Turkey’s tax system balances moderate corporate taxation with progressive personal income taxes. With a 20% corporate tax rate (25% for financial companies) and personal income tax rates reaching up to 40%, Turkey offers a structured and evolving framework. Gift and inheritance taxes are in place, but there is no wealth tax. Turkey aligns with international compliance through Double Tax Treaties (DTTs), Controlled Foreign Corporation (CFC) rules, and automatic data exchange agreements, ensuring a transparent and regulated financial landscape.
Turkey’s Tax System overview
| Corporate Income Tax: | 20% |
| Personal Income Tax: | 40%, progr. |
| Inheritance Tax: | 10%, progr. |
| Gift Tax: | 30%, progr. |
| Wealth Tax: | None |
Legal System
The Republic of Turkey is a presidential Republic, which has applied Civil Law since 1926, originally based on the Swiss Civil Code.
Personal Income Taxation
Turkish residents are subject to tax on worldwide income on progressive rates from 15%-40%. Turkey imposes gift tax as well as inheritance tax, but not wealth tax.
Corporate Income Tax
Turkish resident corporations are subject to tax on worldwide income at 20%. Financial companies are subject to tax at 25%. Dividends paid by a Turkish company to another Turkish company are exempt from WHT, but a 10% WHT rate applies to dividends paid to resident individuals or non-resident individuals or corporations.
Anti-Avoidance Rules
Turkey has no general anti-avoidance rules (GAAR). Turkey has Transfer Pricing rules, as well as Thin Capitalization rules, and Controlled Foreign Corporation (CFC) rules.
Controlled Foreign Corporations (CFCs)
Foreign corporations that are controlled by Turkish resident individuals or corporations that hold 50% or more of the shares, dividend rights or voting rights, will be treated as CFCs if the following 3 conditions are met: 25% or more of the income of the foreign corporations is passive; the foreign corporations are subject to an effective tax rate of less than 10%; and annual gross revenue exceeds TRY 100,000. The profits of the CFC must be included in the income of the Turkish resident.
Double Tax Treaties (DTTs)
Turkey has a number of DTTs in effect, including with Canada, Hungary, Luxembourg, Malta, Netherlands, Switzerland, UK, and US.
Investment Treaties
Turkey has a network of bi-lateral and multi-lateral agreements for the protection of foreign investments that provide for international arbitration in the event of nationalization or expropriation, including with Hungary, Luxembourg, Malta, Mauritius, Netherlands, Singapore, Switzerland, UAE, the UK, and the US.
OECD Multilateral Convention
Turkey is a signatory to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. The Convention requires signatories to exchange information “on request,” and authorizes information exchange spontaneously and automatically.
Common Reporting Standard (CRS)
Turkey has implemented CRS for the automatic exchange of information, and has a number of exchange relationships in effect.
FATCA
Turkey has signed a FATCA Model 1 IGA with the United States for the automatic exchange of account information.
