Types of taxes, incentives, exemptions in Turkey for 2022

The tax system in Turkey is similar to the tax system in the European Union. The Turkish state deducts taxes at different rates to meet public expenditures including but not limited to health, education, transportation, etc. These taxes and their rates are defined and updated each year based on specific statistics.

The basic taxes in Turkey and their rates for 2022:

Types of taxes in the Turkish tax regulation are numerous and grouped in code. And they can be classified into three principal groups:

• Income taxes
• Expenditure taxes
• Wealth taxes

First: Income taxes in Turkey:

Income tax fall into two types:

• Individual income tax
• Corporate income tax

1- Individual income tax:

Income means the net profit that a person has gained throughout a full year. The types of taxable income can be assorted into seven groups:

• Business profits
• Agricultural profits
• Salaries and wages
• Freelance profits
• Real estate capital profits "rent income"
• Capital investment profits
• Gains and other imports

The following table presents the value of income tax as a percentage for 2022:

Tax %	Maximum amount TL	Minimum amount TL
15%	24.000	0
20%	53.000	24.000,01
27%	190.000.01	53.000,01
35%	650.000.01	190.000.01
40%		650.000,01 and above

 

Who is obligated to pay individual income tax in Turkey?

• Unlimitedly taxpayers:

• Turkish citizens working in official offices and institutions or working in institutions and companies headquartered in Turkey but reside in foreign countries because of their businesses or jobs.
• Foreigners permanently residing in Turkey.
• Residents in Turkey for more than 6 months without interruption during the year.

This tax includes all the profits of persons mentioned above being earned in Turkey or abroad.

• Limitedly taxpayers:

All persons residing outside Turkey are included here, and only their returns in Turkey are taxed.

1. Corporate income tax: It is a type of tax imposed on corporate profits. It is calculated on the company's net income earned every 3 months and paid to the government.

The private companies subject to this type of tax are:

• Capital companies
• Associations
• General economic institutions
• Economic institutions affiliated with associations or institutions
• Joint work projects

Corporate tax is paid to the government at a rate of 22% of the income.

Second: Expenditure taxes in Turkey:

This includes four types of taxes:

1- Value-added tax (KDV):

It is an indirect tax that a person pays when purchasing various goods or merchandise. The VAT rates, set by the state, are of three types: 1%, 8%, and 18%, depending on the type of good or service sold.

Who is obligated to pay this tax?

According to Article 8 of the VAT Law, value-added taxes are paid by:

• Buyers of various goods and merchandise
• Importers of various commodities and merchandise
• Persons subject to customs transit
• The General Directorate of Radio and Television and the General Directorate of Government Postal Works (PTT)
• Lessors of goods referred to in Article 70 of the Income Tax Law

What transactions are subject to value-added tax in Turkey:

• Deliveries and services in the field of commercial, industrial, agricultural, and self-employment activities
• Importing all kinds of goods and services

2- pecial consumption tax (ÖTV):

This type of tax is imposed on a fixed or proportional basis on certain goods or products that have negative impacts on welfare, health, or the environment. Thus, it is a type of tax that intends to support social benefits.

What products are subject to special consumption tax in Turkey:

• Luxury products such as furs, luxury cars, or jewelry
• Products that may threaten human health, such as alcohol and tobacco
• Products that harm the environment such as gasoline, coal, or fossil waste

Exceptions of special consumption tax:

Companies that transport commercial goods by minibus, taxi, and van, plus companies and individuals transporting passengers within the city benefit from this exception. Furthermore, there are exceptions to the import and export operations of Turkish airlines, in addition to the military and diplomatic exceptions.

3- Stamp duty tax:

This tax is applied to a wide range of documents, including contracts, payment papers, credentials and guarantees, financial statements, and payroll. Stamp Duty Tax is charged as a percentage of the document value at rates ranging from 0.189% to 0.948% or charged as a flat rate (pre-set rate) for some documents.

4- Banking and insurance transactions tax (BITT):

Banking transactions and insurance companies are exempt from VAT, but they are subject to banking and insurance transaction tax. This tax applies to bank income, such as loan interest. Although the general rate is 5%, some transactions, such as interest on interbank deposit transactions, are taxed at 1%. However, there is no sales tax has been imposed on foreign currency transactions since 2008.

Third: Wealth taxes in Turkey:

There are three types of wealth taxes:

• Property taxes “Real Estate Taxes”
• Taxes on means of transportation
• Taxes on inheritance, donations, or gifts

 

1- Property taxes "Real estate taxes in Turkey":

The real estate tax system for investors in Turkey is one of the most important points that must be taken into account when considering investing in Turkey. Turkey's investment and tax laws are in line with international standards, and aims to achieve equal treatment for all investors, whether Turkish citizens or foreigners. Property taxes include:

 

• Municipal annual property tax:
  

  The first reference in real estate taxes is the current value of the property. This value is calculated for each year according to today's markets. Thus, there is a change in the tax values ​​according to the current value of the property. Ranging between 0.1% and 0.6%, property taxes are paid annually and this tax can be paid in one or two installments directly to the municipalities or through the municipalities’ websites. The first installment is paid in March, April, and May, while the second installment is paid in November. Property tax has increased by 4.55% compared to 2020 values.

• Real estate title deed tax:
  This tax is paid only once when buying or selling a property in Turkey. The value payable is about 4% of the total property value, and according to the law, it is paid jointly between the buyer and the seller, but in most cases, the buyer is the one who pays all the due amount.

• Real estate profit tax:
  This tax is paid when the property is sold within five years of the date of purchase. In this case, a 20% tax must be paid on the net profit made by the property during this period, starting from the date of purchase. However, if the property has been possessed for more than five years, there is no tax on it at all. And this will be a profit for the investor because he will be exempted from paying taxes and the profit in the property will increase.

2- Taxes on means of transportation:

Vehicle taxes are collected on the basis of fixed amounts that vary according to the age of the vehicle and its engine capacity each year.

3- Inheritance tax in Turkey:

Inheritance and gift taxes are levied at a rate of 1% to 30%. For more details about this tax visit “Inheritance tax in Turkey”.

Fourth: Tax incentives in Turkey:

They are exceptions within the general tax system that reduce the tax burden on specific entrepreneurs in order to encourage investors to invest in certain projects or sectors. Tax incentives can be applied in the form of lower taxes on profits, tax exemptions, or reduced tariffs for imported machinery, equipment, and raw materials. In 2016, tax incentives for project-based investments were introduced. Accordingly, many advantages are provided within the scope of supporting investment projects such as tax reduction, VAT exemption, and health insurance premium support. Accordingly, investment is supported by reducing the capital cost of the project; by deducting a certain percentage of the expenses allocated to investments made within the limits determined by the tax laws from the taxable income.

In conclusion, it can be said that taxes in Turkey on its diversity are in line with international standards. taxes in Turkey also achieve equality between the Turkish citizen and the foreigner, in addition to tax incentives that encourage and attract investment in Turkey.