Establishing a Software Company in Turkey: The Logical Choice Due to Tax Advantages

Turkey's recent legislative changes have positioned the country as an attractive destination for various sectors, especially in the field of software development. The amendments, effective from January 1, 2023, bring significant tax benefits for those considering establishing a software company in Turkey.

Tax Incentives for Software Companies in Turkey: A Strategic Move

Turkey has become a focal point for entrepreneurs eyeing the software industry, thanks to its favorable tax regulations. The recent adjustments in the legal framework, as per Law No. 5520, make it a logical and strategic choice for individuals and businesses in the software sector.

Key Sectors and Tax Incentives:

1. Architecture, Engineering, and Design: The amended law provides an 80% corporate tax exemption for services such as architecture, engineering, and design when the entire income is transferred to Turkey before the submission of the corporate tax return for the relevant accounting period.

2. Software Development: Software-related services also fall under the umbrella of the amended regulations. With an 80% corporate tax exemption, software companies can significantly benefit from the favorable tax environment in Turkey.

3. Medical Reporting and Certification: The amended law extends its benefits to services like medical reporting and certification, allowing companies in these sectors to enjoy the 80% corporate tax exemption.

4. Call Centers: The call center industry is another sector poised to thrive in Turkey due to the amended regulations. The 80% corporate tax exemption provides a competitive edge for businesses in this field.

5. Data Storage, Processing, and Analysis: Companies involved in data-related services, including storage, processing, and analysis, can leverage the 80% corporate tax exemption, making Turkey an ideal location for their operations.

Financial Implications and Examples:

Let's consider the case of a software business in Germany. If an entrepreneur establishes a software company in Turkey, the financial implications are significant. With a 80% corporate tax exemption and the ability to issue invoices without VAT under specific conditions, the tax burden is substantially reduced.

For instance, in 2023, a software business with an annual invoice of €200,000 in Germany would face a total tax burden of approximately €112,792.18. However, by establishing a company in Turkey, the total tax burden could be reduced to 5% corporate tax, resulting in a significant tax advantage.

Recommendations for Entrepreneurs:

1. Utilizing Tax Advantages: Taking advantage of the 80% corporate tax exemption and VAT exceptions can lead to substantial savings for software companies in Turkey.

2. Strategic Profit Distribution: Entrepreneurs can strategically decide whether to distribute profits or leave them in the company account for further investments, considering the favorable tax environment.

3. Competitive Edge: The ability to issue invoices without VAT provides a competitive edge for Turkish software companies in the global market.

Conclusion:

Establishing a software company in Turkey has become an enticing proposition for entrepreneurs seeking tax advantages and a conducive business environment. The recent legislative changes position Turkey as a strategic hub for software-related services, offering not only financial benefits but also a competitive edge in the international market. As the global business landscape evolves, the logical choice for those in the software industry is to explore the opportunities that Turkey's tax incentives present.

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