Profit Deduction on Services Provided to Non-Residents (Exported Services)

In today’s economy—where activity is increasingly digital and service-centric—the profit deduction for services provided to non-residents is strategically important for businesses serving overseas clients. By allowing a portion of profits earned from high value-added services delivered in Türkiye (such as architecture, engineering, software development, and data analytics) and exclusively utilized abroad to be tax-deductible, the regime aims to (i) strengthen the competitiveness of domestic firms and boost their capacity for employment and innovation, and (ii) support foreign-exchange inflows, thereby contributing to the national economy.

Pursuant to subparagraph (ğ) added to Article 10(1) of the Corporate Tax Law (Kurumlar Vergisi Kanunu) by Law No. 6322 (effective 15 June 2012), service companies operating in fields including architecture, engineering, design, software, medical reporting, bookkeeping, call centers, product testing, certification, data storage, data processing, data analytics, and vocational training services determined by the Ministry of Treasury and Finance (upon the opinion of the relevant ministries), as well as entities operating in education and health under the authorization and supervision of the relevant ministry and serving persons not resident in Türkiye, may deduct 50% of the profits derived exclusively from such activities from the declared corporate income.

In 2016, Law No. 6728 expanded the scope of covered services to include product testing, certification, data processing, and data analytics. Subsequently, Article 59 of Law No. 7491 amended the subparagraph to apply from 1 January 2023: provided that all profits from the said activities are transferred to Türkiye by the deadline for filing the corporate tax return for the relevant fiscal period, the deduction rate is 80%.

What Services Fall Within the Deduction?

To deduct 80% of profits from declared corporate income, the profit must arise from the following activities:

• Architecture, engineering, design, software, medical reporting, bookkeeping, call center, product testing, certification, data storage, data processing, and data analytics services.

• Vocational training services determined by the Ministry of Treasury and Finance upon the opinion of relevant ministries.

• Education and health services rendered under the authorization and supervision of the relevant ministry.

For vocational training services provided in Türkiye to persons not resident in Türkiye and exclusively utilized abroad, the Ministry of Treasury and Finance has the authority to determine scope—upon consultation with relevant ministries. Services identified as falling within vocational training for purposes of this deduction include:

• Planning, promotion, sales, after-sales services, brand management, financial management, technical support, R&D, design, external procurement, testing of newly developed products, laboratory services, research and analysis, and

• Sectors such as industry, tourism, construction, agriculture, defense, advertising, internet & e-commerce, environment, health, press, culture & arts, insurance, energy, sports & maritime, domestic and foreign trade, logistics & transportation.

Accordingly, vocational training services rendered in the areas listed above are within scope of the deduction.

Conditions for Benefiting from the Deduction

To benefit from the deduction:

1. The company’s articles of association must list the qualifying services among its principal business activities.

2. The service must be rendered from Türkiye exclusively to a non-resident individual and/or entity.

3. The invoice must be issued to the non-resident individual and/or entity.

4. For services such as architecture, engineering, design, software, medical reporting, bookkeeping, call centers, product testing, certification, data storage, data processing, and data analytics provided from Türkiye, the service must be exclusively utilized abroad.

5. All of the profits must be transferred to Türkiye by the corporate tax return filing deadline for the fiscal period in which the profit is earned.

Non-Resident Customer and Overseas Utilization Requirement

To claim the deduction, the service must be provided to persons not resident in Türkiye or to entities whose permanent establishment, legal, and business headquarters are abroad.

“Considering that the architectural drawing services for the Chancery building of the Turkish Embassy in Madrid, Spain and the Embassy building in Muscat, Sultanate of Oman are essentially provided to the Republic of Türkiye, it is not possible to deduct the profit obtained from this activity from corporate income under Article 10/1-ğ of the Corporate Tax Law.” (Private Ruling No. 39044742-KDV 12-53061, dated 09/05/2016)

The invoice for the service must be issued to the non-resident person and/or entity. In health services, if the service is provided to individuals resident in countries with which Türkiye has a bilateral social security agreement and the consideration is collected by Türkiye’s Social Security Institution (SGK) from the foreign institution, the invoice may be issued to SGK and the deduction may still be claimed.

To qualify, the service rendered from Türkiye for the non-resident person and/or entity must not relate to that person’s or entity’s activities in Türkiye, and the service must be utilized abroad.

In one private ruling, a company providing textile quality control services to foreign customers inspected products in Türkiye before export, reported to customers, and the customers made purchasing decisions based on those reports. The opinion:

“...Since the quality control service you provide cannot be considered a service exclusively utilized abroad within the meaning of Article 10(1)(ğ) of the Corporate Tax Law, it is not possible to deduct the profit obtained from this activity from corporate income.” (Private Ruling No. 62030549-125[10-2016/458]-101659, dated 12/04/2017)

Transfer of Profits to Türkiye by the Return Deadline

By the amendment introduced with Law No. 7491 in 2023, benefiting from the deduction requires that all profits derived from covered activities be transferred to Türkiye by the deadline for filing the tax return for the fiscal period in which the profits were earned. This change applies to profits earned on or after 1 January 2023.

The Corporate Tax General Communiqué (Serial No. 1) clarifies that if only part of the profit is transferred to Türkiye, the deduction cannot be applied at all (including to the transferred portion). Likewise, if profits are transferred after the deadline, the deduction cannot be applied in later periods.

Determining the Profits from Covered Services

For covered activities, 80% of the profit—computed by deducting expenses and costs incurred due to these activities from the gross revenue—may be deducted in the “Exemptions and Deductions to Be Claimed if There Is Profit” section of the corporate tax return. Amounts that cannot be deducted due to other exemptions/deductions or prior-year losses cannot be carried forward. If the activity results in a loss, no deduction is available.

Book and Record Requirements

For purposes of determining the corporate tax base, revenue, costs, and expenses relating to the profits from covered activities must be tracked separately, must not be associated with other activities, and records must be kept to ensure this separation.

If covered and non-covered activities are conducted together, revenue, expenses, and costs related to the profits subject to the deduction must be separately determined.

If separate tracking of expenses and cost elements is not feasible, common general expenses must be allocated based on the ratio of revenue from the covered activities to total revenue for the current year. Depreciation of shared facilities, machinery, and transportation vehicles used jointly in covered and non-covered activities must be allocated based on the number of days used in each activity. If the usage duration cannot be determined, the depreciation must be allocated together with common general expenses.

Notifications and Documentation for Education and Health Services to Non-Residents Under Ministerial Supervision

Businesses operating in education or health under the authorization and supervision of the Ministry of National Education or the Ministry of Health, respectively, and deducting 80% of profits from services provided to non-resident individuals must submit, as an attachment to each provisional tax return, a form containing information about the non-resident recipients (name/surname or title, nationality, passport number, invoice date and number, nature of the service, and consideration). Information not included with a given provisional return may be submitted with the subsequent provisional return.

Additionally, a copy of the license issued by the Ministry of Health for health-sector entities or the permit/license issued by the Ministry of National Education for education-sector entities must be submitted to the relevant tax office in the first year in which the exemption is claimed, within the annual corporate tax return filing period.

Income Outside the Main Business Scope

Income from transactions outside the main business scope and extraordinary income cannot be considered within the deduction. Therefore, interest income from cash management, FX gains from valuation of cash foreign currency, and gains from disposal of assets are out of scope.

Selected Private Rulings (Özelgeler)

FX Differences on Receivables Arising from Covered Services—Must They Be Considered?

“...Since, for purposes of the deduction, only FX differences arising from the valuation of cash foreign currency are excluded, FX gains or losses arising from period-end valuation of receivables related to services rendered in consideration for foreign currency must be taken into account in applying the deduction.” (Private Ruling No. E-49327596-125[KVK.ÖZ.2021.24]-6172, dated 09/01/2023)

Can One Benefit Simultaneously from R&D/Tasarım Incentives (Law No. 5746) and the Article 10(1)(ğ) Deduction at the Same Address?

Article 4(5) of Law No. 5746 (R&D and Design Activities Support Law) provides:

“Beneficiaries of incentives under this Law may not additionally benefit from Article 89(13) of the Income Tax Law, Article 10(1)(ğ) of the Corporate Tax Law, or Provisional Article 2 of Law No. 4691.”

A private ruling states:

“...Benefiting from the R&D deduction under Law No. 5746 does not prevent you from benefiting from Article 10(1)(ğ) for overseas software activities carried out at the same branch address but with different functions and personnel, provided that revenue, expenses, and costs of overseas software activities are tracked separately, common costs are properly allocated, activities are conducted independently of R&D, and expenditures for these activities are not included in the R&D deduction.” (Private Ruling No. 62030549-125[10-2020/223]-, dated 02/04/2024)

Given that the limitations in Article 4 of Law No. 5746 concern profit-based incentives/deductions, while the R&D deduction is expenditure-based, it is considered possible to benefit from Article 10(1)(ğ) if overseas services are performed with different functions and personnel, revenue/expenses/costs are tracked separately, common costs are appropriately allocated, and expenditures for the qualifying services are not included in the R&D or design deduction. However, if the services are conducted with the same functions and personnel as those covered by the R&D deduction, simultaneous use of both Law No. 5746 incentives and the profit deduction for exported services is not possible.

Is a Foreign Exchange Purchase Certificate Required for Deducting Profits from Design Services Provided Abroad?

“...Provided that the conditions above are satisfied, and all profits are transferred to Türkiye by the deadline for filing the annual income tax return for the calendar year in which the income is earned, 80% of the profits from software services provided in Türkiye to non-residents and utilized exclusively abroad may be deducted under Article 89(13) of the Income Tax Law.

The absence of a mandatory foreign-exchange repatriation requirement under the Export Communiqué for service exports does not remove the requirement under Article 89(13) to transfer the profits to Türkiye to benefit from the deduction; documentary proof of transfer is required.” (Private Ruling No. E-18008620-120[2023-720-39]-119534, dated 11/06/2025)

Are Education Services to Children of Foreign Embassy Staff and Temporarily Assigned Officials in Türkiye Covered?

“...Since the education services (pre-school, primary, secondary, and high school) provided in Türkiye to the children of foreign embassy staff and children of officials temporarily assigned to Türkiye by international organizations are related to these persons’ or institutions’ activities in Türkiye, the profits cannot be considered within Article 10(1)(ğ).” (Private Ruling No. E-38418978-125[10-2022/9]-, dated 14/11/2023)

Are Advertising Design and Consultancy Services for Use Abroad Within Scope?

“...As the services of showing foreign customers how to advertise on, or buy/sell via, foreign websites to accelerate product sales, or designing such websites, are not among the services listed in Article 10(1)(ğ), it is not possible to deduct 50% (80% as of 1.1.2023) of the profits from such activities.” (Private Ruling No. 62030549-125-644684, dated 12/06/2023)

If Covered Services Are Added Later to the Articles of Association, When Can the Deduction Start?

“...If, before the amendment adding ‘…’ to your articles of association was registered and published in the Turkish Trade Registry Gazette, you received advances for services within the scope, and such advances are recorded as income after registration, then these amounts may be deducted in the fiscal period in which the profit arises.

However, if payments received before the amendment are not advances by nature and should be associated with income accounts, those amounts cannot be deducted.” (Private Ruling No. E-84098128-125[10-2021/13]-212590, dated 12/05/2023)

Are Health Services Provided in Türkiye to Non-Resident Turkish Citizens and Dual Nationals Within Scope?

“...It is possible to deduct 50% (80% as of 1.1.2023) of profits from health services provided in Türkiye to non-resident persons under the conditions set out in the Law, regardless of whether the patients are Turkish citizens living abroad or hold dual nationality.” (Private Ruling No. 21152195-130[13-2022.5194]-149014, dated 24/03/2023)

Are Services to Free-Zone Companies Covered?

Since the deduction is limited to services provided in Türkiye to persons not resident in Türkiye or entities whose workplace, legal, and business headquarters are abroad, profits from services provided to Free Zones or entities operating in Free Zones are not eligible.

“...Profits from engineering and project-drawing services provided to companies operating in free zones cannot be considered within Article 10(1)(ğ).” (Private Ruling No. E-49327596-125[KVK.ÖZ.2022.52]-31116, dated 08/02/2023)

“...Profits from software or software-update services provided by you to ... Free Zone must be taxed under general provisions; since the services are not provided to persons not resident in Türkiye, and are not exclusively utilized abroad, 80% (previously 50%) of the profit cannot be deducted under Article 89(13) of the Income Tax Law.” (Private Ruling No. E-84098128-120[89-2022/16]-3211, dated 03/01/2024)

Conclusion

For services in architecture, engineering, design, software, medical reporting, bookkeeping, call centers, product testing, certification, data storage, data processing, data analytics, education, and health provided in Türkiye to persons not resident in Türkiye or entities whose workplace, legal, and business headquarters are abroad, and exclusively utilized abroad, 80% of the profits may be deducted from declared corporate income provided that all profits are transferred to Türkiye by the return filing deadline for the fiscal period in which the profits are earned.

This deduction offers a material tax advantage for those delivering services in Türkiye for use abroad. Taxpayers should review the conditions summarized above, verify their eligibility, and carefully consider the special points noted when availing themselves of this benefit.

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