Taxation of Foreign Income in Turkey
Taxation of Foreign Income in Turkey
Core Insights on Taxation of Foreign Income in Turkey
Nature of Agreement Matters
Most contracts for remote work with foreign firms are structured as “Independent Contractor,” “Consultant,” or “Vendor Agreements.” These designate the worker as a business entity, not an employee (“ücret geliri”) — meaning the income is classified as commercial revenue.
Such contracts typically include clauses like:
“Consultant is an independent contractor and is solely responsible for all taxes, withholdings, and other statutory or contractual obligations.”
Why This Distinction Is Important
Employee income (subject to personal withholding and social insurance) is taxed differently than commercial income (which may qualify for various tax treatments and deductions).
If your contract labels you as a contractor, Turkish tax authorities expect you to file business income, potentially under your own company, not as an employee.
Tax Exemptions Do Not Automatically Apply
There are exemptions (like the “%50 → %80 kazanç istisnası” for software, design, and data services exported abroad) applicable to commercial revenue .
However, these apply to business/commercial income, not employee wages. So if your contract is misclassified, you can’t claim the exemption.
Documentation and Proof Matters
Turkish authorities may request your contract, payslips, social security documents (SSN or equivalent), even apostilled payroll records.
For an employee arrangement, banks and tax offices require proof of a real employment relationship—including payroll and social insurance.
Remote work for U.S. firms, for example, won’t qualify as employee status since no U.S. social security is paid.
Local Practices in Other Countries
- In countries like Italy or Spain, officially employing remote Turkish workers leads to high local payroll taxes. Thus it often makes more sense to hire them as independent consultants.
Bottom Line Advice
If you believe your foreign-earned income is exempt from Turkish taxation, recheck your contractual and business structure.
Most likely, you need to register as a business, file commercial income, and only then claim any applicable export exemptions to avoid future disputes.
✅ What You Should Do Next
Review your contract: Is it clearly labeled as an independent contractor agreement?
Check your invoicing and filings: Are you registered as a business in Turkey (sole proprietor or company)? Are you filing commercial income forms?
Claim the export exemption: If valid, utilize the up to 80% exemption for income from software, data-analysis, or design services exported abroad.
Stay prepared: Keep your contracts, invoicing records, bank transfers, and any abroad payroll data well-organized in case of audit.
Reach us for more information
info@ozmconsultancy.com
