Turkey Income Tax Guide for 2022

Income tax in Turkey: It is a type of tax that is deducted from the income received by individuals or institutions. Gars Consulting Company provides you with important clarifications about the income tax system in Turkey.

What is income tax?

When faced with the question, what is income tax? It is a type of tax that is deducted from per capita income, after accounting for imports, profits and net returns that an individual earns in one year.

The income tax system in Turkey

The tax system in Turkey is divided into two parts:

• A part dealing with direct taxes, such as income tax and corporate tax.
• A part deals with indirect taxes, such as value-added taxes, stamps, automobiles, banking, insurance, property, telecommunications, customs, inheritance, gambling, and special consumption taxes.

As for the income tax system in Turkey, it is imposed on the income of individuals that may fall under one or more of the following incomes.

Income subject to income tax in Turkey

Revenues and profits included within the income subject to income tax according to the Income Tax Law in Turkey are:

1. Salaries

Income tax includes employee salaries, wages, and related supplements, such as allowances, bonuses, commissions, premiums, compensation, etc., and all employees are subject to income tax.

There is what is called in Turkey the stoppage tax or wage tax, which is the tax withholding from the source, as a certain amount (about 20%) is deducted from the salaries and wages received by employees and workers as income tax, so that the tax is deducted before the income reaches the owner's hands, the task of paying this tax is assumed by a third party other than the parties charged with paying it, for example, factory owners or owners of companies and all interests pay the tax of their workers and employees. Public sector institutions pay the salaries of their employees. This is done by deducting the tax from the wages of workers and employees and paying it to the concerned tax departments. the burden of tax officials, in addition to reducing the psychological impact that may appear on taxpayers by deducting this tax from their salaries the moment it reaches their hands.

2. Immovable capital income

These taxes are levied on income and rent of immovable property and rights from apartments, buildings, etc., as well as on loans owned by real estate taxes, as well as taxes levied for the preservation of immovable buildings and cultural sites.

This includes immovable property: land, buildings, and permanent lessors' rights.

Trucks, boats, planes, and other large transport vehicles and rental income from them are also accepted for the income tax applicable to immovable property.

3. Movable capital income

For movable property income, interest, profit distributions, rental returns, cash capital, and in-kind proceeds are included from movable property income, as those gains and interest are subject to income tax.

These taxes also include:

• Car taxes, which are applied to fixed amounts, where two basic things are taken into account, namely the age of the car and the ability of its engine.
• Gift and inheritance taxes.

4. Business profits

Business profits are subject to income tax, but there are conditions for business income tax to be imposed, which are:

• The business owner has a permanent establishment or a permanent representative in Turkey.
• The income is earned through the business of the institution or representatives.
• Income tax is calculated in commercial profits by the difference between the net profit assets of the company at the beginning and end of the calendar year.

5. Free business profits

Free business tax in Turkey is classified, along with all commercial and industrial activities and goods entering Turkey - imported - among the categories in which it is owed what is known as value-added tax (VAT).

Income from independent professional services, which means the activity of a self-employed person, and the services of lawyers, doctors, accountants, consultants, and engineers are also subject to income tax.

6. Agricultural profits

Profits from agricultural activities fall under income subject to income tax so that those activities include agricultural work done on land, sea, rivers, and lakes in the forms of cultivation, breeding, fishing, and other activities.

7. Revenue and other profits

These include the proceeds of independent services, that is, those that are not linked to a particular salary - as well as the stamp tax for card charges and other proceeds and profits.

Read also our article about Tax number in Turkey

Categories obligated to pay full income tax

• Permanent residents of Turkey.
• Residents in Turkey for six months or more without interruption during the calendar year.
• Turks residing outside Turkey as a result of the activities and actions of companies and institutions based in Turkey.

Categories obligated to pay partial income tax

Individuals not residing in Turkey are subject to incomplete tax assignments, where taxes are deducted only from profits and imports received from Turkey but not from outside Turkey.

Income tax brackets in 2021

Income tax brackets in Turkey are divided as follows:

• The first bracket is up to 24,000 TL: their tax is 15%.
• The second bracket of 24,000 TL to 53,000 TL: their tax is 20%. 
• The third bracket is from 53,000 TL to 190,000 TL: their tax is 27%.
• The fourth bracket is from 190,000 TL to 650,000 TL; their tax is 35% 
• The fifth bracket is above 650,000 TL: their tax is 40%.

How to calculate income tax in 2021: application example

If the taxable amount is 61,000 TL, for example, then the calculation of his tax will be as follows:

15% of the amount of 24,000 (the first bracket), i.e. 3,600 TL, is deducted from the aforementioned amount, and 20% is deducted from the second bracket (the remaining part of 53,000 TL after subtracting 24,000), i.e. 20% of the 29,000 in the second bracket, so his tax is 5,800 TL, and the remaining Of the amount, which is 8,000, it falls into the third bracket, so it is subject to a tax of 27% so that its tax is 2,160.

Then the results of the withholding taxes are collected from the three brackets to get the tax rate imposed on the mentioned amount: 3600 + 5800 + 2160 = 11560, the tax imposed on the amount of 61,000 TL.

Frequently asked questions about income tax in Turkey

Edited by Gars Consulting Company

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