Turkey: Favorable Tax Rate for Transit Trade Operations

Türkiye has been always an economic environment open to international investments and do not step back showing its appetite on incoming capital with his bridge role among Europe and Asia. In that regard, always highlighting the geographical advantage of the State has been offered to international capital providers, supporting with the legal infrastructure but especially tax regulations.

As an early step in 2012, to play a hub role, many shared service activities to non-Turkish entities from Türkiye (i.e. architecture, engineering, design, software, medical reporting, accounting, call center, product testing, certification, data storage, data processing, data analysis) has been enabled to benefit from 50% exemption on profit, which limits the effective tax rate to 10% for these services (current tax rate in Türkiye is 20% for now). Moreover, capital gains received by Turkish holding companies on non-Turkish entities’ shares are fully exempted from Turkish corporate income taxation under certain conditions till 2006.

In line with the charming international hub role of Turkish entities, currently a new enactment regulated in corporate income tax law as below literally:

“50% of earnings of corporates, in accordance with the provisions of the Istanbul Financial Center Law dated 22/6/2022 and numbered 7412, the institutions operating in the Istanbul Financial Center Region by obtaining a participant certificate, exclusively sell the goods purchased from abroad within the scope of this activity without being brought to Türkiye, or act as an intermediary in the purchase and sale of goods abroad, are exempt from corporate income tax.

In order to benefit from this discount, it is essential that the annual corporate tax return for the accounting period in which the income is earned has been transferred to Türkiye by the due date, and the seller and buyer of the goods related to the intermediary activity must not be in Türkiye.”

Accordingly, Türkiye has enacted a legislation welcoming international transit traders with 50% exemption on corporate income tax base, which lowers the effective tax rate to 10%, which is very competitive as compared to European region legislations. As a result, together with the geographical advantageous of the state, together with the logistics and manpower logistics close to Europe, the international traders to be structured in Türkiye has been promoted with a supportive tax rate.

Istanbul Finance Center is a new special zone in very center of İstanbul and it is very much supported by the Government. Further regulation in respect of permission on operating in İstanbul Finance Center will be regulated by the Presidential Office. It is believed that bylaw to operate in special zone will be completed further to announcement of new secretaries of State or Ministries in new governing era of Türkiye.

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