Tax Advantages and Obligations for Foreign Entrepreneurs in Türkiye

Türkiye offers a competitive tax framework and a series of incentives designed to attract foreign investment. Understanding the country’s core tax system, available exemptions, and compliance obligations is essential for foreign entrepreneurs aiming to operate effectively in the Turkish market.

Main Tax Obligations

The main tax imposed on foreign companies in Türkiye is the corporate income tax, which is set at 25%. The actual liability depends on whether the foreign entity has a permanent establishment (PE) in Türkiye.

Full Tax Liability

Foreign companies that maintain a permanent establishment, such as a branch, office, or appointed representative in Türkiye, are subject to corporate income tax on their total income derived from Turkish operations.

Limited Tax Liability

Companies without a permanent establishment are taxed only on income generated from Turkish sources. Withholding rates applied to such income include:

• Dividends: 15% (reduced under tax treaties)
• Interest: 0–10%
• Royalties: 20% (can be lowered through treaties)
• Service fees: 0–20%

The standard Value Added Tax (VAT) rate is 18%, with reduced rates of 1% and 8% applied to specific goods and services.

Legal Tax Optimization Opportunities

1. TechVisa Program for Technology Entrepreneurs

The TechVisa initiative supports high-value technology ventures by offering several incentives:

• Corporate income tax exemption for companies established in technology parks or incubators
• Income tax exemption for employees
• Three-year work permit
• Accelerated administrative procedures

2. R&D and Innovation Incentives

Companies engaged in research and development benefit from favorable tax treatment, including:

• Tax deductions
• Income tax withholding incentives
• Social security premium support

Note that 3% of R&D deduction amounts must be allocated to venture capital investment funds or partnerships.

3. Tax Reduction for Exporting Companies

Export-driven companies benefit from a 5-point corporate tax reduction for 2024–2025, effectively lowering the rate from 25% to 20%.

4. Free Zones and Technology Parks

Companies operating in free trade zones or technology parks enjoy significant tax privileges, including:

• Corporate income tax exemption
• VAT exemption
• Customs duty exemption

Technology parks further offer reductions in social security contributions and stamp tax exemptions.

5. Investment Incentive System

Investments in certain sectors or regions may qualify for extensive support measures:

• Tax exemptions
• VAT and customs duty exemptions
• Social security premium support

6. Exemption for Foreign Subsidiary Earnings

Turkish resident companies holding more than 50% of a foreign subsidiary’s shares and repatriating dividends may exclude 50% of such earnings from corporate income tax. These provisions should be monitored regularly as they are subject to updates.

Key Tax Provisions

Significance of Permanent Establishment (PE)

Activities that may create a permanent establishment in Türkiye include:

• Opening a branch, office, or appointing a permanent representative
• Regularly concluding contracts or selling goods and services through a representative
• Providing continuous consultancy or support services

Once a PE is established, all income connected to Türkiye becomes taxable.

Digital Services Tax (DST)

Non-resident companies offering digital advertising, software, e-commerce, or digital content in Türkiye are subject to a 7.5% Digital Services Tax.

Global Minimum Tax (Pillar 2)

Multinational groups with annual consolidated revenue exceeding EUR 750 million are subject to a minimum tax rate of 15%. If the effective tax rate in Türkiye falls below this threshold, a top-up tax applies to ensure compliance.

Support for Young Entrepreneurs

Foreign entrepreneurs under the age of 29 are eligible for the same young entrepreneur benefits as Turkish nationals, including:

• Income tax exemption on annual profits up to 414,000 TL for three years (as of 2026)
• Ongoing VAT and stamp tax obligations
• Annually updated exemption thresholds

Critical Considerations

Avoiding Double Taxation

To prevent double taxation, tax paid in Türkiye can generally be credited against tax due in the foreign investor’s home country, provided a valid tax treaty and residency certificate exist. A list of Türkiye’s double taxation treaties is available from the Turkish Revenue Administration.

Risk of Misclassification

Incorrect identification of a permanent establishment, incomplete declarations, or withholding errors may lead to penalties in both Türkiye and the foreign investor’s jurisdiction.

Importance of Professional Guidance

Since tax legislation in Türkiye evolves frequently, entrepreneurs are encouraged to obtain continuous professional advice from certified tax experts or reputable audit firms.

By understanding Türkiye’s tax system, foreign entrepreneurs can take full advantage of incentive programs while maintaining compliance and minimizing potential risks.