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Turkey Corporate - Other taxes

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Value-added tax (VAT)

Deliveries of goods and services are subject to VAT at rates varying from 1% to 18%. The general rate is 18%.

VAT payable on local purchases and on imports is regarded as 'input VAT', and VAT calculated and collected on sales is considered 'output VAT'. Input VAT is offset against output VAT in the VAT return filed at the related tax office. If output VAT is in excess of input VAT, the excess amount is paid to the related tax office. Conversely, if input VAT exceeds output VAT, the balance is carried forward to the following months to be offset against future output VAT. With the exception of a few situations, such as exportation and sales to an investment incentive holder, there is no cash refund to recover excess input VAT.

Turkish VAT principles contain a 'reverse-charge VAT mechanism', which requires the calculation of VAT by resident entities on payments to persons in foreign countries. Under this mechanism, VAT is calculated and paid to the related tax office by the resident entity. The resident entity treats this VAT as input VAT and offsets it in the same month. This VAT does not create a tax burden for the resident or non-resident entity, except for its cash flow effect on the former if there is insufficient output VAT to offset the input VAT.

VAT is also collected at the point of import. The VAT rate is the same rate as the one that is applied for transactions in the country of origin. The base for VAT is the value of the goods for customs tax purposes plus any kind of tax payable at the point of import and all the expenses incurred until the single administrative document is registered.

Reduced rates

For the deliveries and services mentioned in List No. I (e.g. agricultural products such as raw cotton, dried hazelnuts, supply and leasing of goods within the scope of the Finance Leasing Law), the reduced rate is 1%.

For the deliveries and services mentioned in List No. II (e.g. basic food stuffs, textiles, books and similar publications), the reduced rate is 8%.

Foreign trade: imports and exports

Importation of goods and services is a taxable transaction, whether or not the importation is made for business purposes. Export transactions are exempt from VAT, and credit and refund is available for input VAT for the export goods.

Importation of goods and services

For VAT purposes, any importation of goods or services into Turkey is a taxable transaction, regardless of the status of the importer or the nature of the transaction. To equalise the tax burden on importation and domestic supply of goods and services, VAT is levied only on the importation of goods and services that are liable to tax within Turkey. Accordingly, any transaction exempt in Turkey may also be exempt on import. The VAT on importation is imposed at the same rates applicable to the domestic supply of goods and services. In the case of importation, the taxable event occurs at the time of actual importation. Importation of machinery and equipment under an investment incentive certificate (IIC) is exempt from VAT.

Banking and insurance transactions tax (BITT)

The transactions being performed by licensed banks and insurance companies are generally exempt from VAT but are subject to BITT at a rate of 5% in general (although some transactions are subject to 1% or 0% BITT), which is due on the gains of such corporations from their transactions.

The purchase of goods and services by banks and insurance companies are subject to VAT, but this is considered an expense or cost item. Therefore, it is not recoverable (i.e. for VAT purposes by offsetting against the output VAT) in the hands of these corporations.

Special consumption tax

There are four main product groups that are subject to special consumption tax at different tax rates, depending on the GTIP numbers (tariff numbers):

  • Petroleum products, natural gas, lubricating oil, solvents, and derivatives of solvents.
  • Automobiles and other vehicles, motorcycles, planes, helicopters, yachts.
  • Tobacco and tobacco products, alcoholic beverages.
  • Luxury products.

Unlike VAT, which is applied on each delivery, special consumption tax is charged only once (except for some activities, such as production).

Customs and foreign trade

Following the changes in Turkish economic policy in the 1980s, there has been rapid growth in the foreign trade volume of Turkey.

Turkey is a member of the World Trade Organization (WTO) and World Customs Organization (WCO). Turkey signed a ‘Customs Union Agreement’ with the European Union (EU) on 1 January 1996 and has amended its customs code and legislation in line with those of the EU customs code.

According to the Customs Union Agreement, with the exception of certain goods (e.g. agricultural products), no customs tax is incurred on trade between Turkey and the European Union as long as the goods are imported to Turkey with an A.TR Movement Certificate proving that the goods are in free circulation in the European Union.

In order to harmonise its foreign trade, Turkey has also signed several Free Trade Agreements (FTAs) with the trade partners of the European Union.

The Turkish Customs Code is very similar to that of the EU, and its aim is to harmonise the customs practices of Turkey with EU customs practices.

The Turkish Customs Code defines the ‘Turkish Customs Territory’ as the territory of the Republic of Turkey including the territorial waters, the inland maritime zone, and the airspace of Turkey.

The Turkish Customs Code has also brought into force the customs regimes with economic impact that have been in use in the EU countries for a long time. The import taxes, VAT, other taxes, and funds are collected at the time of importation. The main tax collected at customs is the import tax. The import tax differs according to the classification of the commodity and to the country of origin.

VAT is also collected at the point of import. The VAT rate is the same rate as the one that is applied for the transactions in the country of origin. The base for VAT is the value of the goods for customs tax purposes plus any kind of tax payable at the point of import and all the expenses incurred until the single administrative document is registered.

The VAT rates are 1%, 8%, and 18%, varying according to the type of goods imported.

In addition, if the import transaction is not conducted in cash, there is a special Resource Utilisation Support Fund (RUSF), which should also be paid during importation. RUSF is a special kind of fund applied to importations on a credit basis. According to the RUSF legislation, any importation conducted on credit (if the payment related to the importation is not paid before the actual importation) is subject to a special payment of 6% of the value of the goods to be imported. The important criteria are payment term and whether it is a cash payment or payment on credit.

Dumping and anti-dumping duties are collected at the point of import.

In certain cases, such as temporary importation or inward processing, the customs administration shall require a kind of guarantee letter to secure the taxes. The amount of this guarantee shall cover all the taxes payable in the case of an importation.

There is no customs tax on trade between the EU and Turkey except for certain products (e.g. agricultural products). However, it is crucial that the imported goods are imported together with an A.TR Movement Certificate proving that the goods are in free circulation.

In the case of FTAs, the goods must be imported with a EUR.1 certificate, giving proof of their country of origin in order to benefit from the FTA.

Turkey applies the Common Customs Tariff of the EU to third countries, except for agricultural products.

Property taxes

Buildings and land owned in Turkey are subject to an annual real estate tax at different rates.

Stamp tax

Stamp tax applies to a wide range of documents, including, but not limited to, agreements, financial statements, and payrolls. Stamp tax is levied as a percentage of the value stated on the agreements at rates varying between 0.189% and 0.948%.

Salary payments are subject to stamp tax at a rate of 0.759% over the gross amounts, whereas a lump-sum stamp tax is calculated for certain types of documents, such as the printed copies of the financial statements.

Resource Utilisation Support Fund (RUSF)

According to the current legislation, regressive RUSF rates apply to foreign exchange and gold borrowings provided to Turkish residents (banks and financing institutions are exempt) from abroad depending on the maturity.

The RUSF rates on foreign currency denominated loans are as follows:

  • 3% if the maturity is under one year.
  • 1% if the maturity is between one and two years (including one year).
  • 0.5% if the maturity is between two and three years (including two years).
  • 0% if the maturity is three or more than three years (including three years).

The RUSF rates on Turkish lira (TRY) denominated loans are as follows:

  • 1% if the maturity is under one year.
  • 0% if the maturity is one or more than one year (including one year).

Moreover, RUSF bases differ based on the type and the currency of the loan. RUSF is calculated:

  • Over the principal amount in case the loan is foreign exchange denominated.
  • Over the interest payments in case the loan is Turkish lira denominated.
  • Over the interest payments plus the exchange difference of the principal between the drawdown date and the re-payment date in case the loan is indexed to a foreign exchange.

Payroll taxes

In accordance with the Turkish tax regulations, all employees working under a resident employer are included into the local payroll. The employer withholds taxes and other duties on income at source, and the employees receive the net amount after the deductions. The income tax and the stamp tax should be declared by the employers filing the withholding tax return. The tax tables applicable to individuals are provided in the Taxes on personal income section of Turkey’s Individual tax summary.

The social security premiums and the unemployment premiums should be declared by the employers filing the social security premium declaration on a monthly basis.

Income tax, stamp tax, social security premiums, and unemployment premiums are the legal deductions from the salary.

Social security premiums

Social security premiums for both the employer and the employee total 34.5% of an employee’s salary; 14% for the employee and 20.5% for the employer. In addition to social security payments, unemployment contribution is 3% of the salary, 1% for the employee and 2% for the employer.

The social security ceiling is determined as TRY 15,221.40 for the period 1 January 2018 through 31 December 2018.


Last Reviewed - 15 August 2018

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