TURKISH TAX SYSTEM
PERSONAL INCOME TAX
Aysun ÖZDAMAR ULUÇAY
State Revenue Expert 2011
TAXES ON INCOME
PERSONAL INCOME TAX
THE TAXPAYER
•
Real persons
TAXES ON INCOME
PERSONAL INCOME TAX
DEFINITION OF INCOME
• The total net earnings and profits gained in a calendar
year.
• Source principle is adopted related to the acquisition of
earnings and income elements are fixed and named.
TAXES ON INCOME
PERSONAL INCOME TAX
CHARACTERISTICS OF INCOME
•
•
•
•
Personal
Annual
Net amount
General
TAXES ON INCOME
PERSONAL INCOME TAX
TAX LIABILTY
•
Full tax liability
•
Limited tax liability
TAXES ON INCOME
PERSONAL INCOME TAX – Types of Liability
Full tax liability
Those who have the full tax liability are subject to tax
on income generated within Turkey and in foreign
countries.
Limited tax liability
Those who have limited tax liability are subject to tax
only on income generated within Turkey.
TAXES ON INCOME
PERSONAL INCOME TAX – Types of Liability
FULL TAX LIABILITY
Real persons indicated below are taxed on their total
income obtained within and outside of Turkey.
1. Those domiciled in Turkey (the persons indicated below
are considered as residents of Turkey):
• Those whose residence is in Turkey,
• Those who abide in Turkey continuously for more
than six months in a calendar year.(183 days)
TAXES ON INCOME
PERSONAL INCOME TAX – Types of Liability
FULL TAX LIABILITY
2. Turkish citizens attached to public undertakings and
institutions or establishments of which head offices are
situated in Turkey and residing abroad due to their work
related with the above said institutions, undertakings and
establishments.
TAXES ON INCOME
PERSONAL INCOME TAX – Types of Liability
FULL TAX LIABILITY
3. Foreigners indicated below are not considered as
residents of Turkey, even if they stay in Turkey for more
than six months;
• Businessmen, scientists, specialists, officials, press and
radio correspondents, who come to Turkey on a given or
temporary mission or for business, and other persons in a
similar situation as well as those who come to Turkey to
study, medical treatment, rest and travel.
• Those who are detained or remain in Turkey for reasons
beyond their control, such as detention, conviction or
illness.
TAXES ON INCOME
PERSONAL INCOME TAX – Types of Liability
LIMITED TAX LIABILITY
Real persons, who are not residents of Turkey are taxed
only on their income obtained in Turkey.
TAXES ON INCOME
PERSONAL INCOME TAX
ELEMENTS OF INCOME
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Commercial income
Agricultural income
Wages
Professional income
Income from immovable property
Income from movable property
Other earnings and profits;
● Gains from value appreciation
● Incidental profits
TAXES ON INCOME
PERSONAL INCOME TAX – Elements of Income
COMMERCIAL INCOME
Income derived from all types of commercial and industrial
activities.
 Labor-capital organisation
 Continuity
Volume of business
TAXES ON INCOME
PERSONAL INCOME TAX – Elements of Income
AGRICULTURAL INCOME
• Income derived from agricultural activities
• Any activity performed in land, sea, lakes and rivers in
forms of cultivating, planting, breeding, fishing, hunting and
etc.
TAXES ON INCOME
PERSONAL INCOME TAX – Elements of Income
PROFESSIONAL INCOME
 Professional and scientific expertise rather than capital
 Self employment
 Continuity
TAXES ON INCOME
PERSONAL INCOME TAX – Elements of Income
WAGES
 Payment for dependent personal service
 Employment by an employer
 Working at a certain work place.
TAXES ON INCOME
PERSONAL INCOME TAX – Elements of Income
INCOME FROM IMMOVABLE PROPERTY
• Rental income derived from the lease of real estates
which include land, buildings, leasehold rights and
transporting vehicles
TAXES ON INCOME
PERSONAL INCOME TAX – Elements of Income
INCOME FROM MOVABLE PROPERTY (Saving Income)
• Income such as interest, dividend, rent and the like
derived from capital in cash or capital in kind.
- Dividends,
- Interest accrued on all types of bonds and Treasury bills,
- Interest paid on all credit,
- Interests on deposits,
- Repo incomes
- The payments made by the retirement funds and insurance
companies etc.
TAXES ON INCOME
PERSONAL INCOME TAX – Elements of Income
OTHER INCOME AND PROFITS
 Gains from value appreciation
- Value increases from partial or total transfers of commercial
undertakings, value changes gained from transfers of goods, rights
and movables
 Incidental profits
- Income from occasional commercial and professional activities
TAXES ON INCOME
PERSONAL INCOME TAX
TAXATION PROCEDURE
 DECLERATION
 WITHHOLDING
TAXES ON INCOME
PERSONAL INCOME TAX
TAXATION PROCEDURE IN COMMERCIAL INCOME
 DECLERATION
 WITHHOLDING
income derived from construction and repair works
extending over more than one calendar year
TAXES ON INCOME
PERSONAL INCOME TAX
DETERMINATION OF COMMERCIAL INCOME

Real basis
- Balance sheet method
- Operating account method

Simple procedure basis
TAXES ON INCOME
PERSONAL INCOME TAX
REAL BASIS
Expenses to be deducted

General expenses incurred for the purpose of
earning and maintaining commercial gains
-
Wages of bureau employees
Insurance payments
Communication expenses
Bureau expenses
TAXES ON INCOME
PERSONAL INCOME TAX
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REAL BASIS
Food and lodging expenses for employees and
workers
Expenses for treatment and drugs
Insurance premiums and retirement payments
Clothing expenses paid for workers and employees
Travel and lodging expenses
Losses, damages and indemnities paid upon
agreements, judgement of court or by order of love
Expenses for vehicles used in the business
Taxes and fees ( Stamp and municipal taxes, registration
fees etc.related to the enterprise)
TAXES ON INCOME
PERSONAL INCOME TAX
SIMPLE PROCEDURE BASIS
- For some small businesses with certain threshold
criteria, which are assumed as they are not able to
calculate their income on real basis
- Commercial income is the positive difference between
receipts and the expenses in a calender year.
- These taxpayers don’t have the responsibilitiy to keep
books.
TAXES ON INCOME
PERSONAL INCOME TAX
TAXATION PROCEDURE IN AGRICULTURAL INCOME
 WITHHOLDING
 DECLERATION
TAXES ON INCOME
PERSONAL INCOME TAX
TAXATION PROCEDURE IN AGRICULTURAL INCOME
All payments made for the agricultural products and
services are subject to withholding tax.
Withholding is the final taxation if the size of agricultural
enterprises don’t exceed the limits determined in ITL.
TAXES ON INCOME
PERSONAL INCOME TAX
LIMITS FOR DECLERATION
 The size of the land where agricultural activities
conducted exceeds certain limits or possessing more
than certain number of bovine animal or sheep and
goat.
 Possessing a combine harvester or other similar motor
vehicles or possessing more than two tractors up to age
of ten.
TAXES ON INCOME
PERSONAL INCOME TAX
TAXATION PROCEDURE IN WAGE AND SALARIES
 WITHHOLDING
income from one employer
 DECLERATION
income from more than one employer and second income
is higher than the threshold assessed for each year.
TAXES ON INCOME
PERSONAL INCOME TAX
WAGES
According to Income Tax Law, wages is classifed into
two groups.


Real wages
Other wages.
TAXES ON INCOME
PERSONAL INCOME TAX
TAXATION PROCEDURE IN REAL WAGES
Real wages is subject to withholding tax.
Employees do not have to file tax return if they receive
income from one employer.
In case of receiving income from more than one employer, it
is not necessary to file tax return if the second income is
lower than the threshold assessed for each year.
TAXES ON INCOME
PERSONAL INCOME TAX
TAXATION PROCEDURE IN OTHER WAGES
Net wages of the following employees shall be 25% of the
annual gross amount paid to the workers above 16 years
of age employed in the industrial sector.
 Persons employed by merchants whose earnings is determined
on simple basis
 Drivers employed in private services
 Construction workers employed by private owners of
construction
 Persons employed by the owners of revenue from real estate
TAXES ON INCOME
PERSONAL INCOME TAX
TAXATION PROCEDURE IN PROFESSIONAL INCOME
 DECLERATION
(Except income of copyright holders)
 WITHHOLDING
TAXES ON INCOME
PERSONAL INCOME TAX
TAXATION PROCEDURE IN IMMOVABLE PROPERTY
 DECLERATION
Rental income subject to withholding tax exceeding the
annual thresold
Rental income not subject to withholding tax
 WITHHOLDING
( Except rental income of residences)
TAXES ON INCOME
PERSONAL INCOME TAX
TAXATION PROCEDURE IN IMMOVABLE PROPERTY
A part of the income gained from renting buildings as
residence in a calendar year is excepted from income
tax (3.000TL for 2012)
TAXES ON INCOME
PERSONAL INCOME TAX
TAXATION PROCEDURE IN MOVABLE PROPERTY
 DECLERATION
Dividents, Interest paid on all credits, Saving income
obtained in abroad
 WITHHOLDING
Article 94 (Dividents, payments made by the retirement
funds and insurance companies etc.)
Temprorary Article 67 (Interest from all kinds of bonds
and Treasury bills, interests on deposits, repo incomes
etc.)
TAXES ON INCOME
PERSONAL INCOME TAX
TAXATION OF DIVIDENDS
• The half of the gross amount of the obtained dividend is
excepted.
• For the year 2012, if the residual amount of the
exception is exceeding 25.000 TL , the return shall be
submitted.
• If the return is submitted, the amount witheld is writtenoff.
• In cases where there is no obligation for declaration, the
witholding will be the final tax.
TAXES ON INCOME
PERSONAL INCOME TAX
TAXATION OF SAVING INCOME NOT SUBJECT TO
WITHHOLDING TAX OR EXEMPTION
 Interest paid on all credits
 Saving income obtained in abroad
Decleration in case of exceeding the annual threshold
assessed for these kind of income.(1.290 TL for 2012)
TAXES ON INCOME
PERSONAL INCOME TAX
WITHHOLDING TAXATION
II) Temporary Article 67
 Interest from all kinds of bonds and Treasury bills,(10 %)
 Interests on deposits, (15 %)
 Repo incomes, (15 %)
Withholding is applied by banks and financial
intermediaries
Withholding is the final tax
TAXES ON INCOME
PERSONAL INCOME TAX
WITHHOLDING TAXATION
II) Article 94
 Dividents
The tax withheld by the full liable corporations can be
set-off from the income tax in case of filing a tax return.
TAXES ON INCOME
PERSONAL INCOME TAX
 Payments made by the retirement funds and insurance
companies (private pension payments)
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-
Payments made to the persons who depart from system withhout
paying their premiums for ten years (15%)
Payments made to the persons who paid their premiums for ten
years but depart from individual retirement system withhout
acquiring the right of retirement (10%)
Payments made from the other funds and insurances to the
individuals having paid their premiums or allowances for ten years,
but leaving due to compulsory reasons such as death, disability or
liquidation (10%)
Payments made to the persons acquiring the right of retirement
bound to application of individual retirement system, and to the
individuals who depart from system due to compulsary reasons such
as death, disablement or liquidation (5%)
Withholding is the final tax.
TAXES ON INCOME
PERSONAL INCOME TAX
TAXATION PROCEDURE IN OTHER EARNINGS
AND PROFITS

DECLERATION
Gains from value appreciation
( In case of exceeding 8.800 TL for 2012)
Incidental profits
( In case of exceeding 20.000 TL for 2012)
TAXES ON INCOME
PERSONAL INCOME TAX
TAXATION PROCEDURE IN OTHER EARNINGS
AND PROFITS

Gains from value appreciation
In the determination of appreciation gains, inflation
adjusted gains are taxed through indexing the
acquisition costs of goods and rights which have been
disposed.
If the difference between the indexed purchase price
and the sales price is exceeding 8.800 TL for 2012, it
is necessary to file a tax return.

Incidental profits
If incidental profit exceeds 20.000 TL for 2012, the tax
payer submits a decleration.
TAXES ON INCOME
PERSONAL INCOME TAX –Declaration of the Tax
TYPES OF TAX RETURNS
Declaration of personal income tax shall be made by
means of:
1)
2)
3)
Annual tax return
Withholding tax return
Special tax return
TAXES ON INCOME
PERSONAL INCOME TAX – Declaration of the Tax
ANNUAL TAX RETURN
used for consolidation of earnings derived from various
sources in the calendar year.
The fact that income is associated with a particular period
of the year, does not affect the annual character of the tax
return.
TAXES ON INCOME
PERSONAL INCOME TAX – Declaration of the Tax
WITHHOLDING TAX RETURN
 used for declaring total taxes to the tax office withheld
by employers and other providers
TAXES ON INCOME
PERSONAL INCOME TAX – Declaration of the Tax
WITHHOLDING TAX RETURN
Those required to apply withholding tax:
Public administrations and institutions,
Public commercial concerns and other corporations,
Commercial companies, business partnerships,
Associations, foundations,
Economic enterprises of associations and foundations,
Cooperatives,
Managers of investment funds,
Merchants and self-employed persons obliged to declare their actual
incomes,
The farmers determining their agricultural earnings in according to
principle of balance sheet or agricultural operations
TAXES ON INCOME
PERSONAL INCOME TAX – Declaration of the Tax
SPECIAL TAX RETURN
 used by taxpayers subject to limited tax liability, to
declare profits and earnings for which they are not obliged
to file annual tax return
TAXES ON INCOME
PERSONAL INCOME TAX –Declaration of the Tax
DECLERATION TIME
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Annual tax return: 1-25 th day of MARCH

Withholding tax return: By the 20 th day of the
foollowing month
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Special tax return: In fifteen days from acquirement.
TAXES ON INCOME
PERSONAL INCOME TAX
TAX EXEMPTIONS AND EXCLUSIONS IN INCOME TAX
 Exemption for Small Artisans and Tradesman
 Diplomatic Exemption
 Exclusion on Salaries
 Exemption for Education Enterprises
 Exclusion on professional income (copyright holders
income)
 Exclusion on income from immovable property
 Exclusion on income from movable property
 Disablement deduction
Minimum subsistence(living) allowance
TAXES ON INCOME
PERSONAL INCOME TAX
EXEMPTION FOR SMALL ARTISANS AND
TRADESMAN
Those engaged in retail trade without opening a workplace
or by travelling without using motor vehicles
Small artisans doing works by travelling and directly for the
consumers without opening a place of work
Those who sell homemade products such as towels,
coverings, bed sheets, food etc. which are produced at
their homes without using motorised devices, opening a
workplace or hiring external workers.
TAXES ON INCOME
PERSONAL INCOME TAX
DIPLOMATIC EXEMPTION
Ambassadors, consuls as well as officers who are
members of embassies and consulates and who are
citizens of that country and people who are assigned to an
official duty in Turkey are exempt from the individual
income tax.
These exemption does not extend to withholding taxes
collected on movable capital earnings.
TAXES ON INCOME
PERSONAL INCOME TAX
EXCLUSION ON SALARIES
Salaries of officials and employees of foreign embassies
and consulates who are not subject to diplomatic
exemption are also exempt from income tax.
TAXES ON INCOME
PERSONAL INCOME TAX
EXCEPTION FOR EDUCATION ENTERPRISES
Income from private schools for pre-school education,
primary education, special education and secondary
education are excluded from individual income tax for five
taxation terms.
TAXES ON INCOME
PERSONAL INCOME TAX
EXCLUSION ON PROFESSIONAL INCOME
Gains obtained by copyright owners and their legal heirs
are exempt from individual income tax.
• But those who are mentioned above are subject to
witholding tax at a rate of 17 % and they don’t have to
submit tax return.
TAXES ON INCOME
PERSONAL INCOME TAX
EXCLUSION ON INCOME FROM IMMOVABLE
PROPERTY
3.000 TL of the proceeds earned within one calendar year
from leasing the building as residence shall be exempt
from income tax.
•This exception shall not extend to persons who must
submit yearly declaration for their commercial, agricultural
or professional earnings
TAXES ON INCOME
PERSONAL INCOME TAX
EXCLUSION ON INCOME FROM MOVABLE PROPERTY
 The half of the gross amount of the obtained dividend is
excepted from income tax.
The divident should be paid by full liable corporations
TAXES ON INCOME
PERSONAL INCOME TAX
EXCLUSION ON INCOME FROM MOVABLE PROPERTY
Exclusion on private pension savings
-25% of the payments made to the persons acquiring the right of
retirement bound to application of individual retirement system, and to
the individuals who depart from system due to compulsary reasons
such as death, disablement or liquidation
-10% of the payments granted to the persons who paid their premiums
for ten years from the insurance companies and to the individuals who
leave office due to compulsary reasons such as death, disablement or
liquidation;
-The total amount of payments granted from the annual income
assurances by single premium
TAXES ON INCOME
PERSONAL INCOME TAX
DISABLEMENT DEDUCTION
The monthly deductions applicable to the salaries of the
employees according to the degree of disablement shall
be as follows;
•For first degree disabled, 770 TL.
•For second degree disabled, 380 TL.
•For third degree disabled, 180 TL.
(for 2012)
TAXES ON INCOME
PERSONAL INCOME TAX
ADDING UP INCOME
FULL TAX LIABILITY
I) Income to be declared regardless of the amount
 Commercial income
 Agricultural income
 Professional income
Merchants, farmers and self-employed persons shall
submit yearly tax return even they have not obtained any
earning from their commercial, agricultural and
professional activities.
TAXES ON INCOME
PERSONAL INCOME TAX
ADDING UP INCOME
II) Income to be declared incase of exceeding the
annual threshold assessed for each year.
 Wages
(Income from more than one employer exceeds the
threshold assessed for each year.)
Income from movable property taxed by withholding
Income from immovable property taxed by withholding
Income from movable and immovable property without
any exemption or withholding taxation.
TAXES ON INCOME
PERSONAL INCOME TAX
ADDING UP INCOME
LIMITED TAX LIABILITY
I) Income not to be declared
Wages,
Professional income,
Income from movable property,
Income from immovable property
subject to withholding tax in Turkey
TAXES ON INCOME
PERSONAL INCOME TAX
ADDING UP INCOME
LIMITED TAX LIABILITY
II) Income to be declared (Special tax return.)
Income from movable and immovable property not
subject to withholding tax in Turkey
Other income and profits
TAXES ON INCOME
PERSONAL INCOME TAX
DECLARATION IN CASE OF OBTAINING INCOME
FROM DIFFERENT SOURCES
• To determine the threasold of 25.000 TL
 Wages are considered separetely from the other elemets
of income
 The other income excluding (except) wages are
considered together
If income from more than one employer is declared the
other income will be included in annual tax return even if
the other income do not exceeds 25.000 TL in total.
If income from more than one employer is not declared the
other income will be included in annual tax return in case
of exceeding 25.000 TL in total.
TAXES ON INCOME
PERSONAL INCOME TAX
WRITTING-OFF LOSSES AGAINST PROFITS
•Losses incurred from some elements of income and the
losses suffered as a result of the activities abroad in full
liability are set-off against the gains from other elements.
•Remaining part of the losses which could not be deducted
can be carried forward for the five successive years.
TAXES ON INCOME
PERSONAL INCOME TAX
WRITTING-OFF LOSSES AGAINST PROFITS
Losses resulting from “Other Earnings and Profits”,
Diminutions of capital in the income from movable and
immovable capitals,
Losses incurred abroad related to the gains exempted
from income tax in Turkey
Can not be set off against the gains from other elements.
TAXES ON INCOME
PERSONAL INCOME TAX
DETERMINATION OF INCOME TAX BASE
OTHER DEDUCTIONS
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Insurance premiums and contribution payments
effected to individual retirement system,
Education and health expenditures,
Annual deduction calculated for the declared income of
the disabled,
Aids and donations to public administrations
Expenses made for the construction of schools, health
facilities and dormitories , rest homes, care and
rehabilitation centres,
TAXES ON INCOME
PERSONAL INCOME TAX
OTHER DEDUCTIONS
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Cost of foodstuff, hygiene, heating materials and cloths
donated to associations and foundations engaged in
food providing activities with an aim to helping the
poor,
Aids and donations made for supporting cultural and
art activities,
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Sponsorship expenditures,
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Research and development expenditures,
Aids and donations made related to natural disasters
TAXES ON INCOME
PERSONAL INCOME TAX
TAX SCHEDULE
Tax rate schedule is determined as progressive in the
Income Tax Law. The tax schedule to be applied to any
income of 2012 is as follows:
Taxable Income (TL)
Tax Rate (%)
Up to 10.000
15
10.001 - 25.000
20
25.001 - 58.000
27
Over 58.000
35
TAXES ON INCOME
PERSONAL INCOME TAX
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