TURKISH TAXATION SYSTEM Below we would like to give you a basic explanation of taxation system in Turkey at a glance and explain you the different kinds of taxes your company will be subject to: 1.Corporate Income Tax In Turkey, the basic corporate income tax rate levied on business profits is 20%. This is applied on the taxable income calculated after deducting allowed expenses from Company’s annual revenue. Tax payers pay provisional tax at the rate of corporate tax quarterly (on year-to-date profit), these payments are deducted from corporate tax of current period i.e. corporate tax on first quarter profit is declared on April,14 and paid on April 14. Witholding taxes on dividends for resident corporations is 15%. 2.VAT (Value Added Tax) The Turkish Tax System levies value added tax on the supply and the importation of goods and services. Liability for Value added tax arises; (a) when a person or entity performs commercial, industrial, agricultural or independent professional activities within Turkey, (b) when goods or services are imported into Turkey. In Turkey, goods and services are subject to VAT at rates %1 ,%8 and % 18. The general rate is % 18. Goods and services delivered to a customer outside the country is exempt from Value added tax.
The computation of the Value added tax liability is based on the difference between the Value Added Tax liability of the tax payer on his sales (output VAT) and the amount of VAT that has already been paid on the purchases (input V A T). In other words V A T on the supply of the goods and services can be written off against the VAT on the purchase of goods and services. If any input VAT left behind after the write off, it can be taken forward to the
next month, to be offset against future output VAT, but will not be refunded. As you know VAT is calculated and controlled on monthly basis. VAT on transactions is declared until 23rd and paid until 26th of the following month. Therefore at the end of the each month, the input VAT and output VAT accounts are net off with each other. 3.Witholding Income Tax: Briefly, this is the income tax paid on behalf of some third parties that your company has certain transactions listed in the Turkish Tax Codes. Most common ones are: Withholding income tax calculated on the salaries of your employees. Please find the detailed calculation of taxes on an employee’s salary in “Gross to net salary calculation table” at the end of this document Independent professional service fee payments to resident individuals Royalty, license and service fee payments to non-residents Companies in Turkey are responsible to withhold such taxes on their payments and declare them through their withholding tax returns. Related declaration is made until 23rd and paid until 26th of the following month. 4.Stamp Tax Stamp tax applies to a wide range of documents, including but not limited to agreements, financial statements and payrolls. Stamp tax is levied as a percentage of the monetary value stated on the agreements at rates ranging from 0.18% to 0.95%. Please note that salary payments are subject to stamp duty at the rate of 0.76% over the gross amounts paid, whereas a lump sum stamp tax is calculated for financial statements and tax returns.
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