Turkey legal and accounting and tax considerations in 2021

Turkey corporate tax obligations

Since 2003, Healy Consultants Group PLC assists our multi-national Clients’ to timely accurately and completely discharge their Turkish legal, accounting, audit and tax obligations. Our in-house Accounting and Tax Department will assist your Firm with i) monthly and quarterly Government reporting including VAT and payroll and ii) corporation tax and iii) book-keeping and iv) annual financial statements and v) independent statutory audit and vi) so on.

  • Turkey corporation tax

    1. A standard corporate income tax (CIT) rate of 25% applies for the year 2021 and a rate of 23% for 2022 fiscal year;
    2. A Turkish tax resident company is liable to corporate income tax on its worldwide income. A non-resident company is liable to corporate income tax on its Turkish-source income only;
    3. The fiscal year is the calendar year. However, companies can secure approval from Ministry of Treasury and Finance for a special accounting period. All resident and non-resident companies with a permanent establishment in Turkey must register for corporate tax and VAT;
    4. Companies with calendar year end as their financial year end must pay and file annual corporate tax on or before 30 April of the following year. The last day for payment of corporate income tax is the 30th day of the fourth month following the fiscal year end for all tax resident entities;
    5. In accordance with the Turkish Commercial Code, companies fulfilling two of the following criteria are subject to mandatory independent statutory audit: i) asset value exceeding €3million ii) net sale proceeds of €6 million or more and iii) at least 175 employees;
    6. Capital gains of resident individuals are taxed as ordinary income. Non-Turkish investment income is taxable in Turkey only if the individual is resident in a calendar year;
    7. Employers and employee must contribute social security premiums totalling 34.5% of an employee’s salary as follows i) 14% for the employee and ii) 20.5% for the employer. For the period 1 January 2021 through 31 December 2021, the social security tax ceiling is set at €2,500. In addition to social security payments, unemployment contribution totals 3% of the salary as follows i) 1% for the employee and ii) 2% for the employer;
    8. Branches of foreign companies are taxed solely on the income derived from activities in Turkey since they are regarded as non-resident entities. Branch profits are subject to corporate income tax at the rate of 25% for 2021, and 23% for 2022;
      • There are no additional provincial or municipal taxes on corporate income in Turkey;
      • Dividends received from resident subsidiaries are exempt from withholding taxes in Turkey;
      • Additionally, dividends received from non-resident subsidiaries may be exempt under certain conditions;
    9. Turkish Ministry of Finance (MoF) is the Turkey Government Agency responsible for tax laws and administration. Following incorporation of a company, each entity must appoint a local tax agent (CPA) and inform the Turkish Revenue Administration before the tax and VAT numbers are activated;
    10. Turkish tax authorities do not have a regular audit cycle for every taxpayer. Tax audits are performed based on selection through risk assessment software, where authorities can conduct either sector-specific or issue-specific audits. Tax returns filed by companies remain open to tax inspection until the end of the five-year statute of limitations according to the provisions of the Tax Procedural Law;
    11. Tax losses can be carried forward for a period of 5 years. However, a carry back of losses is not permitted unless where a company is liquidated;
    12. It is important our Clients are aware of their personal and corporate tax obligations in their country of residence and domicile, and that they fulfil those obligations annually. Let us know if you need Healy Consultants Group PLC’s help to clarify your annual reporting obligations.
  • Value Added Tax (VAT)

    1. Before the 26th of every month, a VAT return must be submitted to the Government. VAT is payable by the 26th day of the month in which the return is submitted;
    2. VAT is applicable of sales of goods and services within Turkey at a general rate of 18%;
    3. A reduced rate of 1% is applicable for the deliveries and services related to agricultural products such as raw cotton, dried hazelnuts, supply and leasing of goods within the scope of the Finance Leasing Law;
    4. A reduced rate of 8% is levied on the deliveries and services related to basic food stuffs, textiles, books and similar publications;
    5. VAT returns must be filed monthly by 24th of the month following the tax period end, detailing all taxable supplies and inputs. Companies can opt to file VAT online or on paper.
  • Withholding taxes & DTTs

    1. Turkey does not impose withholding tax on dividend payments to resident companies. There is one exception where a 3% withholding tax is imposed on progress payments to contractors, both domestic and foreign, within the scope of construction work spanning more than one calendar year;
    2. A standard 15% withholding tax is levied on dividend distribution to non-resident individuals who are shareholders. This rate can be reduced for non-residents under a double taxation treaty;
    3. As 0% – 10% withholding tax is applicable on interest payments made to non-resident entities. This rate may be reduced under a double taxation treaty;
    4. Turkey has currently signed double tax treaties (DTTs) with almost 80 countries including UAE, Spain, Canada, France, Italy, Germany, Norway, Qatar, Singapore among others.
  • Tax credits and incentives

      VAT and Custom duty:

    1. Importation of goods to be utilized for research as part of a qualifying R&D project is 100% exempt from customs duty and importation fund contributions;
    2. There is a 100% exemption from VAT on both i) domestic purchases and ii) import of equipment and machinery under the Investment Incentive Certificate (IIC);
    3. Corporate Income Tax:

    4. Profits from i) Design, ii) Software and iii) R&D activities carried out in Turkish Development Zones are exempt from corporate income tax until 31st December 2023;
    5. A 75% Corporate Income Tax exemption is applicable under the Investment Incentive Certificate on capital gains generated from the sale of shares in a Turkish company;
    6. A partial exemption of 50% may also be applicable for the capital gains derived from the alienation of real estate investments in Turkey;
    7. A 100% CIT exemption is applicable under Investment Incentive Certificate conditions if a foreign subsidiary is sold by a Turkish company;
    8. General Investment Incentives:

    9. There are several tax benefits and incentives under the General Investment Incentives Scheme depending on the six regions of investment in Turkey, volume, or type of investment. Refer to this Government webpage for the categorization. The benefits include:
      • VAT exemption
      • Customs duty exemption
      • Tax reduction
      • Social security premium support
      • Income tax withholding allowance
      • Interest rate support
      • Land allocation
    10. Healy Consultants Group PLC will assist your Firm to optimize the use of these incentives according to your Firm’s specific needs and structure;
    11. Other tax incentives:

    12. 50% of the employer’s portion of social security contribution for up to 10% of the full-time design, R&D and support staff will be refunded by the Ministry of Finance;
    13. Investors with a minimum fixed investment amount of €45 million will benefit from VAT refund of non-recoverable VAT with respect to the construction part of the investment until 31st Dec 2023;
  • Healy Consultants Group PLC fees for accounting and tax support

    To help our multi-national Clients’ budget for their Turkish statutory legal & accounting & tax obligations, a summary of our fees follows:

    Turkey accounting and tax task
    Turkey active company unaudited annual tax and accounting *2,300
    Turkey dormant company unaudited annual tax and accounting950
    Turkey active company audited annual tax and accounting *4,950
    Turkey annual personal tax return1,500
    Average monthly bookkeeping services1,600
    Monthly VAT, WHT and Social Security reporting services (active entity)1,600
    Monthly VAT, WHT and Social Security reporting services (dormant entity)860
  • Legal and compliance

    Healy Consultants Compliance Department assists our Clients efficiently and completely discharge their Turkey legal and tax obligations.

    1. According to the Companies Act, a Turkey company must have at least one director and one shareholder of any nationality;
    2. The Memorandum of Association is a contract between the shareholders and comprises i) company activities ii) registered office address iii) shareholder and director details iv) share capital v) profit distribution method;
    3. Every company must lodge an annual return confirming relevant details of the company for the public register including names and addresses of all directors, address of principal place of business and details of shareholders and their shareholdings. A company is exempt from this obligation if there have been no relevant accounting transactions in the financial year;
    4. Annual audited financial statements must be submitted to the Turkish Trade Registry. Healy Consultants assists our Clients efficiently and effectively complete this annual statutory obligation;
    5. A private Turkey company is required to maintain both a local registered address and a local resident company secretary;
    6. Company information such as capital structure and shareholder and director details for a Turkey offshore company do not need to be made public;
    7. Each company must have a registered office in Turkey. Healy Consultants can provide this for monthly fee of €1,450;
    8. All business activities conducted in Turkey receive government approvals and permits and licenses;
    9. When employing local or foreign workers, employers must make sure to stay compliant with the Employment & Labour Law, the main set of laws governing labour in Turkey. The current labour laws most resemble the English system of labour laws, in terms of employer responsibilities;
    10. Employers in Turkey are required to contribute towards their employees Social Security Account, at a rate of 19.5% of the employees gross salary;
    11. The maximum working week in Turkey is 45 hours for all employees and a maximum of 3 hours overtime a day;
    12. A Turkey company can hire EU citizens without them acquiring a work permit visa according to the European Free Movement Law. However, non EU citizens much acquire a work permit visa to work in Turkey;
    13. When incorporating in Turkey, a license is required for all business activities. Healy Consultants can assist our Client in determining what operating licenses are required for their company.
  • External readings

  • Conclusion

    For more information on Turkish legal and accounting and tax considerations, communicate with our in-house Accounting and Tax Department via the contact details below.

Contact us

For additional information on our accounting and legal services in Turkey, please contact our in-house country expert, Mr. Petar Chakarov, directly:
client relationship officer - Petar
  • Mr. Petar Chakarov
  • Client Engagements Manager
  • Contact me!
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