Corporate Gains Tax in Turkey

In Turkey, corporate income tax applies to a variety of income sources that businesses generate both domestically and internationally, depending on their residency status. The Turkish Corporate Tax Law classifies different types of taxable corporate income, which helps determine the tax base for entities. Below are the primary categories of taxable corporate income for both resident and non-resident entities in Turkey.

1. Income from Commercial and Industrial Activities

This category includes income generated from the sale of goods and services. It encompasses any income derived from the company’s primary business operations, such as:

• Manufacturing activities
• Retail and wholesale trade
• Service provision (e.g., consulting, legal services, marketing, IT)

For companies engaged in industrial production or trade, this forms the largest part of their taxable income.

Examples:

• Profits from selling manufactured goods.
• Revenue from a service contract provided to a domestic or foreign client.

2. Income from Agricultural Activities

Corporate entities involved in agricultural production or agribusiness activities are taxed on their agricultural income. This includes profits from farming, livestock breeding, and other related agricultural businesses.

Examples:

• Sale of harvested crops.
• Profits from the breeding and sale of livestock.

3. Income from Professional Services

Corporate entities engaged in professional services, such as law firms, accounting firms, or engineering consultancies, are taxed on the income they generate from service contracts and other related professional activities.

Examples:

• Fees earned from legal or financial advisory services.
• Revenue from consulting and engineering services.

4. Rental Income from Immovable Property

Companies that own and rent out property are subject to corporate tax on their rental income. This applies to businesses that lease commercial, industrial, or residential properties.

Examples:

• Rental income from a commercial property leased to a third-party business.
• Lease income from an industrial facility.

5. Capital Gains

Capital gains are taxable if they result from the sale of assets. These gains can arise from selling real estate, shares, equipment, or other capital assets owned by the business. However, certain exemptions may apply to capital gains, such as those related to long-term investments or reorganizations.

Examples:

• Profit from the sale of a commercial building.
• Gains from selling shares in a subsidiary.

6. Interest Income

Interest earned from deposits, bonds, or loans is also subject to corporate income tax in Turkey. Companies that invest excess cash in interest-bearing accounts or bonds must include the earned interest in their taxable income.

Examples:

• Interest earned on corporate savings or term deposits.
• Interest income from corporate bonds or loans provided to other entities.

7. Dividend Income

Dividends received from other Turkish companies are generally exempt from corporate tax. However, dividends received from foreign subsidiaries may be taxable, depending on the country’s tax treaty with Turkey and the nature of the income.

Examples:

• Dividends received from an investment in a domestic joint-stock company.
• Profits distributed by a foreign subsidiary (with applicable tax rules depending on double taxation treaties).

8. Royalties and Intellectual Property Income

Income generated from licensing intellectual property (IP), such as patents, trademarks, and copyrights, is also subject to corporate income tax. This applies to both domestic and international royalty payments.

Examples:

• Royalties from licensing software to foreign companies.
• Income from renting the rights to use a patent or a trademark.

9. Foreign-Sourced Income

For resident companies, corporate tax applies to income earned outside of Turkey as well. This can include income from foreign subsidiaries, branches, or investments. However, non-resident companies are only taxed on Turkish-sourced income.

Examples:

• Profits from an overseas branch or subsidiary.
• Revenue from selling goods or services to foreign customers.

10. Income from Real Estate and Movable Property Sales

Income earned from the sale of immovable property (e.g., land, buildings) and movable property (e.g., equipment, vehicles) is taxable as capital gains, although there are certain exemptions for holding periods of more than two years for immovable property.

Examples:

• Profits from selling factory equipment or a commercial vehicle.
• Income from the sale of a corporate-owned office building.

11. Income from Financial Instruments

Income generated from financial derivatives, such as futures, options, and other financial contracts, is taxable. Gains from trading in foreign currencies, stocks, and bonds are also subject to tax, though certain types of gains may qualify for tax reductions or exemptions.

Examples:

• Profits from foreign currency transactions.
• Gains from trading stock options or futures contracts.

12. Other Incomes

Any other income not classified under the categories above, but that contributes to the overall profits of a company, is taxable. This could include miscellaneous revenues such as awards, fines received, or gains from non-core activities.