Turkish Tax Regime is a crucial part of Turkish economy and in order to understand the Turkish Taxation Procedure, you need to have basic knowledge about Turkish Tax Code. In accordance with Turkish Tax Law, taxation system consists of two main titles; income tax and corporate tax. While individuals are liable for the income tax on their income and earnings, a company or such foundation is liable for corporate tax on its income and earnings. Corporate Tax Law sets provisions applicable to the income resulted from the operations of corporations.
This brief article aims to give you basic guidance and provide you with some information regarding Corporate Taxation in Turkey, as well as the applicable tax rates. Kindly be informed that the corporate taxation rules are contained in Corporate Tax Law numbered 5520.
Income that is subject to the taxation in Turkey:
The corporate tax is applicable on both the income and earnings of the corporation as per Turkish Corporate Tax Law.
First of all, companies’ official headquarter location should be stated in their Articles of Association in accordance with Turkish Commercial Code. Once it is determined that the company’s legal or business headquarter is in Turkey or the company operates in Turkey by having a centre in here –resident companies- are liable to corporation Taxation on their worldwide income. Those companies are described as “full liability taxpayers” as per Turkish tax legislation. On the other hand, non-resident companies are liable to limited taxation and they are described as limited liability taxpayers. Non-resident companies/limited liability taxpayers are only taxed on their income and earnings that are derived in Turkey.
Below counted corporation’s income and earnings are subject to Turkish Corporate Taxation:
- Companies with share capital
- Public Economic Enterprises/Organisations
- Commercial enterprises that belong to either charitable foundations or associations
- Joint ventures
How to Calculate the Taxable Income, What is the Applicable Tax Rate?
All profits of the corporation resulted from the income and earnings are included in taxable income and become the subject of tax rate which we will mention in the following. However, dividends qualifying under local participation are exempted.
Kindly note that the basic rate of corporation tax in Turkey is 20% and this rate is applicable to both resident and non-resident companies in Turkey as per Turkish Tax Law.
Despite the fact that tax procedures in Turkey are not very complicated, it is recommended you to get legal advice from an experienced lawyer in this area in order not to pay your taxes more than you should.