Turkish Tax Law for Foreigners and Foreign Businesses

Who this page is for

You should read this if you are a foreign person or business with any of the following: a Turkish subsidiary or branch, a permanent establishment, Turkish-source income, cross-border payments to or from Türkiye, or a tax assessment or penalty you want to challenge. Typical clients include:

• Foreign parent companies running a Turkish subsidiary and asking how profits, dividends and management fees are taxed.
• Overseas businesses selling goods or services into Türkiye and unsure whether they trigger VAT or a taxable presence.
• Foreign individuals with Turkish rental income, share sales, or director's fees.
• Companies that received a tax audit notice, a penalty, or a reassessment and need to respond on a deadline.

We also support founders at the start, when tax registration is part of setting up a Turkish company, and on the tax side of M&A and corporate restructuring.

The Turkish tax framework and the statutes that govern it

Turkish tax is built on a small set of core statutes. Knowing which one applies to your problem is half the battle.

• Kurumlar Vergisi Kanunu No. 5520 (Corporate Tax Law) — taxes the profits of companies.
• Gelir Vergisi Kanunu No. 193 (Income Tax Law) — taxes individuals and governs withholding (stopaj).
• Katma Değer Vergisi Kanunu No. 3065 (VAT Law) — the 20% standard VAT and its exemptions.
• Vergi Usul Kanunu No. 213 (Tax Procedure Law) — filing duties, penalties, audits, reconciliation and statute of limitations.
• İdari Yargılama Usulü Kanunu No. 2577 — the procedure for challenging tax acts before the tax courts.
• Türkiye's double-taxation treaty network — bilateral treaties that override domestic rules where they apply.

Corporate income tax: the rate, the minimum tax and the global minimum tax

The standard corporate income tax rate is 25% under KVK Art. 32. Banks and other financial-sector institutions are taxed at 30%. A 5-point reduction (to 20%) can apply to qualifying export and production earnings under Art. 32(7)–(8). The 30% banking rate and the export/production reduction were introduced by Law No. 7456 (2023).

Separately, Türkiye has adopted a global minimum tax (the OECD Pillar Two rules) via Law No. 7524, effective from FY2024. In broad terms, large multinational groups with consolidated revenue above the OECD threshold (around EUR 750 million) face an effective tax rate of roughly 15% in Türkiye, topped up where the local rate falls short. If your group is anywhere near that size, this changes how Turkish profits should be structured.

Tax residency, full vs limited liability, and permanent establishment

Whether Türkiye taxes your worldwide income or only your Turkish income turns on residency. Under KVK Art. 3, a company is fully liable (tam mükellef) if its legal seat or business head office is in Türkiye — in which case it is taxed on worldwide income. A company without that link is limited-liable (dar mükellef) and taxed only on Turkish-source income.

The risk for foreign businesses is the permanent establishment (PE). If your activity in Türkiye crosses from preparatory or auxiliary work into a fixed place of business or a dependent agent who concludes contracts, you may create a PE and become taxable here — often without realising it.

A liaison office is the classic way to keep a presence without commercial activity — but it must stay within its no-revenue limits, or the PE question reopens. We also advise on free zone companies and technology development zones, which carry their own corporate-tax exemptions when conditions are met.

VAT (KDV): rates, reverse charge and exemptions

The standard VAT rate is 20% under the VAT Law No. 3065, with reduced rates of 10% and 1% for listed goods and services. The standard rate was raised from 18% to 20% by Presidential Decree in 2023.

For foreign suppliers, the key mechanism is the reverse charge (sorumlu sıfatıyla KDV / KDV-2). When a Turkish business receives a service from abroad, it generally self-accounts for VAT in Türkiye, declaring and paying the tax on the foreign supplier's behalf. Exports of goods and certain services supplied to non-residents can be exempt, but the conditions are strict and documentary.

Import VAT and customs duties often arise together on goods entering Türkiye, and the VAT treatment of cross-border supplies should be settled inside your cross-border commercial contracts rather than left to chance.

Withholding tax (stopaj) on payments abroad

When a Turkish company pays a non-resident for certain items — royalties, professional and technical services, interest, rent, or dividends — it must usually withhold tax at source and remit it to the tax office. The domestic withholding rates are set under the Income Tax Law No. 193 and the Corporate Tax Law No. 5520 and vary by payment type.

Getting withholding wrong is expensive in two directions: under-withhold and the Turkish payer is liable for the shortfall plus penalties; over-withhold and you tie up cash and create a refund claim. We map the right rate per payment before invoices go out.

Double-taxation treaties and claiming treaty relief

Türkiye has an extensive network of double-taxation treaties (around 85 countries). These treaties decide which country may tax a given item of income, cap withholding rates, and provide a mechanism to relieve double taxation. Where a treaty applies, it overrides the domestic rule.

Relief is not granted on trust. To claim a treaty rate or exemption you typically need to evidence the recipient's tax residence, show beneficial ownership, and sometimes file specific forms. The interaction between the treaty, domestic withholding, and Turkish anti-avoidance rules is where foreign groups most often lose money to avoidable tax.

Transfer pricing and related-party transactions

If your Turkish company transacts with related companies in your group — buying, selling, lending, licensing or sharing services — those dealings must be priced as if between independent parties. This arm's-length principle is set out in KVK Art. 13 (transfer pricing through disguised profit distribution / örtülü kazanç dağıtımı).

Mispricing intra-group transactions is one of the first things a tax audit examines. If GİB finds that profit was shifted out of Türkiye through non-arm's-length prices, it can reassess the Turkish company's tax base, deny the deduction and add penalties.

Tax audits, reconciliation (uzlaşma) and tax-court disputes

A Turkish tax dispute usually starts with an audit (vergi incelemesi) and ends in one of three places: an agreed settlement, a closed file, or litigation. You have real choices at each stage, but they are time-limited.

Reconciliation (uzlaşma) under the Tax Procedure Law No. 213 lets you negotiate an assessment or penalty with the administration before going to court, often reducing the figure. Litigation runs to the tax court and, on appeal, through the Vergi Dava Daireleri of the Danıştay.

Tax litigation is contentious work, and we run it alongside our broader dispute resolution practice so the strategy is consistent if a matter touches more than tax.

Cross-border mechanics: tax ID, power of attorney and remote handling

You do not need to fly to Istanbul to deal with Turkish tax. Foreign individuals and companies can obtain a Turkish tax identification number (vergi kimlik numarası), and most filings, audit correspondence and even litigation can be handled by your lawyer here.

The key instrument is a power of attorney. A PoA signed before a notary abroad, apostilled under the Hague Convention and translated into Turkish, lets us act for you before GİB and the courts without you travelling. Our guide on power of attorney walks through the wording and apostille steps.

Common mistakes foreign businesses make with Turkish tax

• Assuming the accountant has the whole picture. A Turkish accountant (mali müşavir) handles compliance brilliantly, but residency, PE, treaty relief and disputes are legal questions.
• Ignoring the domestic minimum tax. Companies relying on incentives are surprised when the 10% minimum under KVK Art. 32/C still produces a bill.
• Paying foreign suppliers without checking withholding. Missed stopaj lands on the Turkish payer, not the foreign recipient.
• Treating VAT exemptions as automatic. Service-export and zero-rating exemptions need documentation that survives an audit.
• Letting a liaison or representative office drift into selling. That can create a permanent establishment and back taxes.
• Missing the 30-day tax-court deadline while waiting on internal sign-off.

Why instruct a Turkish tax lawyer, not only an accountant

An accountant keeps you compliant. A tax lawyer protects you when money and legal exposure are on the line — structuring transactions to be defensible, reading treaties, arguing a position to GİB, running reconciliation, and litigating in the tax courts. Lawyer-client work also carries legal privilege in a way routine bookkeeping does not.

In practice the two roles work together: your accountant files, we advise on the position behind the figures and step in the moment an audit or dispute appears. For foreign businesses unfamiliar with Turkish procedure, that combination is what keeps a routine matter from becoming a reassessment.

How to start with Lexin Legal

Start with a short consultation. Tell us your structure, where your income arises, and any deadline you are facing — an audit notice, an assessment, or a payment about to go out. We will tell you plainly where you stand under Turkish law, what is time-sensitive, and what we would do next.

For individual tax questions — residency, brackets and personal filing — see our guide to income tax in Turkey. For company matters, we can fold tax into company formation from day one so your structure is tax-aware before you trade.

How we handle your Turkish tax matter

Turkish tax law: frequently asked questions