DOING BUSINESS IN TURKEY

Posted By Romain Ponsot on Oct 6, 1907 in Doing Business


Date de publication : 06-10-1907

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The following information are for the sole purpose  of providing a general overview of  the local taxation of the Corporate tax aspects of the country. In any case, the information provided below cannot be considered as comprehensive or deemed to constitute specific legal advice.

 

Yes we tax in Turkey

 

Flash News

New tax reform: No specific information

New tax treaties:

  • Protocol to tax treaty between Turkey and Uzbekistan is signed.

Local tax advisors

No specific information on the local tax advisors.

Useful links

Website Ministry of Finance: Click here

Website Tax administration: Click here

Permanent Establishment

A permanent establishment is a place of business, through which a commercial, industrial, agricultural or professional activity is carried on.

Resident companies are taxed on their worldwide income (« worldwide principle »). However, non-resident companies are only taxed on their revenues derived from Turkey sources (« source principle »).

Entities are considered to be resident for tax purposes in Turkey if their place of management & control is in Turkey.

Note: the definitions of permanent establishment and place of residence are subject to the relevant provisions of any applicable double tax treaty, if any.

Corporate Income Tax

The general CIT tax rate is 20%.

Income derived from qualifying investment is subject to a reduce CIT tax rate.

Non-taxable income includes the following:

  • Dividends received from qualifying participations;
  • Certain capital gains deriving from qualifying participations ;

Non-deductible expenses includes the following:

  • Dividends benefiting from the participation exemption
  • Interest in excess of the thin-capitalization threshold
  • CIT and similar taxes (including foreign withholding taxes)

Carry forward: Yes 5 years, but some restrictions may apply.

Carry back: No

Companies should submit the tax return annually before the 25th April of the following year.

Annual tax returns are assessed by the tax office on the basis of the tax return provided.

Companies shall pay 4 advance payments on the current taxable year.

Whithholding Taxes (payment to foreign companies)

The local tax rates in Turkey are the following, subject to the provisions of an applicable double tax treaty, if any.

There is a 15% WHT on the profits paid from a branch to its foreign head office.

The general rate of WHT on dividends is 15% of the gross amount.

The general rate of WHT on interest is 10%.

Note: the WHT is 0% for private sector bonds.

The general rate of WHT on Royalties is 20%.

The general rate of WHT on management fees is 20%.

Note: if services are related to petroleum, the WHT is 5%

The general rate of WHT on technical services is 20%.

Note: if services are related to petroleum, the WHT is 5%

Capital gains

Generally, capital gains are taxed under the regular CIT as general income.

Note: capital gains deriving from qualifying participations are exempt under the participation exemption.

VAT

Standard VAT tax rate is 18%

Reduced tax rates are:

  • 8% (among others, basic food products, theatre, educational services, textile products,…);
  • 1% (among others, particular agricultural products, newspapers and magazines,…)

Zero-rated supplies include, subject to certain conditions:

  • exports of goods and services;
  • International passenger transportation.

Exempt supplies include, subject to certain conditions:

  • Certain financial services;
  • Certain insurance services ;
  • Training and education;
  • Cultural scientific and medical goods;

Note: exempt transactions differ from zero-rated transactions in that the input VAT associated with exempt transactions is not deductible.

In case where for a tax period, Input VAT exceeds Output VAT, certain non-resident companies (which are not required to register and incur Turkey-VAT in the course of their business activities in Turkey) may apply for a refund under the same conditions than resident companies.

Refunds are subject to the reciprocity principle, which means that Turkey only refunds VAT to foreign companies in countries that offer similar refunds to Turkey companies.

No other specific information of VAT in Turkey.

Miscellaneous

The general statute of limitation is 5 years starting at the end of the year in which the tax return had to be filed.

There is no foreign exchange control in Turkey. Income and capital could be freely repatriated.

There are thin capitalization rules in Turkey. The interest derived from loans between related parties may not be deductible in case where interest exceeds some ratios (3 times the taxpayer’s net equity).

 

 

 

Do not hesitate to share your experience in Turkey with us in the comments below. Any comments are welcome !

 

Romain Ponsot

Romain est conseiller en fiscalité au sein d’un leader mondial du shipping. Grâce à son expertise tant en matière de TVA, fiscalité internationale, problématiques intragroupe qu’en matière de fiscalité des particuliers, Romain vous guidera au travers d’articles professionnels et humoristiques. 

Romain, poète dans l’âme, aime particulièrement le couscous et passe beaucoup de temps à glacer ses souliers. Profil LinkedIn
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