Taxes are an essential aspect of the life of any country, playing a crucial role in financing public services and achieving economic sustainability, as Turkey continues to modernize and develop its tax system to meet the requirements of its growing economy and understanding the types of taxes in Turkey and how they affect citizens and businesses is crucial.
What are the types of taxes in Turkey?
Below we will learn about the types of taxes in Turkey:
Income tax in Turkey:
It manifests itself in two main forms: “individual income tax” and “corporate income tax" and these two taxes depend on two basic elements, which are sources of income and net income value.
With regard to individual income tax, the amount of net gains and revenues generated by an individual during an annual period is determined and the components of an individual's income are calculated based on multiple aspects, including commercial profits and agricultural profits, in addition to salary and monthly wages, income from self-employed services, and income from rental properties and financial investments.
As for the income tax on companies and institutions, this tax is borne by companies, associations, public economic establishments, and joint projects and the percentage of this tax usually ranges between 20 and 22%, but the Turkish government often relies on a lower percentage and the tax rate on the income of companies residing in Turkey is 15%, and it is paid when distributing profits to individual shareholders in the company.
Expense taxes in Turkey:
As for taxes related to expenses in Turkey, we find that one of these taxes is:
VAT:
In Turkey, VAT is imposed on a variety of goods and services of a commercial, industrial, agricultural and independent artisan nature, in addition to goods and services imported from abroad (imports) and deliveries of goods and services and there are three different VAT rates in Turkey, which are 1%, 8%, or 18%.
The value-added tax system in Turkey is characterized by many exemptions, including:
Goods and services exported from Turkey (exports) are exempt from paying VAT.
In the event that services are provided within Turkey to clients who are not residents of the country and come from outside it, they may be exempt from VAT, provided that reciprocity is carried out by the resident state.
Manufacturers in free zones can benefit from VAT exemptions.
Oil exploration activities are exempt from paying VAT.
Provided to ships and aircraft, they are exempt from paying VAT.
Used machinery and equipment are imported under an “investment certificate” and are exempt from paying VAT.
It is used for transit transportation of goods and is exempt from paying VAT.
Foreign diplomats and representatives of foreign consulates are exempt from paying VAT upon compliance with specific conditions, and employees of international organizations also enjoy tax exemption
At the end of 2018, the Turkish government decided to issue a tax exemption for real estate buyers, whether Turkish or foreign, who make property purchases through bank transfer using foreign currency across Turkey's national borders and this exemption was temporary and continued until March 2019 and the Turkish government could re-apply this exemption again to real estate or even to other areas.
Value-added tax is imposed on every delivery of goods and services and this tax is of great importance in financing government services and stimulating economic growth in Turkey.
Special consumption tax:
This tax is imposed on four main categories: petroleum products, all types of vehicles, tobacco products, alcoholic beverages, and entertainment tools and this tax is paid once upon purchase and financing of consumed goods.
Tax on banking and insurance transactions:
This tax is calculated on income generated from banking activities, such as interest on bank loans, as its maximum is 5% and 1% tax is also imposed on interest on bank deposit transactions and it is worth noting that this tax was canceled on foreign currency exchange transactions in 2008.
Stamp tax:
Stamp tax is a special tax imposed on transactions involving written government documents or papers and it is usually applied to documents such as contracts, payable notes and capital contributions during company incorporation, as well as financial and accounting documents and the amount of stamp duty varies between 0.189% and 0.948% depending on the type of document, and is usually less than 1%.
Revolution and property tax:
Real Estate Ownership Taxes: This category includes taxes related to owning real estate and the tax value depends on the market value of the property and varies according to location, type and use.
Car taxes: These taxes are related to multiple factors, including the age of the car and the power of its engine and the tax amount is determined in various ways depending on certain factors, and this changes every year.
Inheritance and gift taxes: These taxes are imposed when property is transferred between individuals in the form of gifts or inheritance and the tax value depends on the value of the transferred property.
Do foreigners have additional taxes in Turkey?
The truth is that any economic activity you undertake in any country, whether it is Turkey or another, there will be tax costs that you need to bear and the distinctive aspects of Turkey are that it does not impose additional taxes on foreigners.
In the Turkish legal system, foreigners can establish companies in Turkey, own real estate, or carry out any other business activity, and you will not have to pay any additional taxes other than the normal taxes paid by Turkish citizens and simply put, it provides legal foreigners with the same tax opportunities and responsibilities as Turkish citizens.
However, you may face some minor costs in Turkey, such as the costs of translating documents, hiring a translator, or the need for intermediaries or local experts and these are not taxes, but rather business needs that may vary based on the nature of your investment and your ability to carry out tasks on your own or with local helpers and these procedures contribute to facilitating your work and achieving effective tax compliance.
In conclusion, looking at the types of taxes in Turkey shows that the country occupies a prominent position as one of the best economic and investment destinations in the world and these taxes demonstrate the Turkish government's wise direction towards encouraging economic growth and providing opportunities for individuals and businesses to thrive.
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