Full Details of Corporate Taxes in Turkey

Corporate taxes in Turkey, governed by Corporate Tax Law No. 5520, play a pivotal role in the country’s fiscal system. Understanding how corporate taxes are calculated is essential for compliance and optimal financial planning.

Companies must start by determining their gross revenue, and then deducting allowable expenses such as operational costs, salaries, and depreciation to arrive at their net income.

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Finlexia is a globally recognized Turkish Accounting Firm with a long record of excellence and professional leadership in Istanbul, Turkey. Our Turkish accountants and our Turkish accountants are prepared to handle your company’s corporate taxes in Turkey.

Corporate Taxes in Turkey: An Overview

What are Corporate Taxes in Turkey?

Corporate taxes in Turkey are levied on the profits of corporations operating within the country. These taxes are crucial for the Turkish government as they represent a significant portion of national revenue.

The primary legislation governing corporate taxation in Turkey is the Corporate Tax Law No. 5520, which outlines the rules and regulations for calculating and paying corporate taxes.

How are Corporate Taxes Calculated and Paid?

Corporate taxes in Turkey are calculated based on the net income of a corporation, which is the total revenue minus allowable expenses. The current corporate tax rate in Turkey is 20%, although this rate can vary based on government policies and economic conditions.

Steps for Calculating Corporate Taxes:

1. Determine Gross Revenue: This includes all income generated from business activities.
2. Deduct Allowable Expenses: These expenses can include operational costs, salaries, rent, depreciation, and other relevant expenditures.
3. Calculate Net Income: Subtract the total allowable expenses from the gross revenue to determine the net income.
4. Apply Tax Rate: Multiply the net income by the applicable corporate tax rate to determine the tax liability.

Payment Process:

• Quarterly Advance Payments: Corporations must make quarterly advance tax payments based on their estimated annual income.
• Annual Tax Return: At the end of the fiscal year, corporations file an annual tax return to reconcile advance payments with the actual tax liability. Any differences are settled through additional payments or refunds.

Responsibilities Related to Corporate Taxes

Ensuring compliance with corporate tax regulations in Turkey involves several key responsibilities for businesses:

1. Accurate Record-Keeping: Corporations must maintain detailed and accurate financial records. This includes documentation of all income, expenses, and other financial transactions.
2. Timely Filing and Payments: Businesses are required to file tax returns and make payments within specified deadlines to avoid penalties and interest charges.
3. Adhering to Tax Laws and Regulations: Staying informed about changes in tax laws and regulations is essential for compliance and optimizing tax liabilities.
4. Engaging Professional Assistance: While not using the terms “expert” or “experienced,” it is advisable for businesses to engage with professionals who have a thorough understanding of Turkish tax laws to ensure compliance and efficient tax planning.

Corporate Taxes in Turkey

The Turkish standard corporate tax rate is 25% but certain incentives are granted, for example, the incomes provided by software development are exempt from paying taxes until January 2024. Also, major reductions may be granted for operating in certain regions.

The Turkish tax regime can be classified under three main headings:

Corporate Income Taxes

In Turkey, the basic corporate income tax rate levied on business profits is 25%.

Withholding taxes on selected payments of resident corporations:

• Dividends are subject to 15%.
• Interest on treasury-bill and treasury bonds derived by resident corporations is subject to 0%.
• Interest on other bonds and bills derived by resident corporations is subject to 0%.
• Bank deposits are subject to 10%-18%.
• Profit shares paid by participation banks in consideration of participation accounts are subject to 10%-18%.
• REPO agreements are subject to 15%.

Withholding taxes on selected payments of non-resident corporations:

• Dividends are subject to 15%.
• Interest on treasury-bill and treasury bonds derived by resident corporations is subject to 0%.
• Interest on other bonds and bills derived by resident corporations is subject to 0%.
• Bank deposits are subject to 10%-18%.
• Profit shares paid by participation banks in consideration of participation accounts are subject to 10%-18%.
• REPO agreements are subject to 15%.

Reach us for Corporate Taxes in Turkey

Corporate taxes in Turkey are a fundamental aspect of the country’s tax system, impacting all corporations operating within its borders. By understanding the basics of how corporate taxes are calculated and the responsibilities involved, businesses can better manage their tax obligations and contribute to the nation’s economy.

Engaging with knowledgeable professionals can further enhance a corporation’s ability to navigate the complexities of the Turkish tax landscape effectively.

For more information or assistance with corporate taxes in Turkey, contact Finlexia Accounting Firm, a leading provider of comprehensive accounting and tax services in Turkey.

You may reach our accountants and lawyers for corporate taxes in Turkey by visiting our Contact page.