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100% Tax Exemption for Service Exporters in Turkey

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100% Tax Exemption for Service Exporters in Turkey

Turkey has identified service exports as a strategic priority and offers a powerful financial incentive for both Income Tax payers (sole proprietorships/freelancers) and Corporate Tax payers (Limited and Joint-Stock companies) operating in this field. With Presidential Decree No. 11257, published in the Official Gazette No. 33239 on April 30, 2026, the deduction rate applied to earnings from specific technical and professional services provided abroad has been increased from 80% to 100% .

This comprehensive guide explains how all professionals, including software engineers, data scientists, AI specialists, designers, architects, engineering firms, and digital service exporting limited or joint-stock companies, can legally and fully benefit from this advantage.

Legal Basis and Scope

Legislation	Article	Description
Income Tax Law	89/13	Deduction from self-employment earnings
Corporate Tax Law	10/1-ğ	Deduction from corporate earnings
Presidential Decree	11257 (30.04.2026, RG:33239)	Increased deduction rate from 80% to 100%
Sworn-in CPA Communiqué No. 49	46021	Mandated a sworn-in CPA (YMM) confirmation report
Value Added Tax (VAT)	VAT Exemption for Service Exports	0% VAT (No VAT declared or paid)

Who is Covered?

This incentive, regulated within the framework of Corporate Tax Law Article 10 (Export exemption) and Income Tax Law Article 89 (Self-employment earnings exemption), covers the following taxpayers:

Income Tax Payers: Self-employed professionals (freelancers) and sole proprietorships.
Corporate Tax Payers: Limited companies (Ltd. Sti.), joint-stock companies (A.S.), and other capital companies.

Covered Services

To benefit from the exemption, the service provided must fall under one of the following legally specified activities:

Architecture
Engineering
Design
Software
Medical reporting
Bookkeeping
Call center
Product testing
Certification
Data storage
Data processing
Data analysis
Vocational training (in areas determined by the Ministry)
Education and healthcare services (subject to permission from the relevant Ministry)

Important Note: Services such as assistance, consultancy, and intermediacy are not covered.

Conditions for Benefiting

All the following conditions must be met simultaneously to benefit from the full (100%) exemption:

Activity Area Compliance: You must have a company subject to Income or Corporate Tax (Sole Proprietorship or LTD/JSC), and its field of activity must be structured to provide the services listed above.
Customer Condition: The service must be provided directly to a customer resident abroad who does not have a workplace or permanent representative in Turkey.
Benefit Abroad Condition: The service provided must be used exclusively abroad. The service is expected not to relate to the customer’s activities in Turkey.
Invoicing: A self-employment receipt or e-invoice (in foreign currency) must be issued in the name of the foreign customer, clearly defining the service content (avoid vague terms like “consultancy”).
Collection Condition: The payment must be received in foreign currency (USD, EUR, GBP, etc.) via an international money transfer (SWIFT/EFT) to an account in a Turkish bank. Payments via crypto assets, PayPal balances, or funds not directly credited to a Turkish bank are invalid.
- Critical Warning: Full Collection Obligation (“All or Nothing Rule”): To benefit from the exemption, the entire earnings must be transferred to Turkey by the deadline for filing the relevant period’s tax return (end of April for Corporate Tax, end of March for Income Tax). If only a portion is transferred, the exemption is lost entirely for that income, including the transferred part. Income not transferred on time cannot be deducted even if transferred later.
Declaration: The taxpayer must declare their intention to use this exemption in the relevant section and annexes of the annual income or corporate tax return.
Sworn-in CPA (YMM) Report Requirement (NEW!): If the gross revenue from foreign service sales exceeds 500,000 Turkish Lira in a calendar year, a “Confirmation Report on Transactions Subject to Exemption” issued by a Sworn-in Certified Public Accountant (YMM) is mandatory. This report confirms the nature of the service, the customer’s foreign residency, proper invoicing, and the collection of payment in foreign currency to Turkey. The report must be issued before the tax return is filed.
- Taxpayers with a turnover under 500,000 TL within the scope of the exemption are not required to get a YMM report, but it can be prepared voluntarily to reduce audit risk.
- If the report is not submitted within the period, the exemption is canceled, and penalties are applied.

Implementation Steps

Work with a Competent CPA + Sworn-in CPA (YMM): Especially if your turnover exceeds 500,000 TL, support from both a Certified Public Accountant (SMMM) and a Sworn-in CPA (YMM) is essential.
Establish your company/business structure: Open a sole proprietorship, LTD, or JSC with the correct NACE code. Keep your professional certificates.
Contract and Invoice: Sign a service contract with the foreign customer. Issue an e-invoice or self-employment receipt in foreign currency upon service delivery.
Ensure Correct Payment Arrival: Provide your Turkish bank account details to the customer; always obtain the SWIFT/MT103 document for the payment.
Check Turnover Threshold and YMM Report: If your total foreign service sales for the year will exceed 500,000 TL, contact a YMM before the tax return period to prepare the report.
File the Return: Submit the annual income or corporate tax return prepared by your CPA, attaching the YMM report. Calculate the exemption amount correctly.
Keep Records: Retain the contract, invoice, bank receipt/SWIFT document, YMM report, and a copy of the tax return for 5 years.

Step-by-Step Company Formation

Here are the current company formation steps for those exporting services abroad.

1. Choose Your Company Type

Company Type	Suitable For	Establishment Cost	Standard Tax Rate	Tax Advantage
Sole Proprietorship	Ideal for solo freelancers with medium turnover.	1,000 – 1,500 EUR	15% – 45% (progressive)	Benefits 100% from Income Tax exemption.
Limited Company (LTD)	Suitable for those working with 1-50 partners or with high turnover.	Higher (~2,500 EUR+)	25%	Benefits 100% from Corporate Tax exemption.
Joint-Stock Company (A.S)	Suitable for those working with one or more partners, very high turnover, or seeking investment. Most corporate structure.	Higher (~3,500 EUR+ for setup & ops)	25%	Benefits 100% from Corporate Tax exemption.

2. Determine Your Address

Home Address: Lowest cost option. If rented, rent withholding tax may apply.
Virtual Office: Preferred for a professional business address. Does not impose extra obligations like rent withholding tax.
Physical Office: Most professional option. Preferred by large or growth-oriented businesses.

3. Prepare Required Documents

ID Card Copy (or residence/work permit or passport translation for foreigners)
Residence Certificate (obtained from e-Government)
Document showing workplace address (Lease agreement or title deed copy)
Articles of Association (for LTD and JSC, properly prepared, including company name, address, partners, managers, main activity as service export, correct NACE code)
Biometric Photo (mandatory for foreign nationals)

4. Apply to the Tax Office for a Tax ID

For LTD/JSC, this is done online via MERSIS.
For Sole Proprietorships, you must go to the tax office (or via e-Government) to file a “Business Commencement Notification”.
Crucially, select the correct NACE code (e.g., 62.01.01 – Software development; 71.12.01 – Engineering services; 63.11.02 – Data processing; 74.10.02 – Industrial design). Avoid codes containing “consultancy”.

5. Contract a Turkish CPA (SMMM)

Agree with an experienced CPA before or right after formation to optimize the process and ensure full compliance.

6. Wait for the Inspection (“Yoklama”)

A tax inspector will visit your address to verify its existence and suitability. Your tax plate becomes active after this.

7. Complete e-Invoice and e-Ledger Setup

Register for the e-Invoice system to invoice foreign customers (automatic for sole props, manual for LTD/JSC who also need e-Ledger).

8. Draft the Contract: “Independent Contractor”

The contract signed with your foreign customer must clearly state the Scope of Work and be an “Independent Contractor Agreement”. Avoid terms like “consultancy”.

Critical Warnings & Common Mistakes

Exceeding 500,000 TL without a YMM report: Leads to complete rejection of the exemption, plus delay interest and penalties.
Payment via crypto or foreign bank account: The exemption does not apply. Foreign currency must first arrive in a Turkish bank account.
Failure to prove service nature: Invoices vague descriptions like “consultancy” face difficulties during audits.
Not transferring the entire earnings on time: The exemption is completely lost (“all or nothing rule”).
Not segregating expenses: Failing to separate service export income from other income leads to incorrect deduction calculation.
Activity area mismatch: Claiming the exemption with an improperly structured company will result in rejection.

Special Notification & Document Requirements for Education & Health Services

Scope: Applies only to taxpayers operating under the permit/supervision of the Ministry of National Education (MEB) or the Ministry of Health (SB), offering services to persons resident abroad.

Important: The exemption rate for education and health services remains 80% as of 2026.

Form Notification (Quarterly): Must be attached to each provisional tax return (March, June, Sept, Dec), including customer name, nationality, passport number, invoice details, service description, and amount.
License/Permit Submission (First Year): Must submit a copy of the MEB permit or SB license to the tax office by the annual return deadline (end of March/April).
Penalties for Non-compliance: Exemption rejection, partial/complete loss of exemption, or tax loss penalty (50%) + delay interest.

Double Advantage: VAT Exemption (0% VAT)

Service exporters benefit from both income/corporate tax exemption and a VAT exemption (VAT Law No. 3065, Article 11/1-a).

Tax Type	Advantage	Rate/Status
Income / Corporate Tax	Deduction from earnings	100% (or 80% for education/health)
Value Added Tax (VAT)	VAT exemption for service exports	0% VAT (No VAT declared or paid)

Conditions for VAT exemption: Service provided to a foreign customer, benefit used abroad, invoice in customer’s name, payment collected in foreign currency to Turkey. Note: Ev

Can Remote Workers Benefit?

Yes. Freelancers residing in Turkey providing remote services (software, engineering, design, data analysis, etc.) to a foreign company can benefit. However, you must establish a company and provide services as an “independent contractor” , not an “employee”. Services provided under a “consulting” contract are not eligible.

Expectations for 2026 and Beyond

The 100% exemption and mandatory YMM report aim to encourage digital exports while increasing financial discipline and documentation standards. The 500,000 TL threshold is expected to be updated annually based on the revaluation rate. Taxpayers are advised to follow current announcements from the Turkish Revenue Administration and YMM report standards.

Contact Us For 100% Tax Exemption for Service Exporters in Turkey

Establishing a service-based export business in Turkey has become an exceptionally attractive opportunity, particularly following the introduction of the 100% tax exemption on eligible digital and professional services.

With its strategic geographic position, competitive operational costs, and highly skilled workforce, Turkey offers an ideal environment for companies and entrepreneurs aiming to deliver services globally while benefiting from a 0% effective tax structure.

By understanding the legal framework, structuring the business correctly, and ensuring full compliance with tax regulations, service exporters can significantly optimize profitability while minimizing fiscal exposure.

Whether you operate in software development, engineering, design, data analytics, or other qualified service sectors, this incentive allows you to scale internationally while maintaining a highly efficient tax position.

With the right setup:

Your income can benefit from up to 100% corporate or income tax exemption
Your services can be invoiced with 0% VAT under export rules
Your business can operate in full compliance with Turkish legislation

This creates a powerful advantage for both freelancers and corporate structures, enabling sustainable growth and global competitiveness.

How A&M Consulting Co. Supports Your Expansion

A&M Consulting Co. is a specialized investment and business advisory firm, focused on helping foreign entrepreneurs, digital professionals, and international companies establish and scale service export operations in Turkey.

We provide end-to-end solutions, including:

Company formation and optimal structuring
Tax planning aligned with the 100% exemption framework
Compliance and accounting management
Banking, licensing, and operational setup
Ongoing advisory for scaling and international expansion

Our goal is to deliver cost-efficient, fully compliant, and scalable business solutions, enabling our clients to seamlessly enter the Turkish market while maximizing available tax advantages.

Whether you are an individual entrepreneur or a global company, we ensure that your operations in Turkey are strategically structured, legally compliant, and financially optimized from day one.

DISCOVER OUR SERVICES:

You can reach out to our experienced consultans via email or by filling out the Contact Form on our website’s contact page

FAQs About 100% Tax Exemption for Service Exporters in Turkey

Can I fully exempt (100%) my earnings from services provided abroad?

Yes. Presidential Decree No. 11257 increased the deduction rate from 80% to 100% for listed services (software, engineering, etc.). Your entire earnings are exempt from income/corporate tax. (Rate is still 80% for education/health).

Can both sole proprietorships and limited/joint-stock companies benefit?

Yes. Both Income Tax payers (freelancers, sole props) and Corporate Tax payers (LTD, JSC) can benefit 100% under the same conditions.

Is a Sworn-in CPA (YMM) report always mandatory?

No. It’s mandatory if the exempt amount exceeds 500,000 TL or the total of multiple exemptions exceeds 1,000,000 TL. It’s not mandatory for amounts ≤ 500,000 TL but is recommended against audit risk.

I work remotely for a foreign company. Can I benefit?

Yes, but you must establish a company (sole prop or LTD) and work as an independent contractor, not an employee. Services under a “consultancy” contract are not covered.

What are the steps to set up a company as a remote worker?

Choose type (sole prop recommended), determine address (home/virtual), prepare docs, apply for tax ID (choose correct NACE code, avoid “consultancy”), hire a CPA, wait for inspection, set up e-invoice, sign an “Independent Contractor Agreement”.

Must I bring all my earnings to Turkey? Is partial transfer enough?

No, partial is not enough. The “All or Nothing” rule applies. The entire earnings must be transferred to a Turkish bank account by the tax return deadline (end of March for Income Tax, end of April for Corporate Tax). Missing even 1 USD loses the entire exemption for that income.

Can I receive payment in crypto (Bitcoin, USDT)?

No. Crypto payments are not valid for this exemption. Payment must be in fiat foreign currency (USD, EUR, etc.) to a Turkish bank account via SWIFT/EFT. Funds held on PayPal, Wise, Upwork balances are also not exempt until transferred to your Turkish bank account.

Is there a VAT advantage for service exports? What is the "double advantage"?

Yes. You get zero-rated VAT (0%) on invoices to foreign customers (VAT Law 11/1-a). This provides a double advantage: 1) 100% of earnings exempt from Income/Corporate Tax, 2) 0% VAT on your export invoices. (Note: VAT paid on local purchases cannot be deducted).

I provide education or health services. What extra documents do I need?

Quarterly Form: Attached to each provisional return (customer name, nationality, passport no., etc.).
Ministry Permit/License: Submit a copy (MEB or SB) by the annual return deadline (end of April).
Reminder: The exemption rate is still 80% for these sectors.

Can my foreign customer pay me in Turkish Lira (TRY)?

No. The law requires collection in freely convertible foreign currency (USD, EUR, GBP, CHF, JPY, etc.). Payments in TRY are not covered and are subject to normal taxation.

Is special application or prior permission needed to benefit?

No. Just meet the conditions (foreign customer, foreign currency collection to Turkish bank, etc.), declare the amount on your annual return, and attach the YMM report if required. Keep documents (contract, invoice, SWIFT receipt) for 5 years.

Is the 500,000 TL threshold updated annually? What is the 2026 threshold?

Yes. The thresholds (500k TL and 1M TL) are increased annually by half the previous year’s revaluation rate. Check current 2026 limits with your tax office or the Turkish Revenue Administration’s website (www.gib.gov.tr). It is recommended to check these limits at the beginning of each year.