Understanding Corporate Taxation for Companies in Turkey

In Turkey, corporate taxation is governed by Corporate Tax Law No. 5520, which defines the tax obligations and rates for businesses operating within the country. For companies, understanding the tax framework is essential for compliance and effective financial planning. Here’s a comprehensive guide to the structure, rates, and other key details of corporate taxation in Turkey as of 2024.

1. Overview of Corporate Income Tax (CIT) Rates

The primary corporate income tax rates in Turkey vary depending on the type of business activity:

Type of Company	Corporate Income Tax Rate (2024)
Standard Rate	25%
Financial Sector Companies	30%
Publicly Listed Companies	23% (for companies offering 20% shares on the Istanbul Stock Exchange)

Standard Rate: For most companies, the standard CIT rate is 25%.
Financial Sector Companies: Banks, insurance companies, and other financial sector entities are taxed at a higher CIT rate of 30%.
Publicly Listed Companies: Companies that list at least 20% of their shares on the Istanbul Stock Exchange (ISE) can benefit from a reduced rate of 23% for five years, provided they are not part of the financial or insurance sectors.

2. Calculation of Taxable Income

Taxable income in Turkey is determined by adjusting the net accounting profits with eligible exemptions, deductions, and other adjustments, which include:

Allowable Deductions: Operational costs, depreciation, and certain types of losses can be deducted.
Prior-Year Losses: Losses can be carried forward for five years to offset future taxable income.
Exemptions and Incentives: Some exemptions apply for specific income types (e.g., R&D tax incentives).

3. Tax Residency and Scope of Taxation

Resident Companies

Definition: Companies with their legal or business centers in Turkey are deemed residents.
Scope of Taxation: Resident companies are taxed on their worldwide income.

Non-Resident Companies

Definition: Companies without a legal or business center in Turkey are considered non-residents.
Scope of Taxation: Non-residents are taxed only on income earned within Turkey.

4. Tax Administration and Filing Requirements

Requirement	Details
Annual Tax Return	Filed by end of the fourth month following the fiscal year-end.
Tax Payment	Due at the same time as the annual return.
Quarterly Advance Tax	Due on the 17th day of the second month after each quarter.
Statute of Limitations	Tax returns are subject to review for five years from filing.

5. Recent Developments in Turkish Corporate Taxation

Minimum Corporate Tax

As of July 2024, Turkey introduced a minimum corporate tax rate of 10% for most companies, ensuring that even those with exemptions contribute a minimum tax amount.
For multinational corporations with annual revenues over €750 million, a 15% minimum tax on global income was introduced, aligning with the OECD’s Base Erosion and Profit Shifting (BEPS) initiative.

6. Other Taxes Affecting Companies in Turkey

Aside from corporate income tax, several other taxes may impact companies operating in Turkey:

Tax Type	Description	Rate/Range
Value Added Tax (VAT)	Imposed on the supply of most goods and services.	1%, 8%, or 18%
Special Consumption Tax (SCT)	Applies to specific items like petroleum products, tobacco, and luxury goods.	Varies by product
Stamp Duty	Levied on various legal documents, such as contracts and financial statements.	0.189% to 0.948% or fixed
Withholding Tax	Applied on certain payments to non-residents, like dividends, royalties, and interest.	10%-20% depending on income type

Q&A: Common Questions About Corporate Taxation in Turkey

Q1: Are there any tax incentives for R&D investments in Turkey?

A: Yes, companies investing in research and development (R&D) can benefit from tax deductions and investment credits, reducing their taxable income.

Q2: How are dividends taxed for companies in Turkey?

A: Withholding tax on dividends paid to non-residents is generally 10% but may vary based on international treaties.

Q3: Can losses be carried forward indefinitely?

A: No, losses can only be carried forward for five years to offset against future profits.

Q4: What happens if a company fails to pay taxes on time?

A: Late payments incur interest and penalties. Regular audits ensure compliance, and a statute of limitations on returns lasts five years from the filing date.

Importance of Staying Updated on Tax Regulations

Turkish tax laws are updated frequently to align with global standards and economic changes. It’s crucial for businesses to stay informed about these updates to manage compliance risks and optimize tax liabilities effectively.

For tailored advice on corporate taxation and strategic tax planning in Turkey, consulting with a tax professional is highly recommended.

OZM-CPA

info@ozmconsultancy.com

Understanding Corporate Taxation for Companies in Turkey