Overview of Turkish Corporate Income Tax
Corporate income tax (Kurumlar Vergisi) is governed by Corporate Income Tax Law No. 5520. It applies to all companies incorporated in Turkey — including foreign-owned LLCs, JSCs, and branch offices — on their worldwide income if they are considered Turkish tax residents.
The standard corporate income tax rate is 25% for most companies. Financial institutions (banks, insurance companies, certain financial holding companies) are taxed at 30%.
Who Is Subject to Corporate Income Tax?
Full taxpayers (tax residents) are taxed on worldwide income. A company is a full taxpayer if:
- It is incorporated in Turkey (registered in the Turkish Trade Registry), OR
- Its effective management is located in Turkey (management decisions are habitually made in Turkey)
Limited taxpayers (non-residents) are taxed only on Turkey-source income. This category covers foreign companies with a Turkish branch or permanent establishment, and foreign companies earning passive income from Turkey (dividends, interest, royalties).
Foreign-owned Turkish LLCs and JSCs are full taxpayers — they are Turkish resident companies subject to tax on all income regardless of source.
Standard Corporate Tax Rate: 25%
The 25% rate applies to most Turkish companies. Important exceptions:
| Entity Type | Rate |
|---|---|
| Standard companies (LLC, JSC) | 25% |
| Banks and financial institutions | 30% |
| Insurance companies | 30% |
| Free zone manufacturers (≥85% export) | 0% (exempt) |
| Technopark companies (qualifying R&D/software) | 0% (exempt, through Dec 2028) |
| Companies with Investment Incentive Certificate | Reduced rate (2%–18% depending on region) |
Taxable Income
Corporate taxable income is computed as:
Revenue − Cost of Goods Sold − Operating Expenses − Allowable Deductions = Taxable Income
Allowable Deductions
The following costs are generally deductible for corporate income tax purposes:
- Salaries, wages, and social security contributions
- Rent and facility costs
- Depreciation of assets (Turkish depreciation schedules apply)
- Interest on business loans
- Professional fees (accounting, legal, consulting)
- Marketing and advertising expenses
- Insurance premiums
- Research and development expenditures (additional deductions may apply under Law 5746)
- Bad debt write-offs (with documentation requirements)
Non-Deductible Expenses
Common non-deductible items:
- Personal expenditures of shareholders/managers
- Fines and penalties
- Corporate income tax itself
- Disguised profit distributions to shareholders
- Expenses related to tax-exempt income
- Depreciation on assets not used in business
- Undocumented expenses (no valid invoice)
Key Tax Exemptions
Participation Exemption (Dividend Income)
Dividends received from Turkish subsidiaries are 100% exempt from corporate income tax at the holding company level, provided the holding company owns at least 10% of the subsidiary and has held that stake for at least 12 months.
See our Holding Company guide for details on holding structures.
Share Disposal Exemption
75% of capital gains from the disposal of shares in subsidiaries is exempt if the shares have been held for at least 2 years. The remaining 25% is taxable at 25%, resulting in an effective rate of approximately 6.25%.
Foreign Dividend Exemption
Dividends from foreign subsidiaries may be exempt from Turkish corporate income tax if:
- The Turkish company owns at least 10% of the foreign subsidiary’s share capital
- The stake has been held for at least 1 year
- The foreign subsidiary is subject to corporate income tax at a rate of at least 15%
- The dividend is declared by April 30 of the year following receipt
Free Zone Exemption
Manufacturing companies in Turkish free zones that export ≥85% of production are exempt from corporate income tax on qualifying profits.
Technopark Exemption
Software and R&D income of companies resident in technology development zones (technoparks) is exempt until December 31, 2028.
Advance Corporate Tax (Geçici Vergi)
Companies pay quarterly advance corporate tax throughout the year:
| Quarter | Payment Period | Deadline |
|---|---|---|
| Q1 (Jan–Mar) | April | May 17 |
| Q2 (Jan–Jun) | July | August 17 |
| Q3 (Jan–Sep) | October | November 17 |
The advance tax rate is 25% of the quarterly taxable income (cumulative, year-to-date). Advance tax payments are credited against the final annual tax liability.
Annual Corporate Tax Return
- Filing deadline: April 30 of the following year
- Payment deadline: April 30 (same day as filing)
- Filed electronically through the Revenue Administration (GİB) portal
If advance tax payments exceed the final annual tax liability, the excess can be:
- Offset against other tax debts, OR
- Refunded (subject to application and review)
Withholding Tax on Payments to Non-Residents
Turkish companies making certain payments to non-resident entities must withhold tax at source:
| Payment Type | Domestic Law Rate | Treaty-Reduced Rate |
|---|---|---|
| Dividends to foreign shareholders | 15% | 5%–15% (varies by treaty) |
| Interest to foreign lenders | 10% | 0%–10% (varies by treaty) |
| Royalties to foreign licensors | 20% | 0%–12% (varies by treaty) |
| Service fees (if permanent establishment risk) | 20% | Varies |
Turkey has double taxation treaties with 90+ countries that reduce many of these withholding rates. See our Double Taxation Treaties guide.
Loss Carryforward
Tax losses can be carried forward for 5 years to offset future taxable income. Losses cannot be carried back to prior years. The 5-year limitation is strict — losses expire after 5 years if not utilized.
Transfer Pricing
Related-party transactions (between the Turkish company and its foreign parent or affiliated entities) must be conducted at arm’s length prices. Turkish transfer pricing rules require documentation of the methodology used to set intercompany prices.
See our Transfer Pricing guide for full requirements.
Tax Filing Timeline Summary
| Tax Obligation | Deadline |
|---|---|
| Q1 advance tax | May 17 |
| Q2 advance tax | August 17 |
| Q3 advance tax | November 17 |
| Annual corporate tax return + payment | April 30 |
| Monthly VAT declaration | 28th of following month |
| Withholding tax declaration | 26th of following month |
Frequently Asked Questions
What is the effective corporate tax rate after exemptions? For companies fully benefiting from exemptions (e.g., a technopark software company), the effective rate can be 0%. For a standard company with no special exemptions, the rate is 25%. Companies with share disposal income pay an effective rate of approximately 6.25% on qualifying capital gains.
Are dividends paid to Turkish resident shareholders taxed? Dividends paid by a Turkish company to Turkish individual shareholders are subject to 15% dividend withholding tax (acting as final tax for the individual). Dividends to Turkish corporate shareholders (full taxpayers) are generally exempt under the participation exemption.
Can a Turkish company deduct head office management fees from the foreign parent? Management fees paid to a foreign parent are in principle deductible if they are at arm’s length and genuinely reflect services provided. However, they will be subject to scrutiny under transfer pricing rules and a reverse charge VAT obligation applies.
Does Turkey have a minimum tax or alternative minimum tax? Turkey does not have a traditional minimum tax system. However, the Revenue Administration can challenge transactions that appear designed solely to reduce tax liability under the general anti-avoidance rule (substance-over-form principles in Turkish tax law).