This is a general overview of tax in Turkey – for information on specific taxes, see our other tax guides.
Taxation in Turkey
Turkey ranks 27th out of the 35 OECD countries in its tax-to-GDP ratio. Low is less tax. According to the OECD, in 2015, it took the equivalent of 30% of its GDP by way of tax of all kinds. This was against an OECD average of 34.3%. The US takes 26.4%, France 45.4%. The UAE only takes about 1.4%!
However, the amount of tax that Turkey takes as a percentage of its GDP has increased quite sharply over recent years. It has moved from 24.2% in 2008 (a level that it had maintained for some time) to 30% in 2015.
Different countries collect their taxes from different sources and, compared to the OECD average, Turkey takes more tax by way of VAT and social security contributions and less tax from personal income and corporate income. Turkey has a rate of 64% of its tax take from indirect taxes which is much more than the OECD average rate of 46%. However, before 2005, it was over 75%: so the balance is shifting.
Turkey does not feature on any of the world’s lists of tax havens, although it does come 20th on the TJN Financial Secrecy Index and it is only deemed partially compliant by the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes. It is here alongside places such as Andorra, Anguilla, the Dominican Republic and the UAE. But things move on quite quickly, and Turkey is committed to full exchange of information for financial and tax purposes in September 2018.
This is significant because, for many years, foreigners living and working in Turkey have often assumed that what they do there is invisible to the rest of the world and that they can get away with not declaring their income or paying any taxes due.
As in most parts of the world, those days are well and truly over and so anyone now thinking of getting involved in Turkey really must work on the basis that it is a modern country with all of the information exchange protocols that you would expect to find elsewhere and in which they must declare and pay any taxes due.
The good news is that Turkey benefits from many so-called ‘Double Taxation Treaties’ (more properly called “Treaties for the Avoidance of Double Taxation”). See our Guide to Double Taxation Treaties in/with Turkey.
These are designed to ensure that if circumstances arise where you could face paying tax in Turkey and in another country, you do not end up paying tax twice on any item of income or capital gain. See for a full list of such treaties.
The bad news is that the tax system is rather complicated: you need an accountant. In the case of a company, the law requires you to have one.
There is a good general guide to the Turkish tax system on the Ministry of Finance website.
Video guides to tax in Turkey
You can learn about taxes and taxation in Turkey by watching our series of video interviews with Turkish accountant Burak Orkun. You can also read our other tax guides for Turkey.