Taxation in Turkey
Posted by meb at May 12th, 2008
As expatriates spend more time in Turkey, subjects related to Turkish law naturally gain importance for them; of particular concern, especially for foreign investors and those working in Turkey, is the Turkish tax system.
Your first stop for information about the general rules and regulations of current Turkish tax practices is the Turkish Ministry of Finance (Maliye Bakanlığı). Its Web site (www.maliye.gov.tr) provides a lot of information, but unfortunately has not been fully translated into English. Consider consulting other Internet sources such as www.worldwide-tax.com/turkey/ and an expatriate online forum’s tax section at www.allaboutturkey.com/tax.htm
These are good reference sites, but I’d like to give you the most important information here to save you some time. Although a summary of taxation in Turkey follows, I strongly recommend that you follow current events in the Turkish daily press to keep abreast of any changes.
The first type of tax that will directly affect you is value-added tax (VAT), called KDV in Turkey. It is levied on almost every good or service you pay for in your everyday life. Although the rate depends on the product or service, in most cases it is 18 percent. This tax is usually already included in the price of the good or service you are paying for. However, to be sure look out for a certificate in the store or a label on the product that reads “Fiyatlarımıza KDV dahildir,” meaning, “The VAT is included in our prices.”
If for whatever reason this is not the case, you will have to register your purchase with the authorities and pay the tax after filling out a form available at the municipality’s tax office (vergi dairesi). The payment usually needs to be made by the 26th day of the month after your purchase.
Please also keep in mind that VAT is applied not only on goods and services paid for within Turkey, but also on imports. For details of regulations pertinent to this topic, please refer to my “Importing and exporting for expats” articles on the Today’s Zaman Web site.
Another tax that will affect you is the income tax (gelir vergisi), paid by everyone with any kind of income in Turkey, whether stemming from employment, owning property, running a business or other activities.
For permanent residents of Turkey, both their income in Turkey and their income abroad are subject to taxation. A foreign resident employed in Turkey only pays tax on his income in Turkey. Turkey is a signatory to a treaty for the prevention of double taxation with many countries. These treaties, in principle, enable an individual to offset tax paid in one of the two countries against the tax paid in the other, preventing (or reducing) double taxation. Consult the consulate of your country for information on your country’s tax laws and regulations. Turkey also exempts some income types from taxation, including pensions, disability benefits and annuities.
Turkey’s tax system, like those of many countries, is progressive. This means that as income increases, the tax rate applied to that income increases. The exact rates are provided below and were prepared by www.worldwide-tax.com. These rates apply for 2008. If you are employed, this income tax will be, like the VAT, more or less invisible to you because it is directly deducted by the employer from your salary.
Professional advice strongly recommended!
If you own a business, earn income from a property, from banking or other activities, your situation is usually a bit more complicated and I strongly recommend that you consult a tax specialist.
However, if you wish to complete the procedure yourself, the Foreign Economic Relations Board (DEİK) will be very helpful. Visit its Web site at www.deik.org.tr and look for the “rules and regulations” section. There you can look over some translated summaries of articles written on the subject and prepared by global consulting company Ernst & Young professionals. Additionally, DEİK has prepared a guide about the Turkish taxation system to assist those considering investing in Turkey.
If you are not completely sure or if you suspect being cheated, it is always better to ask the vendor, consult a professional or consult the pertinent laws. Whenever your transactions involve large sums of money, if you are self-employed or if you are planning on setting aside money for investment, it is always better to contact a tax specialist.
Last, but not least, there are many small taxes that have to be paid on several goods and services. For the average consumer, these should not be a problem because they are usually already included in the price of the goods and services in question. Let’s look at some of these: a private consumption tax (ÖTV) is levied (at different rates) on petroleum products, gas and oil, vehicles, tobacco products, alcoholic beverages and travel. Municipalities are authorized to collect an “environmental tax,” usually paid through the water bill.
Another tax that may affect you is the annual property tax (emlak vergisi). It is paid on land and buildings at rates between 0.1 and 0.6 percent. Keep in mind that a tax of 1.5 percent has to be paid by the seller as well as the purchaser on the sale of real estate. Transactions carried out by banks and insurance companies are susceptible to a 5 percent tax and items acquired as gifts or through inheritance are subject to a tax rate of 1-30 percent.
source: Today’s Zaman
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