Taxation of Foreign Companies in Turkey

The taxation of foreign companies in Turkey turns on one question: where are the company’s legal centre and its business centre? A corporation with either of them in Turkey is a full taxpayer and is taxed on all its income, earned in Turkey or abroad. A corporation with neither of them in Turkey is a limited taxpayer and is taxed only on the income it derives in Turkey (5520 sayılı Kurumlar Vergisi Kanunu m.3/1, m.3/2).

Being foreign is therefore not a tax category of its own. A company that a foreign group sets up in Turkey with its centre here is a full taxpayer like any Turkish company. A foreign company that sells into Turkey, renders services to Turkish clients or runs a branch here is a limited taxpayer, and the way it pays tax depends on the kind of income: through a return for the commercial profit of a branch, and through withholding by the Turkish payer for fees, rents, interest, dividends and royalties.

The general corporate tax rate in Turkey is 25 percent in the text in force on 22 September 2026, with 30 percent for the financial sector and reduced rates for export and production income (m.32/1, m.32/7, m.32/8). This guide sets out who is taxed, on which income, at which statutory rate, and where the rate actually applied comes from a Presidential decision rather than the Law.

1. Taxation of Foreign Companies in Turkey: Full and Limited Taxpayers

The taxation of foreign companies in Turkey starts from the list of taxable entities. Corporate tax is charged on the income of capital companies, cooperatives, economic public institutions, economic enterprises of associations and foundations, and joint ventures (5520 sayılı Kurumlar Vergisi Kanunu m.1/1). Foreign entities enter that list through the definitions: joint stock companies, limited companies and partnerships limited by shares are capital companies, and so are foreign entities of a similar nature (m.2/1).

Once a foreign company is within the Law, the type of liability depends on two locations that the Law defines:

• Legal centre: the centre shown in the entity’s founding law, Presidential decree, statute, articles or contract (m.3/5).
• Business centre: the centre where business transactions are in fact concentrated and managed (m.3/6).

A corporation whose legal centre or business centre is in Turkey is a full taxpayer on the whole of its income earned inside and outside Turkey (m.3/1). A corporation whose legal centre and business centre are both outside Turkey is a limited taxpayer, taxed only on the income it derives in Turkey (m.3/2).

The word “or” in the first rule matters for groups. A company incorporated abroad whose business is in fact managed from an office in Turkey has its business centre here, and full liability follows from that alone. Conversely, a company whose articles place its centre in Turkey has its legal centre here, so a Turkish subsidiary of a foreign group is a full taxpayer however its shares are held. The formation side of that choice is set out in setting up a company in Turkey as a foreigner.

1.1. Taxation of Foreign Companies in Turkey: What Counts as Turkey-Source Income

For a limited taxpayer, taxation of foreign companies in Turkey reaches only the income listed in the Law (5520 sayılı Kurumlar Vergisi Kanunu m.3/3):

• commercial income from business carried out through a workplace in Turkey or through a permanent representative, within the meaning of the Tax Procedure Law;
• income from an agricultural enterprise in Turkey;
• professional service income earned in Turkey;
• income from renting movable and immovable property and rights in Turkey;
• income from movable capital earned in Turkey;
• other income earned in Turkey.

Goods bought in Turkey for export and sent abroad without being sold in Turkey do not produce income earned in Turkey, even where the company has a workplace or representative here. Selling in Turkey means that the buyer, the seller or both are in Turkey, or that the sale contract is made in Turkey (m.3/3-a).

Whether income is earned in Turkey is decided under the Income Tax Law (m.3/4). That Law gives a separate test for each type of income (193 sayılı Gelir Vergisi Kanunu m.7):

Type of income	When it is earned in Turkey
Commercial income	The earner has a workplace or permanent representative in Turkey and the income is obtained at that place or through that representative
Professional service income	The activity is performed in Turkey or evaluated in Turkey
Rent from immovable property	The property is in Turkey, and such property and rights are used or evaluated in Turkey
Income from movable capital	The capital is invested in Turkey
Other income	The transaction producing it is performed or evaluated in Turkey

“Evaluated in Turkey” has a statutory meaning: the payment is made in Turkey, or, if made abroad, it is recorded in the accounts of the Turkish payer or of the person on whose behalf it is paid, or set aside from its profit (193 sayılı Gelir Vergisi Kanunu m.7). This is why a fee paid by a Turkish company to a foreign consultant can fall within Turkish tax even where the consultant never comes to Turkey, as long as a treaty does not allocate the taxing right elsewhere (see the treaty section below).

2. Taxation of Foreign Companies in Turkey: Workplace and Permanent Representative

Commercial income of a foreign company is taxed in Turkey only where it is earned through a workplace or a permanent representative (193 sayılı Gelir Vergisi Kanunu m.7). Domestic law uses these two terms; “permanent establishment” is the language of the tax treaties.

The workplace is defined by the Tax Procedure Law. It is a place allocated to or used in a commercial, industrial, agricultural or professional activity, and the Law lists examples including a shop, office, administrative office, factory, branch, warehouse, hotel, farm, mine, quarry and construction site (213 sayılı Vergi Usul Kanunu m.156). The Income Tax Law refers to that definition for the workplace test (193 sayılı Gelir Vergisi Kanunu m.8).

The permanent representative is defined in the Income Tax Law. It is a person bound to the represented party by a service or agency contract and authorised to carry out commercial transactions in its name and on its behalf, for a fixed or indefinite period or repeatedly. Three categories are treated as permanent representatives without any further condition (193 sayılı Gelir Vergisi Kanunu m.8):

• commercial representatives, commercial agents and employees, and those who are agents under the Commercial Code;
• persons whose expenses, other than advertising expenses of the represented party, are paid in whole or in part by the represented party on a continuing basis;
• persons who continuously keep goods in their shops or warehouses to sell on consignment on behalf of the represented party.

Representing several principals at the same time does not change a person’s status as permanent representative (193 sayılı Gelir Vergisi Kanunu m.8). For a foreign company that sells through a Turkish distributor or agent, the second and third categories are the ones to check first: they turn on who pays the local expenses and who holds the stock, not on the title of the contract.

3. Corporate Tax in Turkey: the Rate

Corporate tax in Turkey is charged at 25 percent of corporate income in the text of the Law in force on 22 September 2026. A 30 percent rate applies to the corporate income of banks, companies within the scope of Law No. 6361, electronic payment and money institutions, authorised foreign exchange institutions, asset management companies, capital market institutions, insurance and reinsurance companies, pension companies, and the companies that are parties to the contract in build-operate-transfer projects under Law No. 3996 and public-private partnership projects under Law No. 6428 (5520 sayılı Kurumlar Vergisi Kanunu m.32/1).

3.1. Turkey Corporate Tax Rate: Why the Year Matters

The Turkey corporate tax rate has not been constant, and the rate for a return is the one applying to that return’s period. The Law’s own transitional provision shows the recent movement: against a base rate of 20 percent in paragraph 1 of Article 32 as it then stood, the rate was applied as 25 percent for the 2021 tax period and 23 percent for the 2022 tax period, and for companies with a special accounting period those rates applied to periods beginning in the relevant year (5520 sayılı Kurumlar Vergisi Kanunu geçici m.13).

For a foreign investor this has two practical consequences. A rate quoted in an older source may belong to a closed period. And a dispute about an earlier year is decided on the rate for that year, not on today’s 25 percent.

3.2. Turkey Corporate Tax Rate: Reduced Rates for Exports and Production

The Turkey corporate tax rate is lower for export income and for production income:

• Exports. Income that exporting corporations derive exclusively from exports is taxed at a rate 5 points lower. The same reduction applies to manufacturers and suppliers exporting through foreign trade capital companies or sectoral foreign trade companies under an intermediated export contract (5520 sayılı Kurumlar Vergisi Kanunu m.32/7).
• Production. The rate is 12.5 percent on income that corporations holding an industrial registry certificate and actually engaged in production derive exclusively from production, and on income that corporations engaged in agricultural production derive exclusively from that production. Income that uses this rate does not receive the export reduction as well (m.32/8). Paragraph 8 was rewritten in this form on 21 May 2026 by Law No. 7582.

The export and production reductions are applied to the rate that results after the other reductions in Article 32 (m.32/9). Each of them depends on conditions in the paragraph itself, such as the word “exclusively”, so the reduced rate is a matter of how the company’s income is actually made up rather than a status that follows from being a manufacturer.

3.3. Corporate Tax in Turkey: Advance Tax for Limited Taxpayers

Corporate tax in Turkey is also paid during the year through advance tax, calculated at the current period’s corporate tax rate and credited against the year’s corporate tax. For limited taxpayers the advance tax is limited to commercial and agricultural income, and the rules for full taxpayers otherwise apply to them in the same way (5520 sayılı Kurumlar Vergisi Kanunu m.32/2). The President may reduce the advance tax rate by up to 5 points and restore it to the statutory level (m.32/3).

4. Withholding Tax in Turkey on Payments to Foreign Companies

Withholding tax in Turkey is how most limited taxpayers pay their Turkish tax. The foreign company does not file anything; the Turkish party making the payment deducts the tax. The Law imposes a 15 percent corporate tax withholding on the following income of limited taxpayer corporations, to be made by whoever pays it in cash or on account, advances included, or accrues it (5520 sayılı Kurumlar Vergisi Kanunu m.30/1):

• progress payments to corporations carrying out construction and repair work spread over more than one calendar year;
• professional service income;
• income from immovable capital, such as rent;
• income from movable capital, except the items in sub-paragraphs (1) to (4) of the second paragraph of Article 75 of the Income Tax Law;
• payments within the scope of the seventh paragraph of Article 11 of the Tax Procedure Law;
• payments by intermediary service providers and e-commerce intermediary service providers under Law No. 6563 to service providers that have a workplace or permanent representative in Turkey;
• payments for goods and services bought from those with a workplace or permanent representative in Turkey, in sectors or fields of activity determined by the President.

Three further withholding rules sit in the same Article:

• Royalties and intangible rights. Amounts paid or accrued for the sale, transfer or assignment of copyrights, concessions, patents, business rights, trade names, trademarks and similar intangible rights are subject to 15 percent withholding, whether or not the amount forms part of commercial or agricultural income (m.30/2).
• Trade fairs. Commercial income of taxpayers without a workplace or permanent representative in Turkey from fairs and exhibitions opened with the authorities’ permission is subject to 15 percent withholding within the corporation (m.30/5).
• Listed countries. All payments to corporations resident or operating in countries announced by the President, on the basis of whether their tax systems produce a taxation capacity at the level of the Turkish system and of exchange of information, are subject to 30 percent withholding, whether or not the payment is within the scope of tax and whether or not the recipient is a taxpayer (m.30/7).

“Payment on account” covers every record or transaction that shows the payer as owing the income to the person entitled to it (m.30/10). The withholding therefore arises when the Turkish company books the liability, not only when money leaves its account. Tax is withheld on the gross amount; where the payer takes the tax on itself, the withholding is calculated on the amount actually paid plus the tax borne (m.30/11). Payers show the withholding separately in their records (m.30/12).

Rental income of a foreign owner of Turkish real estate falls within this regime; the acquisition side is covered in property acquisition by foreigners in Turkey.

4.1. Withholding Tax in Turkey: Who Sets the Rate Actually Applied

The 15 percent in the Law is a statutory rate, not necessarily the rate withheld. The President is authorised to set the withholding rates in Article 30 separately by type of income or field of activity, to reduce them to zero, or to raise them up to double the rate stated in the Article (5520 sayılı Kurumlar Vergisi Kanunu m.30/8). The same paragraph lets the President set the construction withholding rate according to whether the work is contracted to public bodies, its duration and type, and whether the contractor is a main or sub-contractor and a full or limited taxpayer.

For the 30 percent rate on payments to listed countries, the President may set the rate separately, reduce it to zero or restore it to the statutory level for payments for goods and shares bought at arm’s length prices, for arm’s length charter of sea and air transport vehicles, and for charges such as transit and port fees that are necessary to complete the work (m.30/7-a). Loan principal, interest and profit share payments to foreign financial institutions, and insurance and reinsurance payments, are not subject to that 30 percent withholding (m.30/7-b).

The withholding tax rate in Turkey on a given payment is therefore read from the Presidential decision in force on the payment date, for that type of income. This guide does not state those decision rates: they are outside the Law, they change by decision rather than by amendment, and a figure taken from a secondary source may already be out of date.

4.2. Withholding Tax in Turkey: Is a Return Still Needed?

Withholding tax in Turkey usually ends the foreign company’s obligation. For income other than commercial and agricultural income on which tax has been taken by withholding under Article 30, filing an annual or special return is optional, and so is including that income in a return filed for other income. Certain income from movable capital listed in the Income Tax Law and dividends from fund participation certificates and investment trust shares must, however, be included in a return that is filed (5520 sayılı Kurumlar Vergisi Kanunu m.30/9). Where no return is filed, the withholding periods count as the tax periods (m.25/2).

5. Taxation of Foreign Companies in Turkey: Branch, Subsidiary or Liaison Office

The taxation of foreign companies in Turkey differs between the three usual ways of being present, and they are three different tax positions rather than one “foreign company” regime: a subsidiary is a Turkish full taxpayer, a branch is the foreign company itself as a limited taxpayer with a workplace, and a liaison office may not carry on commercial activity at all.

	Subsidiary (Turkish company)	Branch of the foreign company	Liaison office
Type of liability	Full taxpayer: legal centre in Turkey (5520 sayılı Kanun m.3/1, m.3/5)	Limited taxpayer with a workplace in Turkey (5520 sayılı Kanun m.3/2, m.3/3-a; VUK m.156)	Permitted only on condition that it carries out no commercial activity; see the linked guide
Income taxed in Turkey	All income, earned in Turkey or abroad (5520 sayılı Kanun m.3/1)	Commercial income from business done through the branch (5520 sayılı Kanun m.3/3-a)
How the tax is paid	Annual return and advance tax (5520 sayılı Kanun m.32/2)	Annual return at the tax office of the workplace, and advance tax on commercial income (5520 sayılı Kanun m.25/4, m.32/2)
Tax on sending profit to the foreign parent	15 percent withholding on dividends distributed to a limited taxpayer, made by the distributing company (5520 sayılı Kanun m.30/3)	15 percent withholding on the amount transferred to head office, made within the corporation (5520 sayılı Kanun m.30/6)
Can the President change that rate?	Yes (5520 sayılı Kanun m.30/8)	Yes (5520 sayılı Kanun m.30/8)

The fourth row compares two different withholdings. The subsidiary’s withholding attaches to a distribution of dividends, and adding profit to capital is not a distribution (5520 sayılı Kurumlar Vergisi Kanunu m.30/3). The branch’s withholding attaches to the transfer to head office of what remains of corporate income, taken before deductions and exemptions, once the calculated corporate tax has been deducted (m.30/6). A group comparing the two structures is therefore comparing two different taxable events, not the same event at the same rate.

A dividend is not subject to the Article 30/3 withholding where the limited taxpayer earns it through a workplace or permanent representative in Turkey (m.30/3). In that case the dividend is part of the Turkish business, not a payment leaving it.

The liaison office stands apart because its permit rests on the absence of commercial activity; its permitted scope, the Ministry permit and what happens if trading is found are set out in liaison office of a foreign company in Turkey. Where the office in fact trades, the tax consequences follow from the activity actually carried out and are assessed under the tax legislation, not under the permit regime.

5.1. Taxation of Foreign Companies in Turkey: the Branch’s Annual Return

A foreign company taxed on the commercial income of a Turkish branch files an annual corporate tax return. The return is filed with the tax office of the place where the corporation’s workplace or permanent representative in Turkey is located; where it has neither, with the tax office to which those providing the income are attached (5520 sayılı Kurumlar Vergisi Kanunu m.25/4). It is filed from the first day to the evening of the twenty-fifth day of the fourth month following the month in which the accounting period closes, and, where the addressee of the assessment leaves Turkey, within the fifteen days before leaving (m.25/5).

Each taxpayer files one return for the whole of its taxable income, and no separate return is filed for branches, agencies, sales offices, factories or other workplaces even if they keep separate accounts and have allocated capital (m.24/2, m.24/3). A foreign company with two branches in Turkey files one return, not two.

6. Double Taxation Treaties and Foreign Companies in Turkey

Double taxation treaties limit when Turkey may tax a foreign company and at what rate. International agreements duly put into effect have the force of law (Türkiye Cumhuriyeti Anayasası m.90).

Two rules in the General Communiqué on Double Taxation Treaties (Serial No. 4), whose subject is professional service income, explain how a treaty works alongside domestic law (Çifte Vergilendirmeyi Önleme Anlaşmaları Genel Tebliği (Seri No: 4) § 4.1):

• A treaty does not create a tax. Where a treaty allocates a taxing right to Turkey, Turkey exercises it under its domestic tax provisions, within the limits of the treaty. The right given by the treaty does not by itself allow taxation; a domestic provision is also needed.
• Turkey may use less than the treaty allows, never more. Domestic law cannot extend the taxing right given in the treaty, but it can use it more narrowly, for example by granting an exemption or applying a lower domestic rate than the treaty permits.

The communiqué also records that whether a service fee is taxable in Turkey under a treaty depends on the treaty in question. Turkey’s treaties use different connecting factors for professional services: a fixed base or workplace in Turkey, a period of stay in Turkey, or payment by a Turkish resident, and the communiqué states that there is no single factor across the treaties (Çifte Vergilendirmeyi Önleme Anlaşmaları Genel Tebliği (Seri No: 4) § 3.2). As a general rule, it states that where a resident of a treaty state performs professional services for Turkey without coming to Turkey, the treaty leaves the taxing right only to the state of residence and no withholding is made in Turkey (§ 3.2.1).

6.1. Double Taxation Treaties in Turkey: the Certificate of Residence

A treaty rate is not applied on request. To be taxed under a treaty, residents of the other state must obtain a certificate of residence from the competent authorities of their state and submit the original, with a Turkish translation certified by a notary or by a Turkish consulate in that country, to the relevant tax office or to the withholding party, as the case requires. The withholding party keeps the certificate to produce to the authorities when needed. Where the certificate is not produced, the domestic provisions are applied instead of the treaty, and a certificate for one calendar year is valid until the fourth month of the following year (Çifte Vergilendirmeyi Önleme Anlaşmaları Genel Tebliği (Seri No: 4) § 3.3.2).

For a foreign company this makes the certificate a precondition held by the Turkish payer at the time of payment. Without it, the payer withholds at the rate the domestic rules give, and the treaty position has to be pursued afterwards.

6.2. Double Taxation Treaties in Turkey: the Mutual Agreement Procedure

A taxpayer who claims that it has been taxed contrary to a duly effective double taxation treaty, or that there are strong indications that it will be, may apply to the Revenue Administration under the treaty’s mutual agreement procedure. Depending on the treaty, the application may also be made through the competent authorities of the other contracting state (213 sayılı Vergi Usul Kanunu ek m.14).

The time limit is the one in the treaty. Where the treaty sets no period or refers to domestic law, the application is made within three years from the date the taxpayer first learned of the taxation said to breach the treaty. In every case the period ends at the end of the treaty period, or when three years are complete, counted from the date the notice of assessment was served, the date tax accrued on a return filed under reservation, or, where tax was withheld, the date of withholding (VUK ek m.14). Where the taxation can be split by base or tax difference, the application may be made only for the part of the difference that falls within the treaty (VUK ek m.14).

The mutual agreement procedure and the certificate of residence answer different questions and should not be confused:

	Certificate of residence	Mutual agreement procedure
Purpose	To have the treaty applied to the payment	To contest taxation said to be contrary to the treaty
When	Before or at the payment, held by the payer	After the taxation, or where it is strongly indicated
Addressed to	The tax office or the withholding party	The Revenue Administration, or the other state’s competent authority
Time limit	Certificate for a calendar year valid until the fourth month of the next year	Treaty period; otherwise three years, counted from withholding where tax was withheld
Basis	Communiqué No. 4 § 3.3.2	VUK ek m.14

7. VAT and Foreign Companies in Turkey

VAT is a separate tax from corporate tax and withholding, and it applies to transactions, not to taxpayers’ status. Supplies of goods and services carried out in Turkey within commercial, industrial, agricultural or professional activity, and imports of all goods and services, are subject to VAT. Whether the person carrying out the transaction is a Turkish national, and whether its residence, workplace, legal centre or business centre is in Turkey, does not change the nature of the transaction or prevent taxation (3065 sayılı Katma Değer Vergisi Kanunu m.1).

Where the taxpayer has no residence, workplace, legal centre or business centre in Turkey, the Ministry may make the parties to the taxable transaction responsible for paying the tax in order to secure it. VAT on electronic services supplied by such non-residents to individuals who are not VAT taxpayers is declared and paid by the supplier itself (KDVK m.9). A Turkish business buying services from a foreign company can therefore be the party made responsible for the VAT, alongside its role as the withholding party for corporate tax.

8. What the Legislation Does Not Fix

• The withholding rate on a particular payment. The Law states 15 percent and 30 percent, but the rate withheld is set by Presidential decision within the limits of Article 30/8, and it can differ by type of income and field of activity (5520 sayılı Kurumlar Vergisi Kanunu m.30/8). The decision in force on the payment date has to be read for each payment.
• The treaty rate. Each treaty sets its own allocation and rates. The communiqué on professional services describes five groups of treaty wording, so no general rule answers the question for every country (Çifte Vergilendirmeyi Önleme Anlaşmaları Genel Tebliği (Seri No: 4) § 3.1).
• How much profit belongs to a branch. The Law says the branch is taxed on commercial income from business done through it (m.3/3-a). It does not, in the provisions discussed here, set out how a foreign company’s overall profit is split between the branch and the head office.
• When a sales arrangement becomes a permanent representative. The Income Tax Law lists three categories deemed to be permanent representatives (193 sayılı Gelir Vergisi Kanunu m.8). Arrangements outside those categories are assessed against the general definition, which turns on authority to transact in the principal’s name and on its behalf.
• The computation. Deductions, exemptions and the preparation of returns are accounting work carried out under the tax legislation and its communiqués. This guide covers the legal framework that decides who is taxed, on what, and by which route; a group facing a specific company tax debt question can see company tax debt liability in Turkey. Zone-based incentives are covered in investment zones: free zones, technoparks, OSB.