An up-to-date guide for the British Companies who considers doing business in Turkey, is prepared by Levene Consulting on "How to do Business in Turkey" by referring to Fiscal requirements, Tax and Legal Environment.
The guide has been prepared for the benefit of those who are intending to enter the Turkish Market or continuing a business in Turkey. We aim to provide a broad overview of the essential things that should be taken into account by all companies before initiating an organisation in Turkey.
Turkish Fiscal and Legal Requirements face frequent amendments (depends on the industry or sector) thus we recommend that anyone considering doing business in Turkey or looking to the area as an opportunity for expansion, should seek professional advice before making any business or investment decision.
Our dynamic team is capable of doing extensive research on ever-changing subjects and lead our clients into the most feasible way of doing business in a new market. Use of Primary or Secondary Research, Project Planning, Applications & Authorisations and B2B consultancy is some of our strengths.
Please do not hesitate to contact with Levene Team if you need any professional advice.
What you will find in the report?
A company whose statutory domicile or place of management is in Turkey (a resident company) is subject to full tax liability, i.e. its worldwide income is taxable. If a non-resident company conducts business through a branch or a joint venture, it has limited tax liability, i.e. it is fully subject to corporate income tax on profits earned in Turkey on an annual basis. If there is no presence in Turkey, withholding tax is generally applied to income earned, for example, in respect of services provided in Turkey. If there is a tax treaty in force, reduced rates of withholding tax may apply.
A foreign organisation who has no residency status and have principal place of business in a different country is called “Limited Taxpayer” in Turkish Commercial Code and subject to taxation only on the profits based in Turkey.
When a company provides services such as SW development or Engineering service (rather than trade based commercial gain), falls into “Gain from Self-Employment” status due to the nature of service provided and can be exempted or benefit from reduced rate of Withholding tax. To prevent any possible confusion, the term self-employed is not equivalent of sole-trader in the European commercial code.
Turkey and UK have signed “Double Taxation Agreement” which allows British companies to do business in Turkey by paying only the taxes through the profits earned in Turkey.
In case of a business address (as well as a business) exist for a foreign company, Corporate Income Tax applies at a rate of 22% on net profits gained. On the other hand, if there is no place of business exist in Turkey (such as Import/Export or self-employed services), Withholding Tax applies at a rate of 20% (the rate for professional or technical services) on earnings. The withholding tax is paid by the resident company or the tax agent to the relevant tax office.
The VAT (KDV in Turkish) rates apply as 18%. There is also a so-called reverse charge VAT mechanism, in which the VAT is calculated and paid to the related tax office by the Turkish company on behalf of the foreign company. Generally, A foreign business with no establishment in Turkey but which sells goods located in Turkey must appoint a tax representative (agent) in order to register for VAT. It is not possible to register without the appointment of such a representative, i.e.; direct registration is not possible.
The Customs duty applies to ** is currently “0” (18% VAT) and under HS code ***.00.00.
Personal Income Tax: The PIT rate is between 15-35% and calculated over annual income.
British nationals need a visa to enter Turkey, the Visa requirements of Turkey differ on the desired length of stay. An E-visa allows visits for multiple stays up to a maximum of 90 days in a 180-day period.
Travel length is a crucial item and must be tracked by the employer both for visa topics and to obey “183 days rule” which defines the residence time element. Briefly, if the business activity do not exceed 183 days in a calendar year / fiscal year, the foreign organization pay tax in their own country due to double tax treaties, no obligation for personal income tax, no need for resident permit applications and potential withholding tax exemptions may apply.
There may be a Withholding Tax exemption for a limited taxpayer (in the nature of Self-employed activity) with no residency in Turkey, if the service is provided without the need of visiting Turkey or the business activity do not exceed 183 days in a consecutive 12-month period.
OUR PARTNER IN TURKEY - REHBER CONSULTING:
Since 1981, Rehber Consulting based in Ankara/Turkey, provides specialised services on Tax and Legal Consultancy, Financial Audit, IT System audit and Certified Public Accountancy CPA services.
Rehber Consulting is a proud member of the leading audit and financial advisory organisation ANTEA.
We are a boutique consulting firm based in London / UK specialised in TR-UK trade & business. Our team prepares Tailor-made, sector based or industrial reports based on your business needs.
With the help of our close collaboration with reputable partners in Turkey and local service providers based in UK, we aim to be your one-stop trusted partner in all your business projects.