Turkey country profile - 2021
Turkey country profile - 2021
Key tax factors for efficient cross-border business and investment involving Turkey.
- EU Member State
- Double Tax Treaties
- Most important forms of doing business
- Legal entity capital requirements
- Residence and tax system
- Compliance requirements for CIT purposes
- Corporate income tax rate
- Withholding tax rates
- Holding rules
- Tax losses
- Tax consolidation rules/Group relief rules
- Registration duties
- Transfer duties
- Controlled Foreign Company rules
- Transfer pricing rules
- Thin capitalization rules
- General Anti-Avoidance rules (GAAR)
- Specific Anti-Avoidance rules/
Anti Treaty Shopping Provision/Anti-Hybrid rules - Advance Ruling system
- IP / R&D incentives
- Other incentives
- VAT
- Other relevant points of attention
- Contact us
EU Member State
No
Double Tax Treaties
With the following countries, territories and jurisdictions:
Albania | France | Luxemburg | Singapore |
Algeria | Gambia | Macedonia | Slovakia |
Australia | Georgia | Malaysia | Slovenia |
Austria | Germany | Malta | Somalia(a) |
Azerbaijan | Greece | Mexico | South Africa |
Bahrain | Hungary | Moldova | Spain |
Bangladesh | India | Mongolia | Sudan |
Belarus | Indonesia | Montenegro | Sweden |
Belgium | Iran | Morocco | Switzerland |
Bosnia & Herzegovina | Ireland | Netherlands | Syria |
Brazil | Israel | New Zealand | Tajikistan |
Bulgaria | Italy | Norway | Thailand |
Canada | Ivory Coast(a) | Oman | TRN Cyprus |
Chad(a) | Japan | Pakistan | Tunisia |
China | Jordan | Philippines | Turkmenistan |
Croatia | Kazakhstan | Poland | UAE |
Czech Rep. | Rep. of Korea | Portugal | UK |
Denmark | Kosovo | Qatar | Ukraine |
Egypt | Kuwait | Romania | US |
Estonia | Kyrgyzstan | Russia | Uzbekistan |
Ethiopia | Latvia | Saudi Arabia | Vietnam(a) |
Finland | Lebanon | Senegal(a) | Yemen |
Lithuania | Serbia |
(a) Treaties not yet in force.
Most important forms of doing business
Joint-stock corporation (Anonim Sirket - AS)
Limited liability company (Limited Sirket - Ltd)
Legal entity capital requirements
AS: TL 50,000
Ltd: TL 10,000
Residence and tax system
A company is resident if either its legal seat or its effective place of management is located in Turkey or both. Resident companies are taxed on their worldwide income.
Compliance requirements for CIT purposes
Generally, fiscal year is the same as calendar year. Corporate tax declarations are made on an annual basis through a corporate tax return. This return can be filed until April 30 following the close of the fiscal year. Companies must file advance tax returns for their quarterly profits. Total corporate taxes declared through the advance tax returns are offset against the final corporate tax payable. Advance tax returns can be filed until the 17th and paid until the 17th of the second month following the end of each quarter.
Corporate income tax rate
The standard corporate income tax (CIT) rate is 20 percent. Please note that the CIT rate has been increased to 25 percent for the year 2021 and 23 percent for the year 2022. Reduced rates may be available for companies who hold a certificate for incentivized investments.
Withholding tax rates
On dividends paid to non-resident companies
15 percent.
On interest paid to non-resident companies
Rates vary from 0 percent to 15 percent depending on the type of interest and type of the receiving entity.
On patent royalties and certain copyright royalties paid to non-resident companies
20 percent.
On fees for technical services
20 percent.
On other payments
20 percent.
Branch withholding taxes
15 percent.
Holding rules
Dividend received from resident/non-resident subsidiaries
Dividends received from resident subsidiaries are exempt from corporate tax without further conditions. Dividends received from non-resident subsidiaries may be exempt under certain conditions; otherwise credit method is applicable:
- participation requirement: 10 percent of the paid-in capital of the subsidiary;
- minimum holding period: one year as of the date that earnings are generated;
- taxation requirement: 15 percent (including corporate and dividend taxes), or 20 percent (if financing, insurance or capital investments companies);
- dividends should be transferred to Turkey before the corporate tax filing date of the related fiscal year.
Capital gains obtained from resident/non-resident subsidiaries
Subject to tax at 25 percent for 2021 and 23 percent for 2022. Exemption (75 percent) of capital gains derived from disposal of shares and 50 percent exemption for capital gains derived from immovable property held for two full years, subject to certain conditions.
Specific exemption (100 percent) related to sale of shares in foreign subsidiaries (10 percent minimum shareholding) held for two full years subject to certain conditions.
Tax losses
Losses can be carried forward for a five-year period. Loss carry-back is not possible.
Tax consolidation rules/Group relief rules
No
Registration duties
0.04 percent fund payable on capital contribution.
Transfer duties
On the transfer of shares
No
On the transfer of land and buildings
2 percent for seller and buyer separately over the sales amount.
Stamp duties
Agreements are normally subject to stamp tax at 0.948 percent (capped at TRY 3,534,679.90 for 2021) but there are certain exemptions which may apply based on certain conditions.
Real estate taxes
For buildings: 0.1 percent, 0.2 percent and 0.4 percent of the value calculated by using the value per square meters set by the Authorities. For land and plots: 0.1 percent, 0.2 percent, 0.3 percent and 0.6 percent (depending on the location of the property).
Controlled Foreign Company rules
Yes (foreign subsidiaries that are at least 50 percent controlled by Turkish residents may be qualified as a Controlled Foreign Company (CFC) under certain conditions).
Transfer pricing rules
General transfer pricing rules
According to transfer pricing rules, if companies enter into transactions with related individuals/parties by setting prices or amounts that are not in line with the arm’s length principle, related profits will be treated as if they were wholly or partially distributed.
Documentation requirement
Yes, transfer pricing rules set forth detailed documentation requirements to explain and support the determination of the transfer prices used in dealings with related parties. Submission (upon request) of a transfer pricing report is required if:
- the company is a large company (based on annual net sales), registered with the VIP tax office;
- the company is not a large company but has transactions with foreign related parties or related parties that operate in free trade zones.
Transactions between domestic parties do not require a transfer pricing report for small and medium-sized companies.
Also Country-by- Country Report/Masterfile/Country File Requirements are introduced by 2020.
Thin capitalization rules
A 3:1 debt-to-equity ratio applies in the case of borrowings obtained directly or indirectly from related parties. The ratio is 6:1 if the related party providing the loan is a bank or financial institution (excluding those which are solely involved in the financing of group companies).
General Anti-Avoidance rules (GAAR)
Substance over form principle applies.
Specific Anti-Avoidance rules / Anti Treaty Shopping Provisions / Anti-Hybrid rules
CFC, thin capitalization rules, transfer pricing rules, taxation of payments to low tax jurisdictions.
Advance Ruling system
Yes
IP / R&D incentives
R&D Incentives - 100 percent deduction in the CIT calculation; also exemption from income tax and social security contribution of R&D employees.
Other incentives
Incentives under Investment Incentive Regime (reduced rate corporate tax, VAT, customs duty, social security, income tax, stamp tax) available for investments under certain conditions and subject to an Investment Incentive Certificate.
VAT
The standard rate is 18 percent, and the reduced rates are 8 and 1 percent.
Other relevant points of attention
Turkey also has special tax exemptions for holding companies that are established for investment in foreign subsidiaries.
The Turkish Government announced a limitation on the deduction of financial expenses (Presidential Decision no. 3490 published in the Official Gazette dated February 4, 2021), according to which 10 percent of the sum of financing expenses (e.g. interest, commissions, foreign exchange losses, and similar costs and expenses) related to borrowings that exceed the value of shareholders’ equity is not tax-deductible. The limitation applies to earnings in financial years starting on or after January 1, 2021 .
Mandatory Disclosure Rules Updates
For country specific information and updates on the EU Mandatory Disclosure Rules please visit KPMG’s EU Tax Centre’s MDR Updates page.
Contact us
Eray Buyuksekban
KPMG in Turkey
T: +90 21 231 66 000
E: ebuyuksekban@kpmg.com
Cakmak Timur
KPMG in Turkey
T: +90 21 231 66 000
E: tcakmak@kpmg.com
Mehmet Dogan
KPMG in Turkey
T: +90 21 231 66 000
E: mdogan@kpmg.com