Setting Up a Sole Proprietorship as a Software Engineer

Setting Up a Sole Proprietorship as a Software Engineer Working for Abroad Clients in Turkey

by CPA Evren Özmen

Freelance software engineers in Turkey who serve clients abroad often wonder whether they should set up a company, and if so, what type. One of the simplest and most flexible options is establishing a sole proprietorship (şahıs şirketi). It’s fast, affordable, and legally sufficient for invoicing international clients while benefiting from certain tax advantages.

This blog will walk you through the setup process, explain key tax benefits—including the 80% income tax exemption—and offer practical advice.

Why Set Up a Sole Proprietorship?

If you’re a software engineer exporting services to clients in the US, UK, EU, or elsewhere, registering a sole proprietorship can help you:

Issue official invoices
Open a business bank account
Qualify for tax exemptions on exported services
Prove legal income for visa, credit, or investment purposes
Avoid personal income tax issues for unregistered income

Step-by-Step: How to Register a Sole Proprietorship in Turkey

1. Choose a Tax Office and Business Address

You’ll need a registered address to determine your local tax office. This can be:

Your home address
A virtual office
A co-working space

The address must be supported with a lease agreement if it’s not your own property.

2. Work With a CPA (Serbest Muhasebeci Mali Müşavir)

A licensed CPA is mandatory for registration. They will:

Prepare and submit all documentation
Register you with the tax office
Activate your e-ledger (e-defter) and e-invoice (e-fatura) systems

3. Tax Office Procedures

Your CPA will finalize:

Your tax registration and issuance of your tax plate (vergi levhası)
The opening of your electronic filing systems
Initial tax office inspection if required

The whole process typically takes 2 business days.

Required Documents

e-devlet password
Lease agreement or ownership document

How to Invoice Foreign Clients Legally

You can issue export invoices (hizmet ihracı) for services rendered to foreign clients. Under Turkish law, VAT is 0% for service exports that meet these conditions:

The buyer is located outside Turkey
The service is utilized abroad
Payment is received in foreign currency
The export is declared in your VAT return

Invoices must be issued through the Turkish Revenue Administration’s approved e-invoice platforms.

Taxation: Understanding the %80 Income Tax Exemption

Here’s the key tax incentive: 80% of your income from exported software services can be exempted from income tax, based on Article 89/13 of the Turkish Income Tax Law. To qualify:

Your sole proprietorship must invoice a foreign company or client
The service must be classified as technology-related or software development
Payment must be received in foreign currency
You must declare the income properly in your annual income tax return

For example, if your total annual profit is 1,000,000 TL and it all qualifies under this exemption, you’ll only be taxed on 200,000 TL of it.

This is a powerful incentive for freelance engineers working with clients on platforms like Upwork, Toptal, or via direct contracts.

Can You Use Payoneer, Wise or Revolut?

Yes. Turkish freelancers frequently use platforms like Payoneer, Wise, or Revolut. These are allowed as long as:

The income is tied to properly issued export invoices
You declare the amounts in your tax returns
You keep proper bookkeeping records through your CPA

Who Should Consider an LLC Instead?

You may want to set up an LLC (Limited Company) if:

You have business partners or plan to take investment
You want to limit personal liability
You expect to hire multiple employees
You are operating in high-risk or regulated sectors

Otherwise, a sole proprietorship is more than enough for most solo software engineers.

Final Thoughts

Setting up a sole proprietorship is the easiest and most cost-effective way for software engineers in Turkey to legally work with international clients. Thanks to 0% VAT, the 80% income tax exemption, and simplified compliance requirements, it offers a lean and powerful legal structure.

But registration is not enough—you must also maintain correct invoicing, make timely tax payments, and ensure accurate reporting. Working with a professional CPA will make sure you stay on track.

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If you're a freelance developer and want to structure your business correctly, we’re here to help. Our team works with engineers, designers, and freelancers who serve global clients from Turkey.

Setting Up a Sole Proprietorship as a Software Engineer Working for Abroad Clients in Turkey