TurkeyTax Obligations Detailed

Employers in Turkey have various tax obligations, including social security contributions, income tax withholding, and unemployment insurance. These obligations are based on employee earnings and are subject to specific rates and thresholds.

Social Security Contributions

• Employer Contribution: 20.75% (can be reduced to 16.75% under certain conditions, or 15.75% for the manufacturing sector) of the employee's gross salary.
• Employee Contribution: 14% of the employee's gross salary.
• Contribution Base: Minimum TRY 26,005.50 and maximum TRY 195,041.40 per month (as of January 1, 2025).

Unemployment Insurance

• Employer Contribution: 2% of the employee's gross salary, up to TRY 195,041.40 per month (as of January 1, 2025).
• Employee Contribution: 1% of the employee's gross salary, up to the same monthly ceiling.
• State Contribution: 1% of the employee's gross salary, up to the same monthly ceiling.

Income Tax Withholding

• Progressive Rates: Income tax is withheld at progressive rates ranging from 15% to 40%, based on the employee's cumulative annual income.

• 2025 Tax Brackets (Salary Income):

  • 0 - 158,000.00 TRY: 15%
  • 158,000.01 - 330,000.00 TRY: 20%
  • 330,000.01 - 1,200,000.00 TRY: 27%
  • 1,200,000.01 - 4,300,000.00 TRY: 35%
  • 4,300,000.01 TRY and above: 40%

• Minimum Wage Exemption: An income tax exemption equivalent to the tax calculated on the minimum wage applies.

Withholding Tax Returns and Payments

• Monthly Filing and Payment: Due by the 26th of the following month.
• Quarterly Filing (for employers with 10 or fewer employees): Allowed with payment due by the 26th of the second month following the quarter.

Stamp Tax

• Applies to various documents: Including payroll documents.
• Rate: Generally a small percentage of the document value.
• Due Date: Generally by the 26th of the following month.

Additional Considerations for Foreign Employees

• Social Security Exemption: Foreign nationals covered by their home country's social security system may be exempt from Turkish social security contributions for up to three months (potentially longer with a social security treaty).
• Income Tax: Foreign employees are subject to Turkish income tax withholding regardless of residency status if their economic employer is in Turkey.

It's important to note that this information is current as of February 5, 2025, and may be subject to change. Always consult with a tax professional or legal advisor for the most accurate and up-to-date information.

In Turkey, employee tax deductions encompass several areas, including income tax, social security contributions, unemployment insurance, and stamp tax. These deductions are mandatory and calculated based on the employee's gross salary.

Income Tax

• Progressive Rates: Income tax in Turkey operates on a progressive scale, meaning higher earners pay a larger percentage of their income as tax. The rates for 2025 are:
  • 15% for income up to 158,000 TRY
  • 20% for income between 158,000.01 and 330,000 TRY
  • 27% for income between 330,000.01 and 1,200,000 TRY
  • 35% for income between 1,200,000.01 and 4,300,000 TRY
  • 40% for income above 4,300,000.01 TRY
• Cumulative System: The tax system is cumulative, meaning the applicable rate is based on year-to-date earnings. As earnings accumulate throughout the year, the tax rate may increase to the next bracket.
• Exemptions: An income tax exemption equivalent to the tax calculated on the minimum wage applies. Additional deductions are available for dependents: 9,900 TRY for the first degree, 5,700 TRY for the second degree, and 2,400 TRY for the third degree. Disablement deductions also apply based on the degree of disability.
• Tax Base Calculation: The income tax base is the gross salary minus social security and unemployment insurance contributions.

Social Security Contributions

• Employee and Employer Contributions: Both employees and employers contribute to social security. As of 2025, the employee contributes 14% of their gross salary, while the standard employer contribution is 20.75%. A 5% discount on the employer's contribution may apply under certain conditions, reducing it to 17.75%. However, without meeting those specific requirements, the employer pays the full 20.75%
• Unemployment Insurance: A separate unemployment insurance contribution of 1% is deducted from the employee's salary, with the employer contributing 2%. The state adds another 1%.
• Base and Ceiling: Contributions are calculated on earnings between the minimum social security base (26,005.50 TRY as of 2025) and the ceiling (195,041.40 TRY as of 2025).
• Example: Consider a monthly gross salary of 100,000 TRY. The employee’s Social Security contribution would be 14,000 TRY (100,000 x 0.14), the employer’s standard contribution would be 20,750 TRY (100,000 x 0.2075) or 17,750 TRY (100,000 x 0.1775) if they qualify for the discount, and the unemployment insurance contribution would be 1,000 TRY (100,000 x 0.01) for the employee and 2,000 TRY (100,000 x 0.02) for the employer.

Stamp Tax

• Rate: Stamp tax is levied at a rate of 0.759% of the gross salary.
• Example: On a 100,000 TRY gross salary, the stamp tax would be 759 TRY (100,000 x 0.00759).

Additional Considerations

• Employee Benefits: Certain employee benefits, such as daily food allowances (205.01 TRY per actual workday or a maximum of 240 TRY excluding VAT), may be exempt from social security premiums and income tax.
• Liaison Offices: Salaries from liaison offices in Turkey are exempt from income tax but are still subject to social security contributions.
• Payslips: Employers are required to provide payslips detailing all deductions.
• Tax Year: The tax year in Turkey follows the calendar year.

In Turkey, Value Added Tax (VAT), known as Katma Değer Vergisi (KDV), is levied on most goods and services.

VAT Rates

• Standard Rate: 20% (effective from July 10, 2023)
• Reduced Rates: 1% and 10%

The 1% rate applies to basic foodstuffs, newspapers, periodicals, and certain agricultural products. The 10% rate applies to a range of goods and services including food, medical supplies, pharmaceuticals, cinema and theatre admissions, and certain construction supplies. A zero rate (0%) applies to certain exports, international transport, and supplies for petroleum exploration and the defense industry. Some specific financial transactions, such as leasing immovable property and water for agriculture are also exempt, while various other financial services are subject to Banking and Insurance Transaction Tax (BITT).

Registration

There is no registration threshold for VAT in Turkey. All businesses making taxable supplies, regardless of turnover, must register for VAT. This includes foreign companies. Non-resident businesses providing electronic services to Turkish residents also must register, regardless of the transaction volume.

Filing and Payment

VAT returns are typically filed monthly. The deadline for filing is the 24th of the month following the reporting period, and payment is due by the 26th of the same month. Returns must be filed even if there are no taxable transactions during the period. Online filing is available.

Refunds

Turkey operates a VAT refund system. The refund limit for transactions subject to reduced VAT rates is TRY 130,700 for 2025. Refund requests under TRY 50,000 do not necessitate a tax audit report, CPA report, or guarantee. For foreign companies, reclaiming VAT is generally restricted unless a reciprocal agreement exists between Turkey and the company's country of residence.

Specific Provisions

• A reverse-charge mechanism applies where resident entities calculate and pay VAT on payments to foreign entities. This VAT can be offset as input VAT.
• For imports, the VAT base includes the customs value, import taxes, and related expenses up to document registration. VAT rates on imports align with domestic rates (1%, 10%, and 20%) and are determined by the type of goods. A Resource Utilisation Support Fund (RUSF) applies to non-cash imports.
• A temporary VAT exemption exists until December 31, 2025, for specific construction goods and services provided to non-resident state institutions or organizations in designated disaster areas.
• Certain services provided at airports and ports for air and sea transport vehicles, excluding those for travel or entertainment, are VAT exempt.

This information is current as of February 5, 2025, and may be subject to change due to updates in Turkish tax regulations. It's recommended to consult with a tax advisor for specific situations and up-to-date guidance.

Turkey offers a range of tax incentives to attract investment and stimulate economic growth. These incentives vary based on region, industry, and investment type.

Regional Investment Incentives

• Regional Incentives: These incentives are categorized by region, with Regions 1-2 (less developed) receiving more benefits than Regions 3-6.
• VAT Exemption: Exemption from Value Added Tax (VAT) on purchased machinery and equipment, and on construction expenditures.
• Customs Duty Exemption: Exemption from customs duties on imported machinery and equipment.
• Corporate Tax Reduction: A reduced rate of corporate tax, with the specific reduction varying based on the region and project.
• Social Security Premium Support: Government coverage of a portion or all of the employer's and sometimes the employee's share of social security premiums.
• Income Tax Withholding Support: Exemption or reduction in income tax withholding for employees.
• Interest Rate Support: Government subsidies for a portion of interest payments on loans, typically a higher percentage for loans in Turkish Lira.
• Land Allocation: Provision of land for investment projects, often at reduced rates or free of charge.
• Other Incentives: Depending on the project and region, further incentives such as energy support, infrastructure support, and facilitated authorization procedures may be available.

Strategic Investment Incentives

• Focus on Strategic Sectors: These incentives target investments deemed strategically important for Turkey's economic development.
• Incentive Similarities: Incentives often mirror those under the Regional Investment scheme, including VAT and customs duty exemptions, corporate tax reductions, social security premium support, and interest rate support.
• Tailored Benefits: Specific benefits may be adjusted based on the strategic value of the investment project.

Technopark and Technology Development Zone Incentives

• Focus on Innovation: Targeted at companies operating within designated Technoparks and Technology Development Zones.
• Enhanced Benefits: Often offer more extensive tax benefits compared to other schemes.
• Key Incentives: VAT and customs duty exemptions, full corporate tax exemption, exemption from income tax withholding, and government coverage of the employer's share of social security premiums.

Free Zone Incentives

• Focus on Export-Oriented Businesses: Designed for companies operating within designated Free Zones.
• Broad Exemptions: Extensive tax benefits including exemption from VAT, customs duties, corporate tax, special consumption tax, property tax, and stamp duty.
• Income Tax Withholding Exemption: Income tax withholding for employees is also exempt.

Other Incentives

• R&D and Design Incentives: Incentives for research and development activities, including tax deductions, exemptions, and grants.
• Training Support: Potential support for training costs and expenses, managed by the Turkish Employment Agency.
• Capital Contribution Incentive: A notional interest deduction for capital contributions in cash (excluding banking, finance, and insurance sectors), currently equal to 50% of the calculated notional interest.
• Renewable Energy Incentives: Specific programs exist to encourage investments in renewable energy, such as corporate tax discounts, social security premium support, and interest payment support.

Note: Specific eligibility criteria, incentive amounts, and application procedures vary based on the respective incentive program. For up-to-date and detailed information, consult the official resources provided by the Turkish government. This information is current as of February 5, 2025, and may be subject to change.