Fiscal law in Turkey plays a critical role in shaping the business environment for both local and foreign companies. As Turkey continues to attract international investment and expand its digital economy, understanding the core elements of Turkish fiscal law is essential for companies aiming to stay compliant, minimize risk, and optimize their tax planning strategies.
This comprehensive guide explores the main pillars of fiscal law for companies operating in Turkey, including corporate tax, VAT, withholding taxes, transfer pricing rules, and the latest legal developments in 2025.
What Is Fiscal Law in Turkey?
Fiscal law (Mali Hukuk) refers to the body of legal rules governing taxation and public finance. For companies, fiscal law determines how taxes are assessed, collected, and enforced by the Turkish Revenue Administration (GİB – Gelir İdaresi Başkanlığı).
Key objectives of fiscal law in Turkey:
- Ensure a fair and balanced tax system
- Fund government operations and public services
- Encourage investment and economic growth
- Prevent tax evasion and abuse
Companies must comply with fiscal regulations that cover corporate income tax, VAT, stamp duty, withholding tax, and more.
1. Corporate Income Tax in Turkey
The Corporate Income Tax (CIT) is levied on the worldwide income of resident companies and on Turkish-source income of non-resident companies.
- Corporate tax rate (2025): 25% (subject to change depending on sector or incentives)
- Resident companies: Taxed on worldwide income
- Non-resident companies: Taxed only on Turkish-sourced income through a permanent establishment or representative
The tax year is typically the calendar year, and companies must file annual corporate tax returns by the end of April following the fiscal year-end.
Provisional tax is paid quarterly at the same rate (25%) and is credited against the final tax liability.
2. Value Added Tax (VAT)
Value Added Tax (Katma Değer Vergisi – KDV) is a key component of Turkey’s fiscal system and applies to almost all commercial activities.
- Standard VAT rate: 20%
- Reduced rates: 10% and 1% (e.g. basic food items, newspapers, medical devices)
- Exemptions: Exports, education services, and some healthcare activities
Businesses must register for VAT and file monthly returns, paying the net VAT due. VAT planning and documentation are crucial, as errors may lead to audits or delays in VAT refunds.
3. Withholding Tax
Withholding tax (stopaj vergisi) applies to certain payments made by companies in Turkey. The payer is responsible for withholding and remitting the tax to the Revenue Administration.
Common withholding tax rates:
- Dividends to non-residents: 15% (can be reduced by tax treaties)
- Interest payments: 0% to 10%
- Royalties and service fees: Up to 20%
- Rent payments to individuals: 20%
Withholding tax is a critical area for foreign investors and subsidiaries. Double Tax Treaties (DTTs) that Turkey has signed with over 80 countries can help reduce withholding rates.
4. Transfer Pricing Regulations
Turkey enforces OECD-based transfer pricing regulations to prevent profit shifting and ensure fair taxation of intra-group transactions.
Key obligations include:
- Arm’s length principle: Intercompany transactions must be priced as if between independent parties
- Transfer pricing documentation: Required for companies with related-party transactions exceeding defined thresholds
- Annual TP report and related-party transaction form to be submitted with the corporate tax return
Failure to comply may result in tax penalties, reassessments, and increased audit risk.
5. Tax Incentives and Free Zones
To attract investment and boost economic development, Turkey offers a variety of tax incentives:
- Organized Industrial Zones (OIZs) and Technology Development Zones: Offer VAT exemptions, CIT reductions, and social security support
- R&D and innovation incentives: Up to 100% CIT deduction and wage support for qualified staff
- Investment Incentive Program: Offers VAT exemptions, customs duty exemptions, tax reductions, and land allocation for eligible projects
Companies planning significant investment in Turkey should analyze which incentive schemes apply to their activities.
6. Digital Tax and E-Transformation
In recent years, Turkey has introduced a Digital Services Tax (DST), targeting large tech companies earning revenue from digital advertisements, online marketplaces, and streaming services.
- Digital Services Tax rate: 7.5%
- Applies to companies with global revenues exceeding €750 million and Turkish revenues over TRY 20 million
In parallel, the e-Transformation agenda has expanded, making it mandatory for many companies to use:
- E-Invoice (e-Fatura)
- E-Archive (e-Arşiv)
- E-Delivery Note (e-İrsaliye)
These systems improve transparency, reduce paperwork, and streamline fiscal audits.
7. Stamp Duty and Other Transactional Taxes
Stamp duty is levied on a wide range of documents, including contracts, agreements, and financial papers.
- Standard rate: 0.948% of the document value (2025 rate, subject to annual updates)
- Some documents are exempt, especially within investment incentive frameworks
Other minor taxes to consider:
- Banking and Insurance Transaction Tax (BITT)
- Special Consumption Tax (SCT) – applies to specific goods like fuel, alcohol, and cars
- Environmental Tax – for waste management and sustainability
8. Tax Audits and Penalties
The Turkish tax authorities have become more active in auditing companies, particularly those in high-risk sectors or with frequent VAT refund claims.
Common triggers for tax audits:
- High intercompany transactions
- Regular losses or low profitability
- VAT refund applications
- Mismatched declarations in e-ledger and e-invoice systems
Penalties can include:
- Late payment interest (monthly compound rate)
- Tax loss penalty (25% to 50% of unpaid tax)
- Criminal sanctions in cases of fraud
To mitigate risks, companies should maintain proper documentation, conduct internal audits, and consult with tax advisors regularly.
9. Dispute Resolution and Appeals
If a company disagrees with a tax assessment or penalty, Turkish fiscal law allows for:
- Administrative appeal to the tax office
- Judicial appeal to tax courts
- Use of conciliation procedures before litigation
Appeals must be made within defined deadlines (e.g. 30 days after notification), and expert legal advice is highly recommended.
10. Updates in Fiscal Law in Turkey
As of 2025, Turkey has implemented or is planning several changes in its fiscal framework, including:
- New e-commerce VAT rules
- Expanded use of electronic fiscal documents
- Green tax incentives for sustainable investments
- Sector-specific audits in industries like pharmaceuticals, construction, and digital services
Staying updated with these reforms is essential for ensuring compliance and identifying tax planning opportunities.
Navigating fiscal law in Turkey requires diligence, expertise, and strategic planning. From corporate tax and VAT to digital taxation and incentives, companies must be aware of their obligations and rights under Turkish law.
By working closely with local tax advisors, investing in accounting systems, and adopting a proactive compliance culture, businesses can reduce risk, enhance transparency, and position themselves for long-term success in the Turkish market.
Need Help With Turkish Tax Compliance?
Whether you’re a local business or an international company expanding into Turkey, we can help you understand and navigate the complex fiscal landscape. Get in touch with our experts to ensure full compliance and take advantage of all legal tax opportunities.