Request a Consultation Meeting
You can request a free 15-minute consultation to get detailed information about our processes.
SERVICES
Double Taxation Treaties in Turkey
AAA CPA Services provides international tax consulting to multinational corporations to optimize their tax liabilities. It also provides tax planning under double tax treaties and full support with transfer pricing reporting.
Services:
- Consulting under double taxation agreements
- Transfer pricing reporting
- Foreign affiliate income and withholding transactions
Service Processes
AAA aims to provide the best service by combining traditional accounting rigor with modern technology.
No matter where you are, entering a new market is like learning the rules of a game. You may know the general objective, but the specific rules can catch you off guard. For global investors looking at Turkey, the obvious opportunities include a massive domestic market, a strategic location, and a vibrant manufacturing sector. However, the rulebook, especially the tax code, can be complicated.
Our team at 3A SMMM is ready to help you navigate Turkey’s highly regulated, strictly enforced, and constantly evolving tax code.
Understanding the Turkish Taxation System for International Entities
Turkey’s tax regime is based on OECD standards, making it familiar to European and North American investors. However, it has some unique characteristics that may confuse foreign investors.
The Turkish tax system is primarily based on residency. If your company’s legal seat or place of management is in Turkey, it is considered a “full taxpayer” and is taxed on its worldwide income. If your company is a branch or a non-resident entity, you are a “limited taxpayer” and are only taxed on income generated within Turkey. Understanding this distinction is the first step in effectively planning for foreign entities in Turkey.
Compliance with Corporate Tax in Turkey
The backbone of the Turkish tax system is corporate tax. Although corporate tax in Turkey has been set at 25%, the calculation of the tax base involves various non-deductible expenses and specific exemptions that differ from those in other jurisdictions.
For foreign entities, the declaration process can be difficult and complicated. Companies must submit quarterly provisional tax returns in addition to an annual return. This means you are effectively paying your taxes in installments throughout the year. Failure to file and pay quarterly reports can result in fines and interest charges.
Managing VAT in Turkey (Value Added Tax)
For foreign investors, the most complicated part of Turkey’s tax system is the value-added tax (VAT), which is locally known as the KDV. Unlike US sales tax, VAT is added at every stage of the supply chain in Turkey. The standard rate is currently 20%, though reduced rates apply to basic goods such as textiles and food. Agricultural products are taxed at a rate of 1%.
For international businesses, VAT withholding is a crucial concept. If a foreign company provides a service to a Turkish company, the Turkish company acts as the tax collector, withholding the VAT and paying it directly to the government. Understanding how this mechanism works is essential to correctly pricing your services.
How Double Taxation Treaties in Turkey Protect Your Global Income
For foreign investors, the most complicated part of Turkey’s tax system is the value-added tax (VAT), which is locally known as the KDV. Unlike US sales tax, VAT is added at every stage of the supply chain in Turkey. The standard rate is currently 20%, though reduced rates apply to basic goods such as textiles and food. Agricultural products are taxed at a rate of 1%.
For international businesses, VAT withholding is a crucial concept. If a foreign company provides a service to a Turkish company, the Turkish company acts as the tax collector, withholding the VAT and paying it directly to the government. Understanding how this mechanism works is essential to correctly pricing your services.
Strategic International Tax Consultancy in Turkey
The interaction between Turkish local law and international treaties is complex. General advice often isn’t enough. At 3A SMMM, our expert team is ready to be your strategic international tax consultancy partner.
No matter what industry you work in, our highly educated and experienced team is ready to support you every step of the way to help elevate your profits.
Cross-Border Tax Planning and Income Tax in Turkey
Turkey has a progressive income tax system, with rates climbing up to 40% for high earners. However, Turkey’s wealth taxes are relatively limited compared to those of some European nations. While there is no direct wealth tax on bank balances, valuable house and motor vehicle taxes are still applicable.
Proper cross-border planning can help you structure your executives’ compensation packages to be tax-efficient. Our expert team at 3A SMMM will ensure that you won’t face an unexpected tax burden while working abroad.
Navigating Salary Taxation in Turkey and Social Security
Understanding how salary taxation works in Turkey is crucial for budgeting because there is a significant difference between an employee’s net salary and the total cost to the employer.
Turkey uses a progressive income tax system, so the more an employee earns throughout the year, the higher their tax bracket becomes, causing their net salary to decrease in later months if the contract is agreed upon in gross terms. Conversely, if you agree to a net salary, the employer’s costs will increase significantly towards the end of the year to cover the additional tax burden.
Additionally, both the employer and the employee must contribute to social security and unemployment insurance. The employer’s share is substantial, often adding roughly 22.5% to the gross salary. Our professional payroll team runs these simulations to ensure you know your total cost before making a hiring offer.
Legal Compliance: Obtaining a Work Permit and Residence Permit in Turkey
Hiring local Turkish talent is straightforward, but transferring your own foreign staff to your Turkish branch adds another layer of complexity and bureaucracy. Foreigners cannot simply land in Turkey and start working without a valid work permit.
A work permit in Turkey also serves as a residence permit for the duration of employment. The application process involves the Turkish consulate in the employee’s home country and the Ministry of Labor in Turkey.
There are strict criteria for foreign companies employing foreign staff. Generally, they must employ five Turkish citizens for every one foreign employee to ensure local employment is protected.
Navigating this process requires expert legal guidance to gather the correct documents and justify the hiring. At 3A SMMM, we are ready to be your strategic partner and ensure that your hiring process goes smoothly and stress-free.
The Benefits of HR and Payroll Outsourcing in Turkey
Outsourcing HR and payroll in Turkey mitigates risks and increases efficiency. Turkish labor law dictates strict rules regarding everything from annual leave entitlements to the specific calculations of severance pay upon termination.
Partnering with a local expert like 3A SMMM ensures that your contracts are airtight, your work permit applications are filed correctly, and your salary taxes in Turkey are calculated precisely.
Please fill out the form. We will contact you as soon as possible to discuss your project.
Accounting and Financial Reporting Services
AAA CPA Services meticulously manages all of your company's accounting processes.
Tax Consulting and Compliance Services
AAA CPA Services prepares your VAT, withholding tax, provisional tax, corporate tax and all other returns accurately, on time and in compliance with the legislation.
Payroll and Human Resources Services
AAA CPA Services makes complete salary calculations, social security and tax deductions, and submits your legal notifications on time.
Company Establishment and Restructuring Services
We provide fast and legal company establishment services for local and foreign investors who want to start a business in Turkey.
International Tax and Double Taxation Consultancy
AAA CPA Services provides international tax consulting to multinational corporations to optimize their tax liabilities.
Technology and Automation Supported Financial Solutions
We manage your accounting processes faster and more accurately with our technology-focused solutions.
Payroll and HR in Turkey FAQS
What are the mandatory social security contributions in Turkey?
The total contribution is approximately 37.5% of the gross salary, divided between the employer (about 22.5%) and the employee (about 15%). This covers health, retirement, and unemployment insurance.
How do I obtain a work permit for a foreign employee?
The employer must submit the required documents to the Ministry of Labor to prove that the company meets the “five Turks to one foreigner” employment ratio and pays the minimum required salary.
Can I hire employees in Turkey through an EoR?
Yes, an Employer of Record (EoR) legally hires staff on your behalf, enabling you to employ workers in Turkey without setting up a local legal entity.
What is the "Severance Pay" (Kıdem Tazminatı) rule?
Employees who have worked for at least one year and are terminated without just cause (or who retire) are entitled to one month’s gross salary for each year of service, up to a cap determined by the government.
Are payroll records required to be in Turkish?
Yes, according to Turkish commercial and labor laws, all official payroll records, pay stubs, and employment contracts must be written in Turkish for auditing purposes.