INTRODUCTION
Turkey remains an appealing destination for digital nomads from around the globe. Taxation is the genuine advantage, despite the fact that advertisements highlight the country's climate, history, culture, cuisine, vocational areas, and more. Beginning with the reminder that the Turkish government has the authority to regulate the tax issues of digital nomads, we can easily say that the Turkish tax system currently provides digital nomads with tempting opportunities. In this blog, we intend to investigate the advantages and delineate the conditions that a digital nomad who is contemplating heading to Turkey should be cautious of.
As it is declared, to be a digital nomad in Turkey, the applicant;
- must be between 21-55,
- must have at least 6 months valid passport,
- must submit a university diploma, or an equivalent document proving graduation,
- must show a minimum of 3000 USD monthly income or a minimum of 36000 USD annual income,
- must submit an employment contract or an independent contract with a company outside of Turkey, which is the distinguishing factor in taxation.
- DIGITAL NOMAD WITH AN EMPLOYMENT CONTRACT
An applicant may demonstrate their minimum income by providing an employment contract and supplementary documentation as required. Employer: A foreign company that is a business entity with a legal center outside of Turkish borders and does not engage in commercial activities in Turkey. The applicant's employer company must not operate in Turkey and must not earn income in Turkey.
If a digital nomad residing in Turkey as an employee of a foreign company deposits their salary in a bank other than a Turkish bank, it is evident that there will be no taxation on the salary. Similarly, a digital nomad will be exempt from any tax on their salary if it is received in USD currency from a Turkish bank. Nevertheless, the taxation may be questioned if the salary is paid in TRY (Turkish Lira) currency; however, Turkish regulations are unclear regarding the calculation of the accrued tax in this scenario.
- DIGITAL NOMAD WITH AN INDEPENDENT CONTRACT
In subparagraph 23/14-a of the Income Tax Law No. 193, it is stipulated that wages paid in foreign currency to employees working under employers subject to limited liability whose legal and business centers are not in Turkey will be exempt from income tax on their earnings earned outside Turkey. Nevertheless, this clause should not be misunderstood in the context of an independent contract, as the digital nomad who is engaging in an independent contract with a foreign company, rather than an employee-employer relationship, is subject to taxation in accordance with the regulations governing income from self-employment. However, there are still numerous tax benefits.
The digital nomad is not eligible for tax benefits if the contract pertains to the operations of a foreign company in Turkey or if the foreign company intends to utilize the digital nomad's service in its operations toward Turkey under the independent contract. For example, the digital nomad residing in Turkey enters into an independent contract with a British company to create design for brochures that introduce aesthetic clinics in Istanbul. This service is undoubtedly regarded as being related to the British company's operations in Turkey. Additionally, the independent contract must not contain any references to Turkey's geographical features, such as the Middle East, or Anatolia. If the digital nomad residing in Turkey signs an independent contract with an Italian tourism agency that is intended to promote travels to Cappadocia and specifies that the digital nomad's service is expected to be focused on analyzing data on Italian tourists spending their vacation in Cappadocia, the independent contract cannot be estimated in a manner that would give the digital nomad tax benefits. Additionally, the independent contract should not be confounded with a consultancy contract, as the latter are subject to taxation. Consequently, it would be more prudent to refrain from including the term "consulting" in the independent contract's content.
Turkey endorses the provision of specific services to foreign corporations that operate beyond the country's borders: Tax advantages of 50 to 80 percent are applicable to nearly all information technology (IT) services, including software development, data storage, data processing, data analysis, and cyber security. Among the supported areas, architecture, engineering, design, accountancy, call center services, and so forth may also be shown. If the digital nomad provides services in the aforementioned sectors, they may qualify for tax benefits ranging from 50 to 80 percent. Additionally, the digital nomad's significant advantages, which are recognized for young entrepreneurs, are also implemented in conjunction with the aforementioned advantages if the digital nomad is under 29.
In any event, the money must be transmitted to a Turkish bank account in foreign currency. Every invoice must be transmitted to the account in foreign currency, even when the invoice is prepared in Turkish Lira. Tax advantages are not lost when transfers are executed through intermediary companies.
This means, in order to be subject to taxation, the digital nomads with an independent contract who plan on using a Turkish bank for their income must establish a Turkish company. In terms of taxation and management simplification, the use of a sole proprietorship or limited liability company is recommended, despite the fact that the legal form of the company is not a determining factor.
CONCLUSION
Digital nomads are granted numerous tax advantages by Turkey. There are tax benefits of 50 to 80 percent and opportunities for young entrepreneurs under 29. Also, the digital nomads are permitted to reside in Turkey without paying any tax on their salary in the aforementioned circumstances. Turkey's taxation policies on digital nomads can also be a deciding factor, in addition to the country's cultural and touristic attractions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.