Corporate Tax

In Türkiye, there is a single tax regime, governed primarily at the national level. The tax system is centralised and all significant taxes – such as income tax, corporate tax, value-added tax (VAT) and excise tax – are administered and collected by the central government through the Ministry of Treasury and Finance and its various bodies, including the Revenue Administration.

Local governments (eg, municipalities) have limited authority to impose specific local taxes, fees or charges (eg, property tax, environmental cleaning tax and some minor fees), but these are relatively small in comparison to the national taxes. Thus, the overall structure is centralised and uniform across the country.

Corporate entities that are tax resident in Türkiye are subject to several key taxes, including the following:

• Corporate income tax: The standard rate is 25%, effective from 2023. Banks, insurance companies and other financial institutions are taxed at 30%. From 2025, some companies – such as those under build-operate-transfer or public-private partnership models – will also be taxed at 30%. A reduced corporate tax rate is available for certain taxpayers. Corporate income tax applies to worldwide income.
• Value-added tax (VAT): The standard rate is 20%, with reduced rates of 10% and 1% for specific goods and services such as:
• • food;
  • books; and
  • medical supplies.
• Corporations must collect VAT on their taxable supplies.
• Withholding tax: A 15% withholding tax applies to dividends paid to non-resident shareholders. Interest payments typically attract a 10% withholding tax, while royalties are taxed at 20%.
• Special consumption tax: This is levied on specific goods such as:
• • fuel;
  • alcohol;
  • tobacco; and
  • vehicles.
• The rates vary depending on the product.
• Stamp duty: There are a variety of stamp tax rates and values. A stamp duty of 0.948% applies to legal documents, with fixed fees for certain types. According to Article 14 of the Stamp Duty Law, a ceiling has been set for the stamp duty to be collected on each document. The ceiling that will apply for 2025 is TRY 24,477,478.90.
• Property tax: Corporate entities that own real estate are subject to annual property tax, ranging from 0.1% to 0.6%.
• Social security contributions: Employers contribute around 23.5% of an employee’s gross salary to social security.
• Resource Utilisation Support Fund (RUSF): This is a type of fund deduction applied to financial transactions in Türkiye. RUSF progressive rates apply; after three years of payments, the rate falls to zero.
• Domestic minimum corporate income tax: Introduced in 2024, this constitutes a minimum tax of 10% on corporate income, excluding certain exceptions such as:
• • domestic dividends;
  • income from technological zones; and
  • venture capital fund deductions.

These taxes, alongside VAT and withholding taxes, create a comprehensive tax landscape for corporate entities in Türkiye.

In Türkiye, the primary base for corporate income tax is profits.

• Profits as the tax base: Corporate income tax is levied on the net taxable profits of corporate entities, meaning that the tax is calculated after deducting allowable expenses from revenues. While revenue is one component of the calculation, the tax is ultimately based on the profit generated.
• Key considerations: The starting point for determining taxable profit is generally the company’s accounting profit. This profit is then adjusted for various tax-specific items, including:
• • exemptions;
  • deductions; and
  • prior-year losses carried forward.
• Starting from 1 January 2025, Türkiye has implemented a minimum corporate tax regime. Under this regime, corporate tax cannot be less than 10% of corporate income before certain exemptions and deductions. This ensures that even with exemptions and deductions, a minimum level of tax will apply.
• Other tax bases: Corporate income tax is primarily based on profits, while other taxes have different bases. For example:
• • VAT is based on the value added to goods and services; and
  • withholding taxes are based on specific types of income, such as dividends, interest and royalties.

Yes, in Türkiye, the nature of taxable income significantly influences its tax treatment. The main categories of income and their tax treatment are as follows:

• Trading income: This is generally taxed at the standard corporate income tax rate. It encompasses income derived from the ordinary business activities of a company.
• Capital gains: The taxation of capital gains in Türkiye varies significantly depending on:
• • the type of asset; and
  • the circumstances of the transaction.
• Gains from the sale of real estate, securities and other assets are subject to different tax rules. Key factors that influence the applicable tax treatment include:
• • the holding period;
  • the nature of the asset; and
  • whether the asset is held by a resident or non-resident entity.
• In certain cases, capital gains may be exempt from taxation, provided that specific conditions are met.
• Dividend income: Dividend income in Türkiye is generally subject to withholding tax. However, corporations may qualify for deductions or exemptions under specific conditions to avoid double taxation. The tax treatment of dividend income also depends on whether the dividends are sourced domestically or from foreign entities.

Key differences: The tax rates for trading income in Türkiye generally align with the standard corporate income tax rate. However, capital gains and dividend income may be subject to different rates or withholding taxes. Exemptions and deductions are available for certain capital gains and dividend income, though these may not apply to trading income. Additionally, while dividend income is usually subject to withholding tax, trading income typically is not.

In essence, Türkiye’s tax system recognises the distinct characteristics of different income types and applies tailored tax rules accordingly.

Türkiye’s corporate income tax regime is best described as a mixed system, leaning predominantly towards a worldwide system, with certain territorial elements. While the core principle is to tax worldwide income, the availability of exemptions and deductions for foreign-sourced income creates a mixed regime.

• Worldwide principle: Generally, Turkish tax resident corporations are taxed on their worldwide income. This means that income earned both within and outside of Türkiye is subject to Turkish corporate income tax.
• Double taxation treaties also play a key role in mitigating the effects of taxing worldwide income.
• Territorial elements: Certain exemptions and deductions are provided for specific types of foreign-sourced income, effectively introducing territorial elements. For example, under specific conditions, profits that are obtained from foreign branches and foreign subsidiaries can be exempt.

In summary, Türkiye’s system aims to tax the global income of its resident corporations but provides mechanisms to prevent excessive double taxation and encourage international business activities.

Yes, losses can be utilised and carried forward for tax purposes in Türkiye, but specific rules and limitations apply.

Loss utilisation and carry forward:

• Carry forward: Corporate taxpayers can carry forward their tax losses for a maximum of five years. This means that losses incurred in one year can be used to offset profits in subsequent years, reducing the tax liability.
• Carry back: Loss carry-back is not permitted in Türkiye.

The Corporate Tax Law allows foreign-source losses of resident companies to be deducted as an expense. Net foreign losses may be carried forward for five years. The deductible foreign loss is calculated according to the provisions of the country in which the permanent establishment or branch is located. Under Section 9(1)(b), the conditions for deducting foreign losses are as follows:

• The deductible amount of the loss in the foreign country must be audited by authorised agents or institutions in that country.
• A copy and translation of the audit report must be submitted to the tax office in Türkiye.
• Copies of the tax returns and profit and loss statements submitted to the foreign authorities must be approved and presented with the above audit report.
• If the country has no private audit system, a copy of the tax return must be:
• • approved by the Turkish embassy or consulate; and
  • submitted to the tax office in Türkiye, together with a translation.
• Where the foreign loss is deducted in the foreign country, the income which appears on the tax return in Türkiye is the figure before the deduction.

Details on the application of this deduction are regulated by the Ministry of Finance and Treasury. Loss offsetting is limited on a per-country basis.

If income of an activity is exempt from corporate income tax in Türkiye, foreign losses of the same activity carried on in a foreign country cannot be deducted from the corporate income tax. The losses that are calculated at the end of the taxable period of the relevant country must be included in financial statements and books in Türkiye at the same time and at the exchange rate that is determined by the central bank for that date (Annex 1 of the Corporate Tax Law).

In Türkiye, while legal ownership primarily dictates income taxation, beneficial ownership is increasingly vital, especially in specific contexts. Generally, Turkish tax law focuses on the legal income owner, which is typically taxed. However, when applying double taxation treaties, the authorities may look beyond legal ownership to identify the beneficial owner – particularly for dividends, interest and royalties – to prevent treaty abuse. In transfer pricing, beneficial ownership helps to determine arm’s-length transactions, ensuring that the entity receiving the income also benefits from it. Anti-avoidance rules challenge structures that artificially shift income to low-tax jurisdictions, focusing on the real beneficiary. Moreover, beneficial ownership is crucial to prevent tax evasion and money laundering, in alignment with international and local regulations. Türkiye is increasingly adopting Organisation for Economic Co-operation and Development standards, reinforcing the importance of beneficial ownership in its tax practices. This shift reflects a move towards a more substantive approach to taxation:

• addressing potential loopholes; and
• ensuring fairness in international and domestic tax applications.

This concept is pivotal in ensuring that tax obligations are fulfilled by those that ultimately benefit from the income, rather than just those that hold legal title. This prevents artificial arrangements designed to minimise tax liabilities. Türkiye’s alignment with international standards signifies a commitment to transparency and fairness in its tax regime, reflecting a broader trend in global tax practices.

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In Türkiye, corporate tax is generally applicable to corporations (joint stock companies, limited liability companies) and other legal entities engaged in business activities. However, entities other than companies, such as partnerships or trusts, are subject to different tax treatment.

The following entities are subject to corporate income tax (Section 1 of the Corporate Tax Law):

• corporations;
• limited liability companies;
• partnerships limited by shares;
• investment funds;
• cooperatives;
• commercial and industrial enterprises owned and operated by public authorities, associations and trusts;
• business partnerships. For tax purposes, registration of such partnership as a joint venture is optional; and
• foreign entities similar to those listed above.

In Türkiye, trusts as a separate legal entity do not have the same legal status as in some other jurisdictions, such as common law countries. There is no specific tax regime for trusts in Türkiye.

The classification of an entity for tax purposes depends on its legal form and activities. The Turkish tax authorities assess each entity based on its specific characteristics to determine its tax liability.

Türkiye employs diverse tax incentives to attract investment and bolster key sectors. Technology development zones (‘technoparks’) offer:

• exemptions on corporate income tax for research and development (R&D) and software development until 2028; plus
• income tax exemptions for R&D personnel.

Organised industrial zones provide infrastructure and potential tax breaks, including land allocation. Free trade zones promote exports with customs duty and corporate income tax exemptions for manufacturing.

The Turkish investment incentive system offers broad benefits which vary by region and investment size, including:

• corporate income tax reductions;
• value-added tax (VAT) and customs duty exemptions;
• social security premium; and
• interest support.

Strategic, large-scale and regional investments are prioritised. Specific sector regimes include:

• tourism, with potential tax reductions;
• shipping, with corporate income tax exemptions for international transport; and
• the financial sector, with tailored regulations for banks and insurance, plus specific rules for securitisation.

Real estate investment trusts enjoy a unique tax regime and VAT exemptions exist for certain real estate transactions. IP income benefits from exemptions and deductions under specific conditions. Natural resources, such as mining and petroleum, are subject to distinct tax regimes, including royalties. These incentives aim to position Türkiye as a hub for strategic industries, balancing sector-specific support with broader economic development goals.

In Türkiye, corporate reorganisations or intra-group transfers of assets may benefit from tax relief under certain conditions. The Corporate Tax Law includes specific provisions for tax exemptions and reductions in these cases, primarily in the context of mergers, spin-offs and asset transfers within the same group.

One of the main relief mechanisms available is the merger tax exemption under the Corporate Tax Law, which allows for tax relief on the transfer of assets between entities involved in a merger or spin-off. In such cases, assets, liabilities and shares may be transferred without triggering capital gains tax or VAT, provided that:

• the transaction is conducted at fair market value; and
• other conditions are met.

This exemption is intended to facilitate the smooth transfer of assets during corporate restructuring.

Additionally, Türkiye has a participation exemption regime, which applies to dividends and capital gains received by Turkish corporate entities from their foreign subsidiaries. Under this regime, dividends and capital gains derived from foreign subsidiaries are exempt from taxation if certain criteria are met, such as:

• a minimum ownership threshold (typically 10%); and
• a holding period of at least two years.

This regime aims to:

• avoid double taxation on profits; and
• encourage cross-border investment and business activities.

However, while these exemptions are beneficial, compliance with the relevant requirements and documentation is crucial to avoid penalties and ensure that the relevant tax relief is granted.

In Türkiye, taxpayers generally do not have the option to elect between alternative taxation regimes, such as:

• choosing between revenue-based or profits-based taxation; or
• switching from a cash basis to accrual accounting for tax purposes.

However, specific provisions and exceptions may allow for certain flexibility under limited circumstances:

• Small business regime: Small businesses may benefit from simplified tax regimes, such as paying taxes based on their revenues instead of profits, which is typically allowed for certain businesses with lower income thresholds. This regime aims to reduce administrative burdens for small businesses.
• Cash basis versus accrual accounting: Generally, corporate tax is calculated based on the accrual method, whereby income is recognised when earned and expenses are recognised when incurred, irrespective of when payments are made. However, for smaller taxpayers or certain types of businesses, there may be provisions that allow for the application of a cash basis for VAT or other specific taxes; although this is not widely applicable for corporate income tax purposes.
• Investment incentives and special regimes: Certain taxpayers, especially those in specific sectors (eg, R&D, free zones), may benefit from special tax regimes. These regimes often involve different tax treatments for certain expenses or profits, but they are governed by the specific incentive rules, not by the taxpayer’s election.

In summary, while there is some flexibility for small businesses or specific sectors, the Turkish tax system is largely structured to follow standardised methods of taxation, especially for corporate income tax, without general elective regimes for different taxable bases.

In Türkiye, the general rule for taxing corporate entities is that tax is levied on the income of companies based on the local currency, the Turkish lira. However, companies that maintain their accounts in a foreign currency must convert their income, expenses and other financial items into Turkish lira for tax purposes. The following rules apply in this regard:

• Functional currency and reporting currency: If a corporate entity’s functional currency (ie, the currency of the primary economic environment in which it operates) or its reporting currency is different from the Turkish lira, the company must convert its financial results (including income, expenses, assets and liabilities) into Turkish lira for tax purposes.
• Exchange rate: The conversion is generally done using the exchange rates published by the Turkish Central Bank:
• • Income and expenses are translated at the exchange rate prevailing on the transaction date; and
  • Balance-sheet items (assets and liabilities) are translated at the exchange rate on the balance-sheet date.
• Taxable income: The taxable income is calculated based on the adjusted amounts in Turkish lira after conversion from the foreign currency. Any gains or losses due to currency fluctuations (ie, foreign exchange gains or losses) during the year must also be reported and taxed accordingly.
• Special rules for certain businesses: In some cases, specific industries or companies (eg, those involved in foreign trade) may have additional provisions regarding foreign currency transactions or hedging strategies, but the general principle remains that taxable income must be reported in Turkish lira. However, taxpayers operating in free zones and those granted special permission are allowed to maintain their accounting records in foreign currencies.

This system ensures that companies maintain consistent tax reporting in line with the jurisdiction’s legal and financial framework.

In Türkiye, the taxation of intangibles largely depends on their classification and usage. Intangible assets are typically divided into two categories for tax purposes:

• internally generated intangibles (eg, goodwill); and
• acquired intangibles (eg, patents, trademarks, copyrights or franchises).

Acquired intangible assets are generally subject to depreciation over their useful lives. The standard depreciation method for intangibles is the straight-line method, although a different method may be used if it better reflects the asset’s economic life.

For corporate tax purposes, intangible assets are amortised over their estimated useful life, typically not exceeding 15 years. This allows businesses to deduct a portion of the cost of the intangible asset annually, reducing their taxable income over time. If the useful life of an intangible cannot be reliably estimated, it is amortised over a period not exceeding 10 years.

Moreover, expenses incurred for the acquisition of intangibles, such as patents or licences, are generally deductible. R&D costs related to the development of intangibles may also be deductible, provided that certain conditions are met. Türkiye offers various R&D incentives, including deduction for eligible R&D expenditures, which can enhance the tax treatment of intangibles developed through R&D activities.

Additionally, royalties and licence fees generated from the exploitation of intangibles are subject to corporate tax. Royalties paid to non-residents are subject to withholding tax at a rate of 20%, unless reduced by a double taxation treaty.

In cases of the transfer or sale of intangible assets:

• any gains are subject to corporate income tax; and
• the applicable rate is 25%.

The treatment of such gains may vary depending on the specific circumstances and any applicable exemptions.

Employee remuneration is a deductible expense for the employer. Remuneration includes:

• the salary itself; and
• payments such as:
• • benefits in kind;
  • social security contributions;
  • compensations; and
  • unemployment insurance contributions, (Section 40(2) of the GVK).

Personal retirement contributions paid on behalf of the employees to resident insurance or pension companies are also deductible within certain limits (Law 4697).

If the employee is a shareholder (or a family member of a shareholder), the salary and similar payments must be consistent with the remuneration that would be paid to an independent employee. Any payment exceeding an arm’s-length remuneration is treated as a non-deductible hidden profit distribution (Section 11(1)(c) of the Corporate Tax Law).

Yes, in Türkiye, taxpayers in certain sectors – such as banking, finance and insurance – are subject to different or additional taxes or surtaxes. Examples include the following:

• Increased corporate income tax rate: As of 2023, the corporate income tax rate for banks, financial leasing companies, factoring companies, insurance and reinsurance companies, pension companies and other financial institutions was increased from the standard 25% to 30%. This higher rate also applies to certain companies involved in public-private partnerships and the build-operate-transfer model.
• Banking and insurance transactions tax (BITT): Financial institutions, including banks and insurance companies, are subject to the BITT. This tax is levied on transactions such as:
• • loans;
  • insurance premiums; and
  • foreign exchange dealings.
• The BITT rate can vary depending on the type of transaction. For example, for foreign exchange transactions, the BITT rate is 0.1%, and it may increase in specific cases.
• Special transaction taxes: Companies in the telecommunications, energy and insurance sectors may be subject to special transaction taxes or fees, depending on the nature of their business. These can include:
• • regulatory fees; and
  • contributions to specific funds.

These sector-specific taxes and surtaxes aim to regulate the profitability of financial and certain strategic industries while providing additional revenue streams for the government.

In Türkiye, there are no general surtaxes such as solidarity surtax or corporate net wealth tax applicable to all businesses.

In Türkiye, there are no general deemed deductions against corporate tax for equity similar to those that other jurisdictions might have. However, there are mechanisms that can indirectly provide tax advantages related to equity and it is important to differentiate these from direct deemed deductions.

In Türkiye, the tax treatment of investment in capital assets is primarily governed by the Tax Procedure Law, which establishes specific rules that can differ from accounting practices:

• Depreciation:
• • Tax depreciation is permitted, but it must adhere to the methods and rates stipulated by the Tax Procedure Law.
  • The Tax Procedure Law primarily recognises two main depreciation methods – the straight-line method (normal amortisation) and the declining-balance method (accelerated amortisation) – with specific conditions governing their application.
  • The useful lives of capital assets are determined by tables published by the Ministry of Treasury and Finance, which may differ from accounting estimates.
  • These tables and related regulations can be updated, so it is important to check the latest information.
• Capital expenditure (capex):
• • Capex is generally capitalised and depreciated over its useful life as defined by the Tax Procedure Law.
  • However, certain expenditures, such as those related to R&D, may qualify for special incentives or accelerated write-offs.
  • Investment incentive regimes can provide for accelerated depreciation for investments in prioritised sectors and regions.
• Investment incentives:
• • Türkiye offers a range of investment incentives – including value-added tax (VAT) exemptions, customs duty exemptions and accelerated depreciation – to encourage investments in strategic sectors.
  • These incentives are typically granted through investment incentive certificates issued by the Ministry of Industry and Technology.
  • Write-offs and tax treatment:
  • • Specific rules govern the write-off of capital assets in cases of impairment, loss or disposal.
    • Taxpayers must adjust their taxable income to reflect any gains or losses arising from these events, in accordance with the Tax Procedure Law.

Türkiye encourages research and development (R&D) and investment through various tax incentives. R&D centres that meet specific criteria can benefit from significant tax advantages, including:

• an 80% deduction of eligible R&D expenditures from the corporate tax base, providing substantial relief;
• exemptions from stamp duty on R&D-related documents;
• under certain conditions, income tax exemptions for R&D personnel salaries; and
• social security premium support.

Technology development zones (‘technoparks’) offer:

• tax exemptions on income from software and R&D activities until 31 December 2028; and
• income tax exemptions for R&D personnel salaries.

Similarly, design centres benefit from tax incentives for design activities.

Türkiye’s broader investment incentive system includes:

• corporate income tax reductions or exemptions;
• VAT and customs duty exemptions; and
• social security premium and interest support.

Strategic, regional and large-scale investments receive tailored incentives. Organised industrial zones provide infrastructure and support; while free trade zones offer customs duty and tax exemptions for export-oriented production.

Eligibility and incentive levels vary by sector, region and investment size. Compliance with specific requirements is essential.

In Article 258 of the Tax Procedure Law, ‘valuation’ is defined as the assessment and determination of economic values related to the calculation of tax bases. In valuation, the values of economic assets on the dates and times specified in the tax laws are used as the basis.

According to Article 274 of the Tax Procedure Law, inventories are valued at cost. The methods used for the valuation of inventories are as follows:

• cost price;
• market value;
• lower of cost or market value;
• gross profit method;
• retail price method; and
• normal stock (basic stock) valuation method.

When inventories are valued at cost, one of the following methods can be used:

• specific cost determination (valuation of specific lots);
• first in, first out method;
• average cost method –

The main purpose of inventory valuation is to determine the period profit or loss of the enterprise accurately and reliably. To determine the profit or loss accurately and reliably, the value of the inventory must be calculated precisely. Overstating or understating the inventory value will affect the reported profit or loss.

According to Article 274 of the Tax Procedure Law, the valuation criterion is determined as cost price, but the valuation principles are separately defined based on the characteristics of the inventory.

In Türkiye, derivatives are subject to specific tax rules. The taxation of derivatives depends on their nature and the purpose for which they are used. Generally, the tax treatment of derivatives is determined by the following considerations:

• Income tax: If derivatives are used for trading or speculation purposes, the income generated from them is treated as taxable income. This income is subject to corporate income tax (for corporate entities) or income tax (for individuals) at the applicable tax rates. The profits are considered as part of the taxpayer’s regular taxable income and are subject to normal tax rules.
• Capital gains tax: If the derivative contracts are held for investment purposes, the gains from the sale or maturity of these instruments may be subject to capital gains tax. However, the taxability of these gains may depend on:
• • the type of derivative; and
  • the holding period.
• Transaction tax: Derivatives, like other financial instruments, may also be subject to certain transaction taxes, such as stamp duty, which applies to agreements – including financial derivatives – under certain conditions.
• Withholding tax: Payments made in relation to derivatives (eg, interest on derivative instruments) may be subject to withholding tax, depending on:
• • the nature of the payment; and
  • the residency status of the counterparty.

It is essential to consider the specific details of each derivative transaction to determine the correct tax treatment. Taxpayers involved in trading or holding derivatives should carefully evaluate the purpose and structure of each transaction to ensure compliance with the Turkish tax regulations.

In Türkiye, non-resident corporate entities are subject to tax based on their income derived from Turkish sources. The primary tax imposed on non-resident entities is corporate income tax, which applies to their Turkish-source income. This taxation framework aligns with Türkiye’s principle of territorial taxation for non-residents.

Non-resident entities are taxed not on their worldwide income but rather on income that is considered to be sourced in Türkiye. According to the Corporate Income Tax Law (5520), non-resident entities are taxed on income such as the following:

• Business profits: Non-residents with a permanent establishment or fixed place of business in Türkiye are subject to tax on profits attributable to that establishment or place of business.
• Real estate income: Income derived from real estate located in Türkiye – including rent, capital gains or other related income – is subject to Turkish taxation.
• Dividends, interest and royalties: Non-resident companies earning dividends, interest or royalties from Turkish sources are subject to withholding tax. The standard withholding tax rates are:
• • 15% for dividends;
  • 10% for interest; and
  • 20% for royalties.
• However, these rates may be reduced under applicable double tax treaties.
• Capital gains: Non-residents are subject to tax on capital gains arising from the sale of:
• • shares in Turkish companies; or
  • immovable property located in Türkiye.

In Türkiye, several withholding and excise taxes apply to payments made by corporate taxpayers to non-residents. The main withholding taxes include the following.

Dividends: A withholding tax of 15% applies to dividend payments made to non-resident shareholders. This rate may be reduced under applicable double tax treaties.

Interest: For interest payments on loans from non-residents, the general withholding tax rate is 10%.

However:

• interest on government bonds and treasury bills is generally subject to a 0% withholding tax for non-residents; and
• interest on loans obtained from foreign states, international institutions or foreign banks, or from institutions authorised to regularly provide loans in the country in which they are located, is subject to a withholding tax rate of 0%.

Royalties: A withholding tax of 20% applies to royalty payments made to non-residents. This applies to payments for the use of intellectual property, patents, trademarks and other intangible assets. Tax treaties may offer lower rates.

Service fees: A 20% withholding tax is applied to payments for certain services provided by non-residents (eg, consulting, management services). Again, tax treaties may offer relief or reduced rates.

Rental payments: For payments made to non-residents for the lease of movable or immovable property, a withholding tax of 20% is generally applied.

Excise taxes: No specific excise taxes are applicable to payments made to non-residents. However, excise taxes in Türkiye apply to domestic transactions involving specific goods, such as:

• fuel;
• alcohol;
• tobacco; and
• automobiles.

Yes, double or multilateral tax treaties generally override domestic tax laws in Türkiye. In cases of any conflict between a tax treaty and the domestic tax laws, the tax treaty will take precedence. This principle is in line with Türkiye’s approach to international taxation and is guided by the principle of treaty override.

Türkiye follows the rule that international treaties (eg, double taxation treaties) supersede its domestic tax laws in terms of tax rates, exemptions and tax jurisdiction over income and profits. This means that the provisions of a tax treaty will be applied over and above conflicting domestic tax provisions, provided that the taxpayer qualifies for the benefits outlined in the treaty.

Examples include the following:

• Withholding tax rates: A tax treaty may provide for a reduced withholding tax rate on dividend, interest or royalty payments, even if the domestic tax rate is higher. In this case, the lower rate stipulated by the treaty will apply.
• Tax jurisdiction: A treaty may allocate taxation rights between the two countries, thereby determining which country has the right to tax certain types of income (eg, employment income, business profits or dividends). Where the domestic law of Türkiye and the treaty have conflicting provisions, the treaty’s allocation of tax rights will prevail.

The provisions of a treaty can be applied only if the taxpayer meets the requirements outlined in the treaty, such as residency or specific conditions tied to the treaty’s benefits.

Türkiye’s tax treaties are designed to:

• promote fairness;
• prevent double taxation; and
• provide a clear framework for cross-border taxation.

Therefore, in practice, tax treaties take precedence over domestic laws in situations where the two may conflict.

Yes, in the absence of tax treaties, Türkiye provides unilateral relief for foreign taxes through a foreign tax credit mechanism. According to Article 33 of the Corporate Tax Law, Turkish companies can offset foreign taxes paid on income generated abroad against their Turkish corporate tax liability, subject to certain limitations.

The foreign tax credit is available for taxes paid in foreign countries on income that is also subject to taxation in Türkiye. However, the credit is capped at the amount of Turkish tax due on the foreign income. This means that if the foreign tax rate exceeds the Turkish tax rate on that income:

• the excess foreign tax is not refunded; and
• only the amount equivalent to the Turkish tax liability can be deducted.

This mechanism allows Turkish companies to avoid double taxation on foreign income, ensuring that they are not taxed excessively on profits earned outside of Türkiye. However, specific documentation is required to substantiate the foreign tax payments, such as certificates or official documentation from the relevant foreign authorities, which must be presented during the tax assessment process.

In summary, while Türkiye does provide unilateral relief in the form of foreign tax credits, the relief:

• is limited to the amount of Turkish tax payable on the foreign income; and
• does not allow for refunds of excess foreign taxes paid.

In Türkiye, inbound corporate entities do not automatically obtain a step-up in asset basis for tax purposes upon entry or acquisition of assets. The taxation rules are primarily focused on the existing book values of assets at the time of the acquisition, rather than providing a step-up in the asset basis for tax purposes.

Türkiye has provisions that can effectively function as exit taxes, though they may not always be explicitly labelled as such. These provisions primarily address situations involving the disposal of assets and changes in corporate residency.

Disposal of assets:

• Capital gains tax:
• • When a company disposes of assets – including intangible assets, real estate or shares – any resulting capital gains will be subject to corporate income tax.
  • If a company changes its residency and, in doing so, disposes of assets, these gains will be taxed. This can be viewed as a form of exit tax.
• Transfer pricing: If a company transfers assets to a related party in another jurisdiction at less than arm’s-length value, the Turkish tax authorities can adjust the transaction to reflect fair market value. This adjustment can result in additional tax liability, effectively acting as an exit tax on the unrealised gain.

Change of corporate residency: If a company relocates its tax residence from Türkiye to another country, exit taxes may be imposed on the unrealised capital gains related to the assets held in Türkiye, even if those gains have not been realised through a sale. The main principle is that Türkiye wants to tax the latent profits that accrued while the company was a resident.

In essence, while Türkiye may not have a single, explicitly defined ‘exit tax’, its tax laws include provisions that can result in tax liabilities upon:

• the disposal of assets; or
• a change in corporate residency.

These provisions are designed to ensure that companies pay their fair share of taxes on gains accrued while they were within the Turkish tax jurisdiction.

Türkiye has anti-avoidance rules that apply to corporate taxpayers. These rules are both statutory and based on case law (jurisprudence).

The substance over form doctrine, as regulated in Article 3 of the Tax Procedure Law, is a crucial doctrine in tax practice. This principle allows the Turkish tax authority to disregard the legal form of a transaction if it does not reflect its economic reality. The focus is on the actual substance of a transaction rather than its formal structure. This doctrine helps to prevent taxpayers from engaging in artificial transactions designed solely to avoid tax.

Türkiye has a comprehensive framework of anti-avoidance tax rules designed to prevent corporate taxpayers from using aggressive tax planning strategies to reduce their tax liabilities. These rules cover a variety of areas, such as:

• transfer pricing;
• thin capitalisation;
• controlled foreign companies (CFCs);
• anti-hybrid measures; and
• restrictions on the use of losses and interest deductions.

The major anti-avoidance tax rules in Türkiye include the following.

Special Anti-Avoidance Rule: Articles 10 and 13 of the Corporate Income Tax Law (5520) includes provisions on transfer pricing and thin capitalisation, both of which function as statutory anti-avoidance rules. These rules aim to prevent profit-shifting and under-capitalisation practices that could erode the taxable base in Türkiye.

Transfer pricing rules: These apply when related parties conduct transactions not on an arm’s-length basis, allowing the tax authorities to adjust the taxable profit of a company.

Thin capitalisation rules: These target the excessive use of debt financing from related parties, limiting the deductibility of interest payments if debt-to-equity ratios exceed certain thresholds.

CFC rules: Under Section 7 of the Corporate Income Tax Law, Türkiye has CFC rules to prevent the deferral of taxes by establishing entities in low-tax jurisdictions. If a Turkish resident controls a foreign entity and that entity is subject to low taxation, its profits may be subject to taxation in Türkiye even if not distributed.

Anti-tax haven provisions: Section 30 of the Corporate Income Tax Law also contains provisions that allow for the taxation of profits generated in countries deemed to have preferential tax regimes or classified as tax havens.

Case law: In addition to statutory provisions, Turkish courts have played a role in shaping anti-avoidance practices through case law. The Turkish tax authorities and the judiciary closely examine corporate transactions to ensure compliance with the substance-over-form principle, where the economic substance of a transaction is prioritised over its legal form. The courts often take a stance against artificial arrangements designed solely for tax avoidance purposes, even if they comply with the letter of the law.

Thus, Türkiye’s anti-avoidance framework involves both statutory provisions and jurisprudence, with a focus on ensuring that corporate taxpayers adhere to principles of fair taxation and economic substance.

Yes, Türkiye provides a ruling process for corporate taxpayers to obtain clarification or advance decisions on specific tax issues, including both domestic and cross-border tax matters. This process is known as the ‘advance ruling mechanism’ and is governed by the Tax Procedure Law.

Scope of rulings: Taxpayers can request rulings on specific tax issues related to:

• corporate tax;
• value-added tax (VAT);
• withholding tax; and
• other matters where the application of tax rules may be uncertain or complex.

Rulings can cover:

• domestic tax issues, such as the interpretation of provisions in the Corporate Tax Law; and
• cross-border tax treatment, including matters related to:
• • transfer pricing;
  • CFCs; and
  • the application of double tax treaties.

Once issued, the tax ruling is binding on the Turkish tax authorities for the specific taxpayer that requested the ruling. However, rulings are not binding on the taxpayer itself, meaning that the taxpayer may choose not to follow the ruling if it disagrees with the decision. The ruling is valid as long as the facts presented in the application remain the same. If the circumstances change, the taxpayer may need to seek a new ruling. If the tax authorities change their ruling and a tax assessment is made for past periods, penalties and interest may not be applied

Yes, Türkiye has a comprehensive transfer pricing regime, which seeks to ensure that transactions between related parties are conducted at arm’s length, preventing the artificial shifting of profits to low-tax jurisdictions. The framework for transfer pricing rules in Türkiye is primarily governed by:

• the Corporate Tax Law; and
• the General Communiqué on Disguised Profit Distribution through Transfer Pricing.

The core principle is the arm’s-length standard, which requires that transactions reflect the terms and conditions that would exist between independent parties in similar circumstances.

Taxpayers must prepare and maintain detailed transfer pricing documentation – including local files, master files and country-by-country reports – depending on their size and activities. Türkiye follows the Organisation for Economic Co-operation and Development’s transfer pricing guidelines, which include methods such as:

• the comparable uncontrolled price method;
• the resale price method;
• the cost-plus method;
• the profit split method; and
• the transactional net margin method.

Taxpayers can enter into advance pricing agreements with the Turkish tax authorities to establish the transfer pricing methodology for specific transactions over a defined period. Türkiye also has thin capitalisation rules that limit the deductibility of interest expenses on excessive debt from related parties.

Non-compliance with the transfer pricing regulations can result in significant penalties and the Turkish tax administration actively audits and enforces these rules. This comprehensive regime underscores Türkiye’s commitment to:

• aligning with international best practices; and
• preventing base erosion and profit shifting.

Provided that the transfer pricing documentation obligations are fully and timely fulfilled, the tax loss penalty for taxes not accrued or insufficiently accrued due to implicitly distributed profits is applied with a 50% reduction (except where tax evasion is caused by acts mentioned in Article 359 of the Tax Procedure Law)

Türkiye has statutory limitation periods for tax assessments and claims, which are crucial for both taxpayers and the tax authorities. The general limitation period for tax assessments is typically five years, starting from the beginning of the calendar year following that in which the tax liability arose. This means that the tax authorities have limited time to assess and notify taxpayers of additional tax liabilities. Exceptions may apply in cases of tax fraud.

Once a tax assessment becomes final, a separate limitation period applies for tax collection. This period is also generally five years from the date on which the tax becomes due. After this period, the tax authorities can no longer enforce tax collection. Taxpayers that have overpaid taxes or are entitled to refunds also have limited time to claim them. The limitation period for tax refunds is generally five years, although this can vary depending on specific circumstances.

These limitation periods provide legal certainty and prevent indefinite tax liabilities. Both taxpayers and tax authorities must adhere to these timeframes. The Tax Procedure Law regulates these limitation periods, ensuring clarity and fairness in tax administration. Adherence to these time limits is essential for maintaining a stable and predictable tax environment in Türkiye.

In Türkiye, the deadlines for filing corporate tax returns and paying corporate tax are as follows:

• The corporate tax return must be filed by the 25th day of the fourth month following the end of the fiscal year. For companies using the calendar year as their fiscal year (ending on 31 December), the deadline for filing the return is 25 April of the following year.
• The tax liability must be paid in full by the same deadline as the filing of the return (ie, 25 April for the previous fiscal year, if using the calendar year). Corporate tax is typically paid in advance through quarterly instalments for the first nine months of the year, with each payment due by the 17th day of the second month following the end of each quarter (eg, for Q1, the instalment is due by 17 May). These advance payments are reconciled with the final tax return filed in April and any additional tax owed must be paid at that time. It is important to adhere to these deadlines to avoid penalties and interest in late filing or payment.

In Türkiye, non-compliance with tax obligations can result in various penalties for both corporations and their executives.

Corporations:

• Administrative fines: Significant fines can be imposed based on the severity and duration of the non-compliance. These fines can vary greatly depending on the type of violation.
• Interest charges: Interest is charged on unpaid taxes, increasing the overall tax burden. This interest accumulates over time, making it crucial to address non-compliance promptly.
• Suspension of tax benefits: Companies may lose access to certain tax incentives or exemptions, which can significantly impact their financial performance.
• Criminal penalties: In cases of serious tax fraud or evasion, criminal penalties – including imprisonment – may be imposed. This is reserved for the most severe cases of intentional wrongdoing.

Executives:

• Administrative fines: Executives may be subject to administrative fines for their role in the non-compliance, particularly if they were directly involved in or responsible for the violations.
• Criminal liability: In cases of wilful tax evasion or fraud, executives may face criminal charges and potential imprisonment. This applies when executives are found to have intentionally participated in illegal tax practices.

The specific penalties can vary depending on the nature and severity of the non-compliance, and the applicable legislation may be subject to change.

Türkiye has established a robust system for international-level information reporting, notably through country-by-country reporting (CbCR). In Türkiye, multinational enterprises (MNEs) exceeding a specific revenue threshold are mandated to file a country-by-country report. This report provides comprehensive details on the MNE’s:

• global allocation of income;
• taxes paid; and
• economic activities across various jurisdictions.

Data collected via CbCR is shared with other tax administrations using automatic exchange of information mechanisms. This aligns with the Organisation for Economic Co-operation and Development’s Base Erosion and Profit Shifting project, which aims to enhance tax transparency and combat tax avoidance.

Türkiye significantly contributes to international tax transparency by requiring large MNEs to report their financial activities on a country-by-country basis. This enables tax authorities to better understand MNEs’ global tax practices and more effectively manage tax avoidance risks. CbCR is a vital component of international tax cooperation and Türkiye’s active participation in this area demonstrates its commitment to global tax fairness. This framework helps to ensure that MNEs pay their fair share of taxes in the jurisdictions where they operate, promoting a more equitable global tax environment.

Additionally, Türkiye is a party to the Convention on Mutual Administrative Assistance in Tax Matters and the Foreign Account Tax Compliance Act Agreement with the United States, fulfilling its international obligations.

For tax purposes, group companies and consolidated balance sheets have no application in Türkiye. All entities are separately taxed and income or losses cannot be aggregated. However, branches, agencies, sales departments, factories and other establishments of a company may not submit separate returns, even if they have independent accounting systems or have allocated capital of their own. Accounts of these units are consolidated and reported together in a single tax return.

A corporate taxpayer in Türkiye may be exposed to several indirect taxes. Value-added tax (VAT) is a broad-based consumption tax applied to most goods and services. Companies are responsible for collecting VAT on their sales and remitting it to the tax authorities, while also being able to deduct VAT paid on their purchases. Special consumption tax (excise tax) also applies to specific goods, such as:

• fuel;
• alcoholic beverages;
• tobacco products;
• vehicles; and
• luxury goods.

Corporate taxpayers involved in the production, import or sale of these goods are liable for excise tax. Stamp duty applies to various legal documents, contracts and agreements. Corporate taxpayers may be liable for stamp duty on contracts, agreements and other documents related to their business activities. The banking and insurance transactions tax applies to banking and insurance transactions. Financial institutions and insurance companies are primarily liable for this tax. Companies involved in importing goods into Türkiye are liable for customs duties, which are applied to the value of the imported goods. The specific indirect taxes applicable to a corporate taxpayer will depend on the nature of its business activities.

In Türkiye, several taxes may apply to the transfer of interests in corporate entities, including the following:

• Capital gains tax: When corporate shares or other interests are transferred, the profit generated is generally subject to corporate income tax at a rate of 25%. However, certain exemptions may apply, such as when:
• • shares are held for a specified period; or
  • the ownership percentage meets certain conditions.
• Capital gains from the sale of shares in Turkish companies may be exempt under these specific conditions.
• VAT: Transfers of corporate assets, such as real estate, may be subject to VAT at the standard rate of 20%, depending on the type of asset. However, the sale of shares is generally exempt from VAT, while real estate or business asset transfers may attract VAT.
• Stamp duty: Share transfer agreements related to the transfer of shares in joint stock and limited companies, which are executed before notaries, are exempt from stamp duty
• Other taxes: In certain transactions, such as the sale of real estate, a real estate transfer tax of 4% of the transfer value may also apply.

The current approach to taxation in Türkiye involves a mix of:

• keeping up with global tax rules; and
• focusing on what is beneficial for the national economy.

Türkiye is working hard to align its tax laws with international standards, especially those of the Organisation for Economic Co-operation and Development project to stop companies from avoiding taxes. This includes:

• making transfer pricing rules stronger;
• implementing country-by-country reporting; and
• dealing with tax issues from mixed financial setups.

Like many countries, Türkiye is also figuring out how to tax digital businesses. There is considerable interest in how to tax online services and deals. Türkiye is still offering incentives to attract both foreign and local investment, particularly in important industries and less developed areas. These often include:

• tax breaks;
• lower taxes; and
• tax credits.

The Turkish tax authorities are also doing more audits and enforcing tax rules more strictly, especially for transfer pricing and international deals. Also, starting from 1 January 2025, a new minimum tax rule will limit how companies can use past losses to lower their taxes.

Looking ahead, Türkiye will likely continue to:

• implement international tax rules;
• introduce changes aimed at the taxation of digital services; and
• digitise its tax system.

It may also tweak the available investment incentives and will definitely focus more on ensuring that everyone pays their taxes.

In short, Türkiye is focusing on:

• being more transparent;
• adapting to the digital economy;
• attracting investment; and
• enforcing the tax rules.

Navigating the Turkish tax regime requires attention to detail and a proactive approach. Key tips to consider include the following:

• Regularly update yourself on changing tax laws by monitoring official sources such as the Revenue Administration’s website and consult with tax professionals to stay informed.
• Maintain thorough documentation, including invoices, contracts and transfer pricing records, which are essential for accurate tax filings.
• Understand transfer pricing rules and ensure that all related-party transactions follow the arm’s-length principle with solid documentation.
• Consider obtaining rulings (advance pricing agreements) for complex or uncertain tax situations to gain clarity.
• Explore and utilise tax incentives, such as R&D or regional incentives, and ensure that you meet the eligibility criteria.
• Comply with reporting requirements, including value-added tax (VAT) filings, corporate tax returns and country-by-country reporting where applicable.
• Seek professional tax advice to navigate complex issues effectively.

Key challenges to be aware of include the following:

• Transfer pricing audits are increasingly common, so ensure that your documentation is comprehensive.
• VAT compliance can be tricky, especially for cross-border transactions, so carefully review VAT rates, exemptions and invoicing.
• Withholding taxes on payments to non-residents also require attention, especially when reviewing double taxation treaties.
• Stay prepared for potential tax audits by keeping well-organised records.

During corporate tax filing periods, it is common practice to file a tax return with a reservation regarding uncertain issues. The Turkish tax courts generally handle cases relatively quickly. Therefore, litigation may be considered a viable option for resolving these uncertainties, and following the reservation, initiating a lawsuit is a potential course of action. A similar situation applies to tax assessments and penalties arising from a tax audit.

Finally:

• stay informed on evolving digital tax developments and new domestic minimum tax regulations effective from 1 January 2025, as they may affect loss carry-forwards; and
• always prioritise substance over form in transactions to avoid scrutiny.