Turkey Tax Free 2: A Comprehensive Guide to Other Taxes in Turkey

Is Turkey tax free? While Turkey isn’t entirely tax free, it offers various tax incentives and exemptions for businesses and individuals This guide dives deep into the “Other Taxes” category within the Turkish tax system, providing valuable information for anyone interested in understanding the complexities of taxation in this dynamic country

Navigating the Maze of Turkish Taxes

Understanding Turkey’s “Other Taxes” requires a thorough examination of various tax categories, including:

• Value-Added Tax (VAT): This tax applies to the supply of goods and services, ranging from 1% to 20%, with a general rate of 20%. Businesses can offset input VAT against output VAT, creating a system of credits and refunds.
• Banking and Insurance Transactions Tax (BITT): This 5% tax applies to the profits generated by banks and insurance companies. However, the purchase of goods and services by these entities is subject to VAT, which cannot be recovered.
• Special Consumption Tax: This tax targets specific product groups like petroleum, automobiles, tobacco, and luxury goods, with varying tax rates depending on the GTIP numbers.
• Customs and Foreign Trade: Turkey’s membership in the World Trade Organization and World Customs Organization has significantly impacted its foreign trade volume. The country has implemented various Free Trade Agreements (FTAs) and harmonized its customs code with the European Union, leading to the elimination of customs duties on trade between Turkey and the EU for specific goods.
• Property Taxes: Buildings and land owned in Turkey are subject to an annual real estate tax at varying rates.
• Stamp Tax: This tax applies to various documents, including agreements, financial statements, and payrolls, with rates ranging from 0.189% to 0.948%.
• Resource Utilisation Support Fund (RUSF): This fund applies to foreign exchange and gold borrowings provided to Turkish residents, with rates varying depending on the maturity of the loan.
• Payroll Taxes: These taxes include income tax, stamp tax, social security premiums, and unemployment premiums, all deducted from employee salaries.

Understanding Combat Zones and Tax Benefits

For those serving in designated combat zones, the United States Internal Revenue Service (IRS) offers specific tax benefits. This includes the potential for excluding foreign earned income, as outlined in IRS Publication 3, Armed Forces Tax Guide.

Key Requirements for Combat-Related Tax Benefits:

• Serving in an active combat area designated by Executive Order and receiving special pay for duty subject to hostile fire or imminent danger, as certified by the Department of Defense.
• Serving in a support area designated by the Department of Defense in direct sustainment of military operations in the combat zone and receiving special pay for duty subject to hostile fire or imminent danger, as certified by the Department of Defense.
• Serving in a statutorily designated Qualified Hazardous Duty Area and receiving special pay for duty subject to hostile fire or imminent danger, as certified by the Department of Defense.

Current Recognized Combat Zones:

• Sinai Peninsula
• Afghanistan Area
• Kosovo Area
• Arabian Peninsula Area

Additional Resources:

• IRS Publication 3, Armed Forces Tax Guide: https://www.irs.gov/publications/p3
• PwC Turkey Corporate Tax Summary: https://taxsummaries.pwc.com/turkey/corporate/corporate-income-tax

Navigating the complexities of “Other Taxes” in Turkey requires a thorough understanding of the various tax categories, exemptions, and benefits available. This guide provides a comprehensive overview of these taxes, helping businesses and individuals make informed decisions and optimize their tax strategies. Remember to consult with a qualified tax professional for personalized advice regarding your specific situation.