pixel

Taxes of Individuals in Turkey

This guide was written by Burak Orkun, Managing Partner at Orkun & Orkun (info@orkunorkun.com) in collaboration with Guides.Global (office@guides.global).

It was written on 30 June 2017. The law and practice in Turkey change all the time. Our guides are updated as frequently as possible - typically every three years - but may be out of date.

Our guides are prepared by professionals from many countries. They are, of necessity, both brief and general and can take no account of your personal circumstances. They are intended to be a good introduction to the subject BUT ARE NO SUBSTITUTE FOR PROPER PROFESSIONAL ADVICE, which our contributors will usually be happy to provide upon request.

The advice and opinions contained in the guides are those of the author and are not necessarily those of Guides.Global.

Click or hover where you see lightbulb image for more information

The scope of this guide

This guide is about the taxes you will have to pay as an individual in Turkey.

You may also want to watch the video version of this guide or download the audio (MP3) guide.

Index

Introduction

Turkey is a relatively low-tax regime - you won't be too sore after paying the usual individual taxes.

Who has to pay tax in Turkey?

Whether you have to pay tax in Turkey - and on what basis - depends upon whether or not you are classified as tax resident in Turkey.

Tax residents in Turkey

A person (for these purposes meaning a ‘real life’ person rather than a legal person such as a limited company) is treated as tax resident in Turkey if they are physically present in Turkey for at least 183 days in the calendar year. It does not matter whether those days are in one block or taken piecemeal throughout the year.

A day is counted as from 00:01 to 24:00. So, if you arrive in Turkey at 23:30 on Monday and leave at 07:00 on Tuesday, you have been in the country for two days.

If you are going to stop being tax resident in Turkey, you are required to file a tax declaration 15 days before your final departure.

If a person is treated as tax resident in Turkey then they will pay tax in Turkey on their worldwide income, their worldwide assets, their worldwide capital gains, and any inheritances they receive from anywhere in the world.

This is always subject to the relevant Double Taxation Treaties. Under these treaties, it may be that all or part of the relevant taxable items will be taxed in another country instead of in Turkey.

Non-residents in Turkey

A person who is not treated as a tax resident in Turkey is, for tax purposes, a non-resident.

Taxes on income

Tax residents of Turkey

Tax residents are liable to tax in Turkey on their worldwide income. This means what it says. If you have a salary being paid to you in another country or investment income generated in another country, then all that income plus whatever you might earn in Turkey will be taxed in Turkey.

The main exception to this is that overseas pensions are not generally taxed in Turkey. There are conditions to this. You will need to have a Turkish residence permit and you will need to have certain paperwork prepared by the tax authority in your own country, confirming the status of your pension payments. This form is then approved by the Turkish tax authorities, following which your pension income will no longer be taxable in Turkey.

This rule about your worldwide income being taxable in Turkey could produce cases of unfairness, but these are mitigated by the effects of the Double Taxation Treaties referred to above. These ensure that you do not generally pay the same tax on the same income in two different places. 

Each person is taxed as an individual on their own income.

For the tax year 2017:

Income from employment

Tax bracket   Tax rate
From TRY1 to TRY13,000 15%
From TRY13,001 to TRY30,000 20%
From TRY30,001 to TRY110,000 27%
From TRY110,001 to [NO LIMIT] 35%

 

Other types of income

Tax bracket   Tax rate
From TRY1 to TRY13,000 15%
From TRY13,001 to TRY30,000 20%
From TRY30,001 to TRY70,000 27%
From TRY70,000 to [NO LIMIT] 35%

 

Use the currency converter to work out how much this is in your own currency.

FreeCurrencyRates.com

 

Other income includes interest received, dividends, rental income and any taxable capital gains. 

When calculating rental income, you can offset all of the expenses that you’ve actually incurred in providing the rental property (including mortgage interest) or you can claim 25% of the gross rent received as a direct deduction. If you claim the actual expenses, your claim is subject to the possibility of an inspection by the tax authorities whereas claiming the 25% direct deduction is something you can do as a right.

In either case, the first TRY3,900

There is no general tax-free amount of income. However, there are various deductions that can reduce the tax that you have to pay. These include:

The provision of a car allowance or the use of a company car is taxable.

Meals provided by the employer on his premises or, to a certain limit, by luncheon vouchers, are not taxable.

Income tax is declared on 25th March for the previous financial year (January 1st to December 31st). The tax can be paid in two instalments or as one payment, as you prefer.

If you choose to pay in two instalments, the payments are due on 31st March and 31st July.

If you are late in filing your tax return, there is a small fine – but if you’re late in making a payment of tax, there is an automatic surcharge.

If you’re late in paying your tax but you do eventually pay it before you are challenged by the tax authorities, there is an automatic surcharge of 50% of the tax you owe, plus interest at 16.8% per annum from the date when the tax was due to the date when it is finally paid. If the tax authorities realise that you have been late in paying and challenge you on the point, the surcharge increases to 100%.

In the case of a company, the surcharge can rise to 300%!

If you are self-employed, you will file an interim (provisional) tax return every three months and pay the amount shown as due.

If you’re employed, your employer will deduct the amount of tax that is due from your salary and pay it to the tax authorities.

People who are not tax resident in Turkey

People who are not tax resident in Turkey pay income tax in Turkey on:

  1. Any income they earn from working in Turkey

  2. Any income they earn by renting out any real estate (houses, apartments or land) located in Turkey

  3. Any income they generate from investments in Turkey

For non-residents, there is no tax-free allowance in Turkey.

The Turkish tax rate for non-residents are the same as for residents. So are the penalties for late payment.

You must file your tax return and pay the taxes due in the same way as a resident (see above).

Taxes on capital gains in Turkey

Capital Gains Tax is the tax you pay when you sell an asset that has grown in value since you acquired it.

The tax is payable on the sale of assets of all kinds. The rules are quite complex but, in summary:

Tax residents of Turkey

Real estate

If you own real estate for a period of at least five years, any increase in value is tax free.

Until then, you benefit from a general exception allowing you to generate a tax-free capital gain of up to TRY11,000 (2017) in any one year.

When calculating the amount of your gain, you can adjust the price you paid for the land for inflation and deduct that adjusted amount from the price for which you sold the land. Inflation in Turkey has been substantial over the last few years, so this is a valuable adjustment.

For the purpose of calculating tax on the sale of real estate, it does not matter if the property is your main home or some other building.

Stocks and shares

If you have owned the stocks or shares for a minimum period of two years, any gains are tax free. Otherwise, the gains are taxed as part of your other income.

Financial instruments

There is no exemption. The gain you make is taxed as part of your other income.

Gold, works of art, etc.

There is no exemption from Capital Gains Tax although, strangely, few people seem to remember the money they make from the sale of gold bars or paintings to the tax department. Any profits made are taxed as part of your general income.

Foreign exchange (FX) gains

There is no exemption. The gain you make is taxed as part of your other income.

People who are not tax resident in Turkey

The same rules apply

Capital losses in Turkey

Capital losses cannot be offset against your other income.

Taxes on property

See our Guide to Property Taxes in Turkey

Taxation of cars, boats, planes, etc. in Turkey

There is an annual vehicle tax.

The amount of the tax depends upon the type of vehicle, the year it was manufactured, and its engine size. The list extends to over 100 pages!

By way of example, the tax payable on a four- to six-year-old 15,099cc saloon car is TRY750 per year, payable in two instalments (January and July). This is not paid as part of your normal tax return but, instead, it is paid online directly to the tax office.

Taxes on wealth in Turkey

Wealth tax, for those not familiar with the concept, is a tax charged each year and calculated on the basis of your total accumulated wealth.

There is no wealth tax in Turkey.

Gift tax in Turkey

Gifts, apart from modest gifts on birthdays, weddings etc., are subject to gift tax (see below). The exception is limited to a total of TRY4,068 per donee.

Over and above the tax free amount, the tax payable is as follows:

Gift amount Tax rate
Up to TRY210,000 10%
The next TRY500,000 15%
The next TRY1,110,000 20%
The next TRY2,000,000 25%
Anything over TRY3,820,000 30%

Taxes on death (inheritance tax) in Turkey

The first and most important thing to understand here is that the question of who inherits what and the taxes that need to be paid upon an inheritance are two entirely different questions.

For information about who inherits what in Turkey, see our Guide to Inheritance in Turkey.

Turkish inheritance tax applies in two different circumstances.

  1. If the person who inherits the property is legally resident in Turkey

  2. If the property being inherited is located in Turkey

There is no inheritance tax in Turkey in relation to assets that are not located in Turkey unless the person who receives those assets is resident in Turkey.

So, for example, if you move to Turkey and have a bank account in Turkey containing €1,500 and a bank account in (say) Switzerland containing €10million and then, on your death, you leave all your property to your son:

When it comes to inheritance tax, there is a general exception of TRY176,600 for each heir. In other words, if you leave your assets on your death equally to your wife and three children, there will be four heirs and so 4xTRY176,600 by way of exemptions from tax.

If you have only one heir, the exemption doubles.

Over and above the tax free amount, the tax payable is as follows:

Inheritance amount Tax rate
Up to TRY210,000 1%
The next TRY500,000 3%
The next TRY1,110,000 5%
The next TRY2,000,000 7%
Anything over TRY3,820,000 10%

 

The value of land and buildings (real estate) is assessed at the official value in the municipal tax registry. The value of money in bank accounts and other investments is calculated at their true market value.

Value Added Tax (VAT) in Turkey

In Turkey, the VAT (sales tax) rate is charged at rates varying from 0% to 18%. For almost everything, the rate is 18%.

VAT applies to all goods and services provided by way of business. There are no exemptions such as those enjoyed in some other countries. Nor is there any threshold allowing small companies not to charge VAT.

When you register your business, you will also register it for taxation and receive a unique VAT number. This must be quoted on all bills sent out by the business and shown on any website operated by the business.

If you run a business in Turkey, you will have to file a VAT report every month and pay the VAT shown as being due to the Turkish Tax Department. There are both interest and penalties due for late payment. These are calculated as the same way as for income tax.

The way the VAT due is calculated in Turkey is pretty much the same as under any VAT system: namely the total VAT that you have paid out on your deductible expenses (purchase of materials, administrative costs etc.) is deducted from the total VAT that you have charged for your goods or services. This leaves a net amount payable to the Turkish government.

Other taxes in Turkey

Community Fees

These are not a tax but a fee payable to the Community of Owners (Residents Association/Home Owners Association) in which you live. See our Guide to Communities of Owners in Turkey.

Generally, you will only have to pay community fees if you live in a block of apartments or in a group of house that shares common facilities such as a pool, gardens, parking areas etc.

There is usually no community fee if you live in a self-contained villa.

The amount of any community fee can vary greatly depending upon the range of facilities made available to you.

If you do not pay your community fees your property can (eventually) be seized and sold by the community. Don't forget about them!

Social security payments in Turkey

If you choose to employ people within your business, in addition to their salary you will have to pay social security contributions to the Government of Turkey. These cover the employees’ entitlements to healthcare and other benefits.

At the moment, the rate of social security contributions is 12.5% of the person’s total salary package. This includes the value of any non-cash benefits you give to the employee - for example, private medical insurance or the use of a car.

As the owner of the business, you will also have to make substantial social security payments.

The employer usually pays a total contribution of 22.5% of the employee’s salary. This is divided into separate pools. It is deductible from the employer’s profit when calculating the employer’s tax.

Your social security payments are paid to the government monthly.

Taxation in your own country

It is, obviously, beyond the scope of this guide to look in detail at the taxation systems of the 195 or so countries of the world. Check out our guides for other countries.

The most important thing to stress is that your tax obligations in your home - or indeed other - countries will not necessarily end just because you are now living in Turkey.

If you have income arising from those countries, you will probably find that that income continues to be taxable in those countries.

If you sell things at a profit and so make a capital gain, that gain could well be taxable in those countries. In some places this will be by way or a separate capital gains tax; in other places the gain will be taxed as part of your annual income.

If you inherit property in another country, you are likely to have to pay some form of inheritance tax on what you inherit in that country.

If you have property - real estate - in another country, you are likely to have to pay some annual taxes relating to that property.

If you come from the US, you will even face tax based not upon your residence there but the mere fact of your US nationality.

In many of these cases, the tax laws in Turkey would also include that income or those gains as part of your taxable income or gains in Turkey.

Conclusion

If you're struggling with taxes in Turkey (many people are after moving to a new country, don't worry) then feel free to see an accountant. They'll be happy to help.

Other guides of interest

 Description Link 
Turkey Country Guide
Essential facts and figures about Turkey
Click to see this guide
The Tax System in Turkey
An overview
Click to see this guide
Choosing a Tax Adviser in Turkey
Things to consider
Click to see this guide
Taxes on companies in Turkey
Taxes on businesses
Click to see this guide
Taxes on property in Turkey
Taxes on real estate
Click to see this guide

Readers' Comments

 

Further information?

I hope you have found this guide useful. If you need any further help, please contact me.

Burak Orkun

30 June 2017


 

Guides.Global.logo
expert advice about living, working, investing, doing business
& buying property in another country


Guides.Global Ltd
23 Bridewell Lane
Bury St Edmunds
Suffolk
IP33 1RE
UK

Telephone: +44 1284 719964  ♦  Email: office@guides.global

www.guides.global

© John Howell 1979 - 2018