In general, individuals residing in Turkey are liable for personal income tax on all of their income derived in and outside Turkey. However, individuals who do not reside in Turkey but receive part of their income from Turkey are liable for income tax only on their income derived in Turkey. The former is known as “full liability taxpayers”, and the latter as “limited liability taxpayers”.
Expatriates who reside in Turkey for more than six months in one calendar year are generally considered as having permanent residence in Turkey and are taxed on their worldwide income. Foreigners who are in Turkey for a fixed period on a temporary assignment are not regarded as resident taxpayer in Turkey, even if they stay for more than six months.
In determination of the extent of Turkish tax liability of an expatriate, the relevant provisions of double tax treaties should also be considered.
In order for wages to be taxable in Turkey, the services must be performed or benefited in Turkey; the payment must be made in Turkey; or if the payment is made in a foreign country, it must be transferred to the account of a company in Turkey.
Personnel sent to Turkey by companies with headquarters outside Turkey in order to carry out assembly work or perform any other specific task are taxed on emoluments paid by the local employer covering their costs in Turkey. On the other hand, the emoluments that such personnel receive with respect to their position in their home country and paid by the head office abroad are not subject to Turkish taxation. However, consideration (in the form of wages, salaries or attendance or other fees) received outside Turkey by chairmen, directors, other officials or the auditors of companies located in Turkey is considered to be earned in Turkey (and therefore subject to Turkish taxation) if it has been charged to the account of a company or individual resident in Turkey.
Regardless of their nationality, most Turkish residents, unless covered by an exemption, are subject to personal income tax. The emoluments of employees of some non-resident companies are exempt from income tax if they meet the following conditions:
• The employer is non-resident.
• The emoluments are paid in terms of a foreign currency.
• The emoluments are paid from gains of the employer outside Turkey and not deducted from the tax base in Turkey as a wage and salary expense.
The income tax exemption mentioned above is effectively applicable only to employees of liaison offices.
Income tax is levied on the following types of income:
• Business profits (Commercial Income)
• Agricultural profits
• Salaries and wages (defined further below)
• Income from professional services (such as services rendered by lawyers, tax consultants, engineers etc.)
• Income from immovable property (mainly rental income)
• Income derived from securities (interests, dividends)
• Other income (capital gains and nonrecurring income)
Each income item is defined in the Income Tax Law.
All income arising from an individual's employment is subject to personal income tax. As a rule, all benefits received from the employer (in cash or in kind) fall within the definition of emoluments, however, there are some exceptions to this general rule (for example, equipment that the employer owns but assigns to the usage of the employee do not give rise to assessment). Social security contributions (including contributions to be paid to the Unemployment Insurance Plan starting from 1 June 2000) are also allowable expenses, as well as additional insurance premiums against sickness and life policies.
Additionally, employees are granted particular amount of subsistence allowance varying according to their spouse’s working status and the number of their children.
The progressive income tax rates for personal income (with effect from 1 January 2009) are shown in Table 9.03.
Table 9.03 Individual Income Tax Rates for 2009
| Taxable Income (TRL) | Rate (%) |
| Up to 8,700 | 15 |
| Between 8,701 – 22,000 | 20 |
| Between 22,001 – 50,000 | 27 |
| Above 50,000 | 35 |
The tax year for individuals is calendar year and thus ends on 31 December. The filing and payment schedules vary according to the type of income. Generally individuals must file their income tax return by 25 March of the following year. The income tax must be paid in two equal installments by the end of March and July.
On the other hand, individuals earning commercial and/or professional service income are required to make advance income tax payments based on 15% of quarterly profits shown in their quarterly income statements. Advance income tax of a quarterly period is to be declared within 14th day of the following second month of the end of the quarterly period and paid on the 17th day of the following second month of the end of the quarterly period.
If the advance income tax payments during a year exceed the actual income tax liability to be declared on annual individual income tax return, the excess may be credited against other tax liabilities. Any remaining tax can be paid back to the taxpayer upon written application to the tax office. If Tax Authorities find out that the difference between the actual advance income tax amount declared and the income tax amount which must have been declared is greater than 10% of the income tax that must have been declared, a tax loss penalty and delay interest shall be calculated on the missing portion of the declaration over 10%.
Income Tax is withheld at source from a wide range of payments, including employment income. Generally, employees and a number of other individuals are not required to submit annual individual income tax returns if the tax withheld at source constitutes the final tax burden.
If an individual’s only source of income is his salary and he receives salary only from one employer, he does not have to file annual income tax return. If the individual works for more than one employer, the salaries received from the other employers have to be declared by an annual income tax return, provided that the salaries received from the other employers exceed TRL 19,800 and 22,000 for the year 2008 and 2009, respectively.