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The Basics of Turkey's Tax System

April 15, 2021
When you move to a different country, you're literally starting from scratch. Even if, let's say, you transferred there for work, though you don't need to find a job, you will have to get used to the way things are done in that place. Take Turkey, for instance. The way they do their taxes is far from what other countries do, even though there may be some similarities. When it comes to the finer details of its tax system, you'll find that there some things only Turkey has or does. To better understand it all, here are the basics of Turkey's tax system.
The Basics of Turkey's Tax System

The People Paying Taxes in Turkey

Firstly, there's the question as to who pays the taxes in Turkey. Are you automatically required to pay taxes the moment you move here? More or less, yes! Legal residents and citizens of Turkey are obliged to contribute their fair share of taxes. Also, even if you're not a legal resident here, as long as you earn income from a Turkey-based company, you'll also be required to pay taxes to the Turkish government. Moreover, companies here are also required to do the same. They have their own type of tax that's specific to them.

Income Tax in Turkey

Just like in a lot of other countries like France and the UK, Turkey's income tax rate depends on how much one earns per year. It starts with 15% for those who earn up to ₺18,000.00 annually. For those whose annual salaries range from ₺18,001.00 to ₺40,000.00, your income tax rate is 20%. Employees who earn ₺40,001.00 to ₺148,000.00 per year has to contribute an income tax rate of 27%. And finally, those who earn ₺148,001.00 and above have a tax rate of 35%. All sorts of income apply to these rates, including business profit, salaries, income from rental contracts, and capital investments.

The Basics of Turkey's Tax System

Turkey's Corporate Income Tax

The second form of income tax, the corporate income tax, is also an important part of Turkey's tax system. According to Turkey's tax law, corporate taxpayers include companies, cooperatives, public enterprises, joint ventures, and association & foundation-owned economic enterprises. Unlike the personal income tax, however, the corporate income tax only has a flat rate of 20%. From 2018 to 2020, this rate rose to 22% for a time. but in 2021, it has since reverted back to its original rate. No company that is based in Turkey is allowed not to contribute to this specific income tax.

Turkey Banking and Insurance Transaction Tax

Ordinarily, when you have to pay your insurance or specific banking fees in Turkey, such transactions include the Value-Add Tax. After all, getting coverage and setting up a local bank account are, technically, considered services. However, here in Turkey, such transactions are not covered by the VAT. Instead, the country has its own Banking and Insurance Transaction Tax. Turkish banks who earn income from setting up accounts with millions of clients are also subject to contribute to this specific tax. The general rate is 5% but certain transactions have it at 1%. In any case, it's one of Turkey's more unique types of tax!

The Basics of Turkey's Tax System
Source:Flickr.com/ Todd Mecklem

Taxes on Wealth in Turkey

Here in Turkey, there are three types of taxes on wealth. they include property taxes, motor vehicle taxes, and inheritance taxes. The first one relies heavily on the real estate tax. Any building, home, or land owned anywhere in the country, from Istanbul to Busa, is subjected to real estate tax. The rates for this range from 0.1% to 0.6%. Meanwhile, Contribution to the Conservation of Immovable Cultural Property has a flat tax rate of 10%. If you inherited anything in Turkey, on the other hand, you're required to pay the inheritance & gift tax levied at rates ranging from 1% to 30%.

Turkey's VAT

Now, let's talk about the Value-Added Tax (VAT) in Turkey. There are only around three rates that this specific tax imposes: 1%, 8%, and 18%. The standard is 18% for most good and services, applying to both locals and tourists who purchase anything within the country. 8%, on the other hand, applies to certain necessities such as medical products, food, books, and the like. While the last one, 1%, applies to agricultural products, residential properties, newspapers, and more. More often than not, the VAT is already added to the retail price of any goods and services you pay for in Turkey.

What is SCT in Turkey?

A different form of VAT in Turkey is the Special Consumption Tax. This tax applies to specific purchases many make in the country. They include automobiles, vehicles, tobacco products, alcohol, and luxury items. They're mostly some of the most expensive purchases one can make here in Turkey. Just like the income tax rates, the SCT rates depend on how much you paid for said purchases. From 45% to 220%, this specific type of tax has the biggest rates in Turkey's tax system. So it makes sense that it only applies to expensive goods and services.

The Basics of Turkey's Tax System

Don't think that just because Turkey's tax system has some similarities with those of other countries that you can easily get into it without understanding it first. At the very least, know the basics of it all before settling down in your new life here!

Knowing how to do your taxes in Turkey will make it easier for you to stay living in your luxury home here!