Taxation for Foreign Companies in Türkiye (2024-2025)

Türkiye offers a dynamic business environment for foreign investors, but understanding the taxation system is crucial for compliance and financial planning. Below, we outline the key tax regulations affecting multinational enterprises and foreign businesses in Türkiye for 2024-2025.

1. Local and Global Minimum Corporate Tax

Effective Date

The Local and Global Minimum Corporate Tax regulations came into effect with Law No. 7524 on August 2, 2024. These provisions impact multinational enterprise (MNE) groups that have a parent company based in Türkiye and foreign investors operating branches or companies in Türkiye.

Taxation Basis

The minimum corporate tax is determined based on a country-by-country tax burden. This is calculated by dividing the total adjusted covered taxes of affiliates by their total country-based income.

Application

• Local Minimum Corporate Tax: If the country-based tax burden of entities in Türkiye falls below the 15% minimum corporate tax threshold, they will be subject to local minimum corporate tax.
• Global Minimum Corporate Tax:
  • Income Inclusion Rule: If the Türkiye-based parent company has subsidiaries operating in low-tax jurisdictions (countries taxing below 15%), global tax obligations will apply to those subsidiaries.
  • Under-taxed Payments Rule: From January 1, 2025, Türkiye-based affiliates earning income in low-tax jurisdictions will be subject to global minimum corporate tax.

2. Taxation of Foreign Companies Without a Headquarters in Türkiye

Full and Limited Tax Liability

Foreign companies are taxed based on whether their legal or business headquarters are located in Türkiye.

• Full Tax Liability: Applies to companies with headquarters in Türkiye, taxing their domestic and global income.
• Limited Tax Liability: Applies to foreign companies that earn income only within Türkiye.

Taxation for Limited Taxpayer Foreign Companies

Foreign companies subject to limited tax liability must file annual corporate tax returns similar to fully liable entities. Value-added tax (VAT) declarations must be submitted monthly to the tax office where the foreign company’s branch or representative is registered.

3. Global Minimum Corporate Tax

Tax Rate

The global minimum corporate tax rate is set at 15%. It applies to MNEs operating in low-tax jurisdictions or jurisdictions where no corporate tax is levied at all.

Implementation

• If the effective corporate tax rate for a foreign company’s branch or subsidiary in Türkiye is below 15%, the taxes not collected in Türkiye can be subjected to taxation in the parent company’s home country.
• Türkiye may implement additional local corporate taxes for taxpayers whose effective tax rate is below the global 15% threshold.

4. Setting Up a Foreign Branch in Türkiye

Taxation

Foreign companies establishing a branch in Türkiye must pay taxes on locally generated income. These branches must submit VAT returns to the tax office where their permanent establishment or representative office is registered.

Understanding Türkiye’s tax regulations is essential for foreign entrepreneurs looking to operate in the country. Staying compliant ensures smooth business operations and prevents legal or financial complications.