# Setting Up a Sole Proprietorship as a Software Engineer Working for Abroad Clients in Turkey ### 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. --- ## Need Support? 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. Contact us at [info@ozmconsultancy.com](mailto:info@ozmconsultancy.com) to set up a quick consultation and start issuing legal invoices within a few days. ![](https://cdn.hashnode.com/res/hashnode/image/upload/v1749930073129/7f0c4e0d-95a9-4e11-84d2-53c77aeaec70.png align="center")