Tax Registration in Turkey

Turkey has a comprehensive tax system that includes various types of taxes levied on individuals, corporations, and goods and services. Understanding the different types of taxes in Turkey is crucial for compliance and effective financial planning. Here is an overview of the primary taxes in Turkey:

1. Income Tax

• Personal Income Tax: Levied on the income of individuals, including wages, salaries, business income, and other sources of income. Tax rates are progressive, ranging from 15% to 40% based on income levels.
• Corporate Income Tax: Applied to the profits of companies operating in Turkey. The standard corporate tax rate is 25%.

2. Value Added Tax (VAT)

VAT is a significant source of revenue for the Turkish government and is levied on the supply of goods and services. The standard VAT rate is 18%, with reduced rates of 8% and 1% applicable to specific goods and services, such as basic food items and medical products.

3. Special Consumption Tax (SCT)

SCT is imposed on certain goods that are considered luxury items or have a high social cost. These goods include petroleum products, vehicles, alcohol, tobacco, and luxury consumer goods. The tax rates vary depending on the type of product.

4. Withholding Tax

Withholding tax in Turkey is a mechanism where the tax is deducted at the source of income by the payer, instead of being paid directly by the recipient.This system ensures that the tax authorities receive tax revenue in a timely and efficient manner.

     I) Scope of Withholding Tax

Withholding tax in Turkey applies to various types of income, including but not limited to:

• Dividends: Income from shares or other equity participations.
• Interest: Income from loans, deposits, and other interest-bearing financial instruments.
• Royalties: Payments for the use of intellectual property, such as patents, trademarks, and copyrights.
• Rental Income: Income from leasing property, both movable and immovable.
• Professional Services: Payments for consultancy, accounting, legal, and other professional services provided by individuals or entities.
• Employment Income: Salaries and wages paid to employees.

     II)  Withholding Tax Rates

The rates for withholding tax vary depending on the type of income and the residency status of the recipient. Some of the common withholding tax rates include:

• Dividends: 10%
• Interest: 7,5% for resident entities, 0% for non-residents on certain financial instruments
• Royalties: 20% 
• Rental Income: 20%
• Professional Services: 20% 
• Employment Income: Progressive rates ranging from 15% to 40%  based on the level of income.

5. Motor Vehicle Tax (MVT)

MVT is an annual tax levied on motor vehicles registered in Turkey. The tax amount depends on the age, engine capacity, and type of vehicle.

6. Property Tax

Property tax is levied on real estate properties, including residential, commercial, and land properties. The tax rates are determined by the local municipalities and are generally calculated as a percentage of the property’s assessed value.

7. Inheritance Tax

This tax is levied on the transfer of property through inheritance. The rates are progressive, ranging from 1% to 30%, depending on the relationship between the donor and the recipient and the value of the inheritance.

8. Stamp Duty

Stamp duty is applied to a variety of documents, including contracts, pay slips, agreements, financial transactions, and official documents. The rates vary depending on the type of document and the transaction amount.

9. Banking and Insurance Transactions Tax (BITT)

BITT is levied on the transactions of banks and insurance companies. The standard rate is 5%, but it can be reduced for certain transactions, such as interest on deposits and foreign exchange transactions.

10. Customs Duties

Customs duties are levied on imported goods. The rates vary depending on the type of product and its country of origin, in accordance with Turkey’s trade agreements and customs regulations.

11. Environmental Tax

This tax is imposed on certain activities and products that have an environmental impact, such as waste management services and plastic packaging. The rates vary based on the type of activity or product.

12. Valuable Housing Tax

Valuable Housing Tax, also known as “Değerli Konut Vergisi” in Turkish, is a tax levied on high-value residential properties in Turkey as rates ranking from 0,3% to 1%.

This tax was introduced to address wealth distribution and generate additional revenue from luxury real estate properties.