Turkey's Tax System and Framework in 2025

Turkey continues to maintain one of the most competitive corporate tax environments among OECD countries, operating a hybrid taxation model that blends territorial and residence-based principles. Both foreign investors and domestic entities—whether corporations or individuals—are subject to the same tax obligations, ensuring a level playing field. The country's tax structure is broadly categorized into three main types: income taxes, consumption taxes, and property-related levies.

Key Taxes and Current Rates

Income Taxation

All forms of income—generated domestically or abroad by residents—are subject to income tax in Turkey. As of July 2023, the corporate income tax rate was increased from 25% to 30%, aligning with broader fiscal consolidation efforts. Meanwhile, personal income tax rates now range up to 40%, reflecting adjustments aimed at balancing revenue generation and economic equity. This progressive scale applies to both Turkish nationals and expatriates earning within the country.

Consumption Taxes

Turkey imposes several consumption-based taxes, including Value-Added Tax (VAT), Special Consumption Tax (SCT), Bank and Insurance Transaction Tax (BTT), and Stamp Duty. VAT is applied at tiered rates of 1%, 10%, and 20%, depending on the category of goods and services—essential items often fall under lower brackets. The SCT targets luxury and energy-intensive products such as automobiles, tobacco, and petroleum derivatives, serving both revenue and regulatory purposes.

Property Taxes

Ownership of real estate and vehicles incurs annual property-related taxes. Real estate tax rates vary between 0.1% and 0.6% based on location and property type, assessed by municipal authorities. In addition, transfers of wealth via inheritance or gifts are taxed progressively, with rates ranging from 1% to 30%. These apply to both resident and non-resident beneficiaries under certain conditions.

Digital Services Tax

In line with global trends targeting large digital platforms, Turkey introduced a Digital Services Tax (DST) effective in recent years, currently levied at 7.5% on gross revenues derived from digital services. This includes online advertising, streaming content sales, and user data monetization through digital marketplaces. The policy aims to ensure tech firms contribute fairly to public finances despite limited physical presence.

Special Economic Zones and Incentives

Regulatory Framework for Economic Zones

Turkey has established designated zones—including Technology Development Zones (TDZs), Organized Industrial Zones (OIZs), and Free Zones—under the Free Zone Law, designed to attract foreign direct investment through targeted fiscal incentives and streamlined operations. These zones benefit from strategic geographic positioning, particularly near major ports and transport corridors.

Key Incentives by Zone Type

• Technology Development Zones: Enterprises engaged in R&D and software development enjoy full exemption from corporate and income taxes. Additionally, sales of proprietary software are zero-rated for VAT purposes.
• Organized Industrial Zones: Companies located here receive exemptions from real estate and municipal taxes, along with access to developed infrastructure, utilities, and logistical support.
• Free Zones: Full tax holiday on profits generated within the zone; employees’ income earned in these areas is exempt from personal income tax. Import duties are waived for goods entering or exported from these zones, facilitating re-export and assembly activities.

Overview of Free Zone Operations

Free Zones support a wide range of commercial activities, including manufacturing, warehousing, packaging, and logistics. They serve as gateways for companies aiming to leverage Turkey’s proximity to European, Middle Eastern, and Central Asian markets. With minimal bureaucratic hurdles and favorable customs treatment, these zones have become hubs for international trade and outsourcing.

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