Tax System levies value added tax on the supply and importation of goods and services. Liability for Value added tax arises when a person or entity performs commercial, industrial, agricultural or independent professional activities within Turkey, or when goods or services are imported into Turkey. Goods and services are subject to VAT at rates of 1%, 8%, and 18%, with the general rate being 18%. However, goods and services delivered to a customer outside the country are exempt from Value added tax.
The computation of the Value added tax liability is based on the difference between the Value Added Tax liability of the taxpayer on his sales (output VAT) and the amount of VAT that has already been paid on the purchases (input VAT). Input VAT can be written off against VAT on the supply of goods and services. If any input VAT is left behind after the write-off, it can be taken forward to the next month to be offset against future output VAT, but will not be refunded.
3-Withholding Income Tax
Withholding income tax is the income tax paid on behalf of some third parties that your company has certain transactions listed in the Turkish Tax Codes. The most common ones are withholding income tax calculated on the salaries of your employees, independent professional service fee payments to resident individuals, and royalty, license, and service fee payments to non-residents. Companies in Turkey are responsible for withholding such taxes on their payments and declaring them through their withholding tax returns.
Stamp tax applies to a wide range of documents, including agreements, financial statements, and payrolls. Stamp tax is levied as a percentage of the monetary value stated on the agreements at rates ranging from 0.18% to 0.95%. Please note that salary payments are subject to stamp duty at the rate of 0.76% over the gross amounts paid, whereas a lump sum stamp tax is calculated for financial statements and tax returns.
We hope that this brief overview of the Turkish taxation system is helpful to you. If you have any questions or need further information, please do not hesitate to contact us.