Corporate Income Tax:
For tax purposes, companies are grouped as limited liability companies (corporations and limited companies) and personal companies (limited and ordinary partnerships). Corporate tax applies to limited liability companies. State economic enterprises and business entities owned by societies, foundations and local authorities are also subject to corporation tax.
Whether a company is subject to full or limited tax liability depends on its status of residence. A company, whose statutory domicile or place of management are established in Turkey (resident company), will have full tax liability; in this case, worldwide income is taxable. If a non-resident company conducts business through a branch or a joint venture, it will have limited tax liability; i.e. fully subject to corporate tax on profits earned in Turkey on an annual basis. If there is no presence in Turkey, withholding tax will generally be charged on income earned; for example, for services provided in Turkey. However, if there is an avoidance of double taxation treaty, reduced rates of withholding tax may apply.
The basic corporate income tax rate levied on business profits is 30% in Turkey. Dividend withholding tax is also applied in the event of profit being distributed to share holders. For resident corporations, tax is levied on worldwide income, but credit is given for foreign tax payable in respect of income from foreign sources (up to the amount of Turkish corporate income tax, i.e. 30%)
Corporate entities having their statutory domicile and place of management outside Turkey, but established in Turkey in the form of a branch are subject to tax on an annual return based on income received from the permanent establishment in Turkey.
From the non-resident's point of view, many payments abroad including those for professional services and technical assistance, royalties and rentals are subject to withholding tax at rates varying between 10% to 25%.
In this regard, countries having avoidance of double taxation treaties with Turkey have considerable advantages. Turkey has signed such treaties with 60 countries and the investors of these countries can benefit from a reduction in withholding taxes. Countries with which Turkey has bilateral tax treaty agreements came into force as of April 2005 are as follows:
Albania, Algeria, Austria, Azerbaijan, Belarus, Bangladesh, Belgium, Bulgaria, Czech Republic, Croatia, China, Denmark, Egypt, Estonia, Finland, France, Germany, Greece, Hungary, India, Indonesia, Israel, Italy, Japan, Jordan, Kazakhstan, Kyrgyzstan, Kuwait, Latvia, Lithuania, Luxemburg, Macedonia, Malaysia, Moldova, Mongolia, Netherlands, Norway, Pakistan, Poland, Romania, Russia, Saudi Arabia,(*), Singapore, Slovakia, Slovenia, South Korea, Spain, Sudan, Sweden, Syria, T.R. of Northern Cyprus, Tajikistan, Thailand, Tunisia, Turkmenistan, Ukraine, United Arab Emirates, UK, USA, Uzbekistan,
This agreement covers only air transportation activities. |
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