The Essentials to Know for Turkish Tax System (2025): A Guide for Foreign Investors and Expats
Turkey’s unique geographical location—straddling both Europe and Asia—makes it an attractive destination for businesses and individuals alike. With its rapidly developing economy and extensive trading links, Turkey offers a dynamic market environment. Whether you plan to relocate to Turkey, invest in its vibrant property sector, or establish a company, understanding the key tax regimes is essential for successful financial planning. Below is a comprehensive guide to the main Turkish taxes in 2025 to help you find the information you need wherever you are searching from.
A. Income Tax (Gelir Vergisi)
Income Tax Rates for 2025
Turkey implements a progressive income tax system. The following rates apply to 2025 for both residents and non-residents on their Turkey-sourced income:
Up to TRY 158,000: 15%
Above TRY 158,000 up to TRY 330,000:– 15% on the first TRY 158,000– 20% on the excess
Above TRY 330,000 up to TRY 800,000:– 20% on the first TRY 330,000 (which totals TRY 58,100)– 27% on the excess(For salary/wage earners, this 27% bracket extends up to TRY 1,200,000.)
Above TRY 800,000 up to TRY 4,300,000:– 27% on the first TRY 800,000 (which totals TRY 185,000)– 35% on the excess(For salary/wage earners, this 35% bracket applies from TRY 1,200,000 up to TRY 4,300,000, amounting to TRY 293,000 on the first portion.)
Above TRY 4,300,000:– 35% on the first TRY 4,300,000 (which totals TRY 1,410,000)– 40% on the excess(For salary/wage earners above TRY 4,300,000, the tax is TRY 1,378,000 on the first segment, then 40% thereafter.)
Who Pays Income Tax? The Essentials to Know for Turkish Tax System (2025): A Guide for Foreign Investors and Expats
Residents are subject to tax on their worldwide income.
Non-residents pay tax solely on income derived in Turkey.
This tiered system ensures that individuals earning more pay higher rates. If you have multiple sources of income—such as dividends or rental income—keep track of your total to ensure correct compliance with the relevant tax brackets.
B. Corporate Tax (Kurumlar Vergisi)
What Is Corporate Tax?
Corporate tax in Turkey is levied on the profits of legal entities. Companies with a legal personality (such as joint-stock and limited liability companies) are subject to corporate tax, whereas sole proprietorships (şahıs şirketleri) are not.
How Is Corporate Tax Calculated?
Corporate tax is calculated on a company’s net profits for the fiscal year. Companies must also pay quarterly advance tax (geçici vergi) four times a year. These quarterly payments are then deducted from the final corporate tax due at the year’s end.
2025 Corporate Tax Rates
General Corporate Tax: 25% for 2025.
Finance and Related Sectors (e.g. Banks, Leasing, Factoring, Insurance): 30% from 2024 onwards, as mandated by Law No. 6361.
Sectors subject to the 30% rate include banks, financial leasing companies, factoring companies, financing companies, savings finance companies, electronic payment and money institutions, authorised/authorized currency exchange offices, asset management companies, capital markets institutions, insurance and reinsurance companies, and pension companies.
C. Value Added Tax (Katma Değer Vergisi, KDV)
KDV Rates for 2025
Turkey applies three main VAT/KDV (Value Added Tax) rates:
General Rate – 20%
Applies to most goods and services, including electronic goods, clothing, furniture, automotive, hospitality, and professional services.
Reduced Rate – 10%
Applies to essential goods and services like staple foods (milk, cheese, bread, etc.), medicines, certain healthcare services, some tourism services (package tours, certain hotel stays), and educational materials.
Lower Rate – 1%
Applies to specific basic commodities and socially beneficial services, often including unprocessed agricultural products (like raw milk, cereals, honey) and certain aids for disabled individuals.
Filing and Payment of KDV
Filing Frequency:
Larger enterprises typically file monthly.
Small and medium-sized enterprises may file quarterly.
Payment Deadline:
Usually by the 24th of the month following the filing period.
KDV Refunds and Exemptions
Exports: Exported goods and services are exempt, and businesses can reclaim the KDV paid.
Healthcare and Education: Certain services remain fully or partially exempt to encourage essential public services.
D. Capital Gains Tax
Capital gains in Turkey can be taxed under two regimes:
Withholding Tax (WHT) Regime under Temporary Article 67
Certain capital gains (e.g. from listed equities purchased after 1 January 2006, or from Turkish government bonds issued after that date) are subject to WHT.
For resident and non-resident individuals, this WHT can be 10%, or sometimes 0% if derived from specific listed shares on the Istanbul Stock Exchange (ISE) or certain equity index futures.
Non-residents do not need to file a return if all gains are taxed via WHT.
Permanent Tax Rules (Self-Assessment)
Gains not covered by the WHT regime (e.g. capital instruments issued before 1 January 2006) are taxed through regular income tax brackets.
Individuals must file an annual tax return if these capital gains exceed the relevant legal threshold.
E. Social Security Contributions (Sosyal Güvenlik Kurumu – SGK)
Effective from 1 September 2024, the SGK contribution rates are as follows:
1) Employees under 4/a (Service Contract)
Insurance Branches | Employee Share (%) | Employer Share (%) |
a) Short-Term (Work Accidents, etc.) | 0 | 2.25 |
b) General Health Insurance | 5 | 7.5 |
c) Invalidity, Old-Age, Survivors’ Insurance | 9 | 11 |
d) Invalidity, Old-Age (Heavy Jobs)* | 9 | 12–14 |
*Additional coverage for sectors with extra service days (Fiili Hizmet Süresi).
Total: 14% (Employee) + 20.75% (Employer) = 34.75%–36.75% combined, depending on heavy-job classification.
2) Self-Employed under 4/b
Insurance Branches | Self-Employed Share (%) |
a) Short-Term (Work Accidents, etc.) | 2 |
b) General Health Insurance | 12.5 |
c) Invalidity, Old-Age, Survivors’ Insurance | 20 |
Total | 34.5% |
3) Voluntary Insurance (İsteğe Bağlı)
Insurance Branches | Voluntary Share (%) |
a) Invalidity, Old-Age, Survivors’ Insurance | 20 |
b) General Health Insurance | 12 |
Total | 32% |
Compliance with SGK contributions is crucial for both employers and employees to ensure health coverage and future pension entitlements.
F. Dividend Income
Resident Dividends
50% Exemption: Generally, half of the gross dividend from a Turkish resident entity is exempt from income tax.
Threshold: If the remaining half plus other declared income (e.g. wages, withholdings) exceeds TRY 330,000 in 2025, you must file a tax return.
Withholding Tax Credit: If a 15% WHT is applied to the total gross dividend, it can be credited against your final income tax due.
Foreign Dividends
If foreign-source dividends exceed TRY 18,000 in 2025, they must be declared via the annual return.
50% Exemption applies if:
You own at least 50% of the foreign company’s share capital.
The dividends are remitted to Turkey by the time your Turkish income tax is due.
Any tax paid abroad can be offset against Turkish income tax if proper documentation is provided. Bilateral tax treaties may offer further relief.
G. Tax Incentives in Turkey (Technoparks, Free Zones, Liaison Offices and Finance Centre)
Turkey provides several tax incentives for foreign investors and businesses. The Istanbul Finance Centre (IFC) offers reduced corporate tax and VAT exemptions for qualifying financial institutions. Free Zones promote export activities with full corporate tax exemptions and VAT/customs relief. Technoparks provide corporate tax exemptions on R&D income, VAT exemptions for software development, and income tax relief for R&D staff. Liaison offices are exempt from corporate tax as long as they don’t engage in commercial activities.
Turkey offers a range of tax incentives for foreign investors and businesses, including corporate tax and VAT relief at the Istanbul Finance Centre (IFC), full corporate tax exemptions in Free Zones for export-based production, significant R&D benefits and VAT exemptions in Technoparks, and corporate tax exemptions for liaison offices that do not engage in commercial transactions. For more information on each of these incentives, please refer to our dedicated articles on the IFC, Free Zones, Technoparks, and Liaison Offices.
Practical Tips for Businesses and Individuals
Stay Updated: Turkish tax legislation can change frequently. Monitor the Resmi Gazete (Official Gazette) and the Turkish Revenue Administration (Gelir İdaresi Başkanlığı, GİB) for official announcements.
Maintain Accurate Records: Keep thorough, well-organised/organized financial statements to ensure correct reporting and timely filing.
Seek Professional Advice: Whether you are an expat, a multinational company, or a small business, consult with tax professionals or legal advisers/advisors to optimise/optimize your tax planning and maintain compliance.
Consider Social Security Implications: International assignees should check whether bilateral social security agreements exist between Turkey and their home country to avoid dual contributions.
Turkey’s tax environment can be both favourable and complex, offering numerous opportunities alongside mandatory obligations. By familiarising yourself with the current (2025) tax rates, corporate obligations, VAT rules, social security contributions, and special regimes for capital gains and dividends, you can better position yourself or your enterprise for compliance and success.
For detailed guidance tailored to your unique situation, feel free to reach out to our team at CCS Law.
Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. For guidance tailored to your specific circumstances, please consult with a qualified legal or tax professional.
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