DOING BUSINESS IN TURKEY

Doing Business in Turkey
35
DOUBLE TAXATION RELIEF
Ordinary credit with overall limitation (including taxes
paid by the CFC) is applicable under Article 33 of CITL.
Residents may deduct from their income tax liability
foreign taxes assessed on foreign income. However,
the deductions may not exceed the amount of the tax
assessed on such income in Turkey.
Double Taxation Relief under Tax Treaties
Turkey has a broad tax treaty network, with most treaties
following the OECD Model Tax Convention.
Ordinary credit with overall limitation is applicable under
most of the tax treaties of Turkey in force.
Taxes not deducted wholly or partly in the fiscal year
when the foreign income is transferred to the accounts
of company in Turkey can be carried forward to the
following 3 years.
VALUE ADDED TAX
Liability for VAT arises;
• when a person or entity
performs commercial,
industrial, agricultural or
independent professional
activities within Turkey,
• when goods or services are
imported to Turkey.
Standard VAT rate is 18%; reduced
rates 1% (e.g. newspapers and
magazines, basic foodstuff) and
8% (e.g. books, pharmaceuticals,
medical products).
Following goods and services are
subject to VAT:
• Commercial goods and
services
• Industrial goods and services
• Agricultural goods and services
• Independent professional
goods and services
• Goods and services imported
into the country
• Deliveries of goods and
services as a result of other
activities
In some situations VAT exemptions
may be applied. The list of goods
and services subject to those
exemptions are as follows:
• Deliveries and services made
to diplomatic representatives
and consulates on condition
of reciprocity, international
organizations with tax exemption
status and to their employees
• Exports of goods and services
• Roaming services provided in
Turkey for customers outside
Turkey, subject to reciprocity
provisions, in accordance
with international roaming
agreements
• Contract manufacturing for
clients in free trade zones
• Petroleum exploration activities
• Services for ships and airplanes
in ports and airports
• Machinery and equipment
deliveries under the investment
incentive certificate
• Transit transportation
• Banking and insurance
transactions subject to Banking
and Insurance Transactions Tax
Toll-manufacturing and ready-made
materials (textiles) are subject to
partial withholding and junk metal,
waste paper, junk plastic material
deliveries are exempt from VAT:
Only 50% of the calculated VAT is
paid to the seller by the purchaser.
Therefore, the purchaser will be
responsible for paying 50% of
calculated VAT to the tax office
directly.
Centrum Consulting | 2017