Compared to the UAE, Turkey has high taxes. But the country remains a fairly popular destination for relocation: as of January 2023, there were 1.35 million foreigners living there with a residence permit.
Income tax is levied on a progressive scale. The rate is up to 40% and depends on the annual income.
The tax base is calculated in the national currency, the Turkish lira (TL): in January 2023, its value slightly exceeded $0.05. The tax is levied on income from employment, rental of real estate, yachts and aircraft, as well as on pensions, dividends, interest, royalties and capital gains.
Residents pay tax on income earned in Turkey and abroad, and non-residents pay only on income from Turkish sources.
The rates of income tax in Turkey are the following:
15% — up to TL 32,000;
20% — TL 32,000 to TL 70,000;
27% — TL 70,000 to TL 250,000;
35% — TL 250,000 to TL 880,000;
40% — over TL 880,000.
Part of the paid tax can be returned as deductions for education expenses, life and health insurance, and charitable donations.
Withholding tax rates are:
15% — on dividends;
20% — on royalty;
0% to 18% — on interest.
Taxes on capital gains from the sale of securities, dividends and interest, in some cases, are levied on special conditions:
profits from the sale of certain securities, such as shares traded on the Istanbul Exchange, may not be taxed at source at a reduced rate or not be taxed at all;
half of the dividends from Turkish companies are free from income tax;
interest on certain government and corporate bonds is subject to withholding tax at reduced rates;
interest on bank deposits is taxed at 10% or 18%, depending on the deposit amount and currency.
Investors with income in other countries can reduce the taxes they pay in Turkey through double tax treaties. Turkey has concluded such agreements with 87 states; the conditions depend on the specific country.
Becoming a Turkish tax resident is available to a person who has lived in the country for more than 6 months during a calendar year. At the same time, foreigners who came to the country for study, treatment or recreation cannot apply for tax residence.
Long-term residence in Turkey requires a special status, a residence permit or citizenship. Foreigners can get a Turkish passport by investing at least $400,000 in real estate or $500,000 in securities, a business or a deposit. The most popular option is the purchase of the real estate.
Property taxes are paid on purchase, ownership and sale.
A transfer tax of 4% is paid on purchase. By law, the seller and the buyer pay it in half, but in practice, the buyer pays the full amount more often than not.
Also, VAT of 1 to 18% of the property value is paid, depending on the property area and purpose. Foreigners don’t pay VAT when buying real estate from a developer.
When concluding and registering a transaction, a stamp duty of 0.1 to 0,6% and a fee for issuing a TAPU, an analogue of a certificate of ownership, are paid.
Owners of residential and industrial real estate annually pay tax at 0.1—0.2%, depending on the property location. The rates are higher for land plots and commercial real estate.
The sale is accompanied by paying taxes if the tenure is less than 5 years. The rate is 15% to 35%; the tax base is the difference between the sale price and the value in TAPU.
Turkey citizenship by investment doesn’t allow investors to optimise taxes as effectively as a UAE residence visa. But a Turkish passport provides many other benefits, such as relocation to the country, getting a long-term visa for tourism or doing business in the USA, and visiting 100+ countries without visas.
Applicants can return the investment as early as 3 years after obtaining citizenship. This period is shorter than under many other investment programs.
