Every entrepreneur who is interested in opening a company in Turkey should know the basics about the direct and indirect taxation. The Turkish authorities announced that they intend to change the old taxation system, so when you want to start the investments you should update the information.
The direct taxation system includes two major taxes: income tax, that must be paid by individuals and it is calculated on their income and earnings, and corporate tax for companies, which is calculated the same way. There are two main laws related to these taxes: Income Tax Law that came into force in 1960 and the Corporation Tax Law since 1949. The Turkish tax system is basically similar to systems in the EU countries and Turkey is expected to become a member of EU in the next years. The corporate tax and income tax for individuals were inspired by the German system.
The entrepreneurs who come to set up a company in Turkey have to pay the income tax for certain types of incomes:
- profits from their businesses,
- profits from agricultural activities,
- rentals and other incomes from immovable and movable properties,
- earnings from other sources.
The income tax is to be paid also by members of a partnership, each of them for their share of profit. The foreign citizens who have their residence in Turkey have to pay the income tax calculated on their income obtained all over the world. A resident in Turkey can be considered any person who stays in this country for more than six months per year.
The foreigners who work in Turkey for more than six months or stay in this country on other purposes are not considered residents and for them it is not mandatory to pay the income tax calculated on their total income.
The citizens who are not residents in Turkey must pay the income tax calculated on their income obtained in this country.
The companies opened in Turkey are obliged to pay a corporate tax on the income obtained during their economic activity, according to the Corporate Tax Law.
The entities that are subject to corporate income tax are the following:
- public enterprises,
- enterprises owned by foundations and associations,
- joint ventures.
All types of entities that are subject to corporate tax are mentioned in the Corporate Tax Law which contains the specific regulations related to paying taxes.
If you need more details about the direct taxes you have to pay or you want to set up a company in Turkey, you may contact our agents in company formation.