Turkey is one of the most competitive countries in corporate tax rates among the OECD countries. The new Corporate Tax Law, enacted on 21 June 2006, brought new concepts to tax legislation as well as important changes to existing practices. With the new Corporate Tax Law introduced, the provisions of the Turkish Corporate Tax Legislation have been defined much more clearly and are arranged in objective provisions in line with international standards.

The Turkish tax regime can be grouped under three main headings:

1.1. Income Taxes

In Turkey, income taxes are levied based on all income for domestic persons and companies, as well as foreign individuals residing in Turkey and international companies. Incomes of the persons residing abroad, including employment, ownership of property, business transactions, revenue or income derived by other activities within Turkey, are subject to taxes with the condition that they're earned in Turkey.

1.1.1. Corporate Income Tax

The basic corporate income tax rate levied on commercial profits is 20% in Turkey. The withholding taxes levied on some payments of the resident companies are as follows:

• Dividends are subject to 15% tax.
• 0% tax is levied on interest on treasury bills and treasury bonds issued by resident companies.
• The interest rate for bills and bonds extracted by resident (foreign) companies is 0%, and 15% bank deposit interest is applied.
• In terms of joint accounts, dividends paid by participation banks are subject to 15% tax.
• REPO agreements are subject to 15% tax.

A withholding tax is also levied on some payments of non-resident companies (residing abroad):

• Dividends are subject to a 15% tax.
• No tax is levied on interest on treasury bills and treasury bonds issued by companies resident abroad.
• The interest rate for bonds and bonds extracted by non-resident companies is 0%, and 15% bank deposit interest is applied.
• In terms of joint accounts, dividends paid by participation banks are subject to 15% tax.
• REPO agreements are subject to 15% tax.

1.1.2. Individual Income Tax

Individual income tax rates range from 15% to 35%. Tax rates applied on annual gross earnings since 2011 are as follows:

1.1.3. Social Security 

Social security contribution is the payroll obligation of the employer rather than a tax. Employer and worker; contributes together to the social security system consisting of sickness, work accidents, unemployment, retirement payments and other programs.

• Employer's contribution: 19.5%
• Employee's contribution: 14%

1.2. Taxes on Expenditure

1.2.1. Value Added Tax (VAT)

The generally applied VAT rates are set at 1%, 8%, and 18%. Commercial, industrial, agricultural, and independent professional goods and services, goods and services imported into the country, and deliveries of goods and services as a result of other activities are all subject to VAT.

1.2.2. Special Consumption Tax (SCT)

There are four main product groups that are subject to special consumption tax at different tax rates:

• Petroleum products, natural gas, lubricating oil, solvents, and derivatives of solvents
• Automobiles and other vehicles, motorcycles, planes, helicopters, yachts
• Tobacco and tobacco products, alcoholic beverages
• Luxury products Unlike VAT, which is applied on each delivery, special consumption tax is charged only once.

1.2.3. Banking and Insurance Transaction Tax

Banking and insurance company transactions remain exempt from VAT but are subject to a Banking and Insurance Transaction Tax. This tax applies to income earned by banks, such as loan interest. Although the general tax rate is 5%, some transactions, such as interest on deposit transactions between banks, are taxed at 1%, and 0.1% for interest applies to sales from foreign exchange transactions.

1.2.4. Stamp Duty

Stamp duty applies to a wide range of documents, including contracts, notes payable, capital contributions, letters of credit, letters of guarantee, financial statements, and payrolls. Stamp duty is levied as a percentage of the value of the document at rates ranging from 0.165% to 0.825%.

1.3. Taxes on Wealth

There are three types of wealth taxes: inheritance and gift tax, property taxes, and motor vehicle tax. The buildings and lands owned in Turkey are subject to real estate tax at the following rates:

• residential buildings 0.1%
• Other buildings 0.2%

2. Tax Incentives

• Priority development zones
• Technology development zones
• Organized industrial zones
• Free zones
• Research and development
• Private education institutions
• Cultural investments and enterprises

Tax Exemptions and Discounts

VAT exemptions include, but are not limited to, the following transactions:

• Export of goods and services;
• The roaming services in Turkey for customers outside Turkey (eg services for customers residing abroad) in accordance with international roaming agreements and provided that reciprocity stipulation is applied;
• Oil exploration activities;
• International transportation;
• Diplomatic representatives, consulates and international organizations with tax exemption status and deliveries to their employees;
• Machinery and equipment supply, including imports by VAT taxpayers and real and legal persons who have received an investment certificate from relevant authorities,
• Services provided for ships and planes at ports and airports,
• Social and other exemptions apply to deliveries to the government and other relevant institutions for educational, cultural, health and similar purposes.
• Banking and insurance transactions are exempt from VAT, as they are subject to a separate
• Banking and Insurance Transaction Tax at a rate of 5%. Tax exemptions are provided for the earnings of companies from their overseas branches and domestic and overseas enterprises, provided that they meet certain conditions.
• Research and Development aids.
• Discounts on taxable bases of the companies with regard to certain donations, grants or sponsorship aids.