Everything you need to know about the tax system in Türkiye – different types of taxes

Are you a business owner looking to invest in Türkiye? First things first, you need to be aware of the Turkish taxation system and the mechanisms behind it. Turkish Tax Legislation System involves a diverse range of taxes, each in line with international standards.

What is tax? In brief, tax refers to a compulsory contribution levied by a government on the earnings, wealth, or spending of individuals or businesses within a compound system. It is vital for all individuals or companies planning to live, work on any act of business in Türkiye to understand the Turkish tax regime and be aware of what they will be charged by legal means. Here in this article, we will provide you with everything you need to know about the Turkish tax legislation system and different types of taxes in Türkiye.

Who pays taxes in Türkiye?

Anyone who lives and works in Türkiye are levied on their income, spending, and ownership. Residents working in the country for more than six months are levied by the Turkish government for their global income, yet non-residents with earnings from Türkiye-based businesses are levied merely for their earnings.

Types of taxes in Türkiye

Türkiye applies a multiple taxes system called the Turkish Tax Legislation System, and it imposes several different taxes under two main categories, referred to as direct and indirect taxes. Direct taxes include expenditure taxes, whereas indirect taxes are categorized as taxes on income and wealth; below is overall information about the common types of taxes in Türkiye.

Taxes of income

Individual Income Taxes

Taxes on individual income are levied for individuals working in Turkey. Generally, citizens in Türkiye pay an income tax of about 15 to 40% of their earnings, depending on their annual income. An example can be given as the following: an individual who earns up to TRY 32,000 in a year is in charge of 15% of the income tax; a person with an annual income of more than TRY 880,000, however, needs to pay for the income tax of 40%.

Corporate Income Taxes

Corporate income taxes are levied for corporates, capital or foreign companies, public or private enterprises, and joint ventures earning incomes in Türkiye. The standard fee for corporate taxes is 20% for all businesses; however, due to the recent changes in the Turkish tax regime, the tax is temporarily increased to 25%.

Taxes of Expenditure

Value-added Tax (VAT)

Value-added tax is levied for the goods and services held in Türkiye for commercial, agricultural, industrial, or any other independent professional purposes. VAT is applicable for both import and domestic goods and services after each delivery, and the range of the tax can be between 1% and 20%.

Special Consumption Tax (Excise Duty)

Unlike VAT, a special consumption tax is levied for certain products and is charged only once. Products that include special consumption tax are mainly luxury items (e.g., jewelry) and items that are harmful to public health or the environment (e.g., tobacco, alcohol, automobiles, or petroleum products).

Taxes of Wealth

Property Tax

Property tax is levied for real estate transactions held in Türkiye, and individuals are to pay 4% of the property transfer tax when buying, owning, or selling a property; 2% is paid by the seller, and 2% is paid by the buyer. Other taxes when buying a property in Türkiye include VAT, stamp duty, and governmental fees.

Motor Vehicle Tax

The motor vehicle tax is applied to vehicle owners in Türkiye who registered their names and vehicles in the traffic. The tax is to be paid two times in a year: January and July.

Conclusion

Understanding the Turkish tax legislation system is crucial for anyone living in Türkiye and key to success in business actions. After all, it's the individual's responsibility to know where and why their money goes.