Tax Liabilities Of Expatriates Living In Turkey


In order to compensate public expenditures, the most favourable treasury policy tool applied since the past, is taxation. Taxation is the leading of issues which create debt-credit relation between the individuals and the state and while the creditor (credit side) of such relationship is state, the debtor (debt side) of such relationship is real or legal persons who are obliged to pay the tax. In this relation, the competences and liabilities the parties have, are set forth in the Constitution and other statutes and in certain situations, the determination of tax amount and/or designation of tax responsible persons are left to state’s (administrative) discretion.

The state, relying on power of taxation, describes real and legal persons who have the ability to pay pro rata as “taxpayer” and characterizes them as “primary tax debtor”. Furthermore, the state holds responsible some third persons who are in financial or legal connection with taxpayer, together with or instead of taxpayer, from paying tax debt, sometimes the aim of making the tax collection faster and easier, sometimes the aim of accurately providing performance of duties related to taxation and sometimes the aim of ensuring the tax claim. In order to achieve such goal, state sets forth term of “tax responsible”.

With regard to article 8 paragraph 1 of Tax Procedure Law (TPL); Taxpayer is described as “real or legal person who is liable for the tax debts itself as per Tax Laws”. In other words, a taxpayer is the real or legal person who is supposed to pay a certain amount of tax to public creditor.

There is no distinction in terms of numerous tax types which are collected through withholding; however there is a distinction between the taxpayers in terms of taxation based on declaration. The most significant distinction exists in income tax. In income tax, there are two types of liabilities: limited taxpayer and full-fledged taxpayer. The taxation system of such two groups is different from each other.

  • Full-fledged taxpayer: There are two criteria on the issue of who shall be deemed to be a Full-fledged taxpayer. First of them is residency and second one is citizenship criteria. The residency criterion is taken as base principal. Residency principle is valid only in the situations stipulated in 2nd paragraph of article 3 of Income Tax Law No 193(“ITL”).

As per the residency principle, the persons who are settled in Turkey are deemed as Full-fledged taxpayer and the issue of who are deemed to be settled in Turkey is explained in article 4:

i)                    The persons whose domicile is in Turkey and

ii)                  The persons who permanently reside in Turkey more than 6 months in one calendar year.

As per the citizenship principle, Turkish citizens who are connected to institutions and enterprises located in Turkey while reside at foreign country due to business of such are deemed as full-fledged taxpayer. .

  • Limited taxpayer: As per the article 6 of ITL, the real persons who are not settled in Turkey are subjected to income tax as limited taxpayer. Despite the fact that such persons are not settled in Turkey, they acquire income. Limited taxpayers are generally foreign national persons. However a foreign nationality person can be a Full-fledged taxpayer, if the right conditions are met.

Full-fledged taxpayers are levied due to incomes they acquire either inside or outside of Turkey. Limited taxpayers are levied due to income only they acquire in Turkey. The most significant distinction between limited and Full-fledged taxpayer is income tax and corporate tax.

Accordingly, if expatriates living in Turkey can be deemed as full-fledged taxpayer pursuant to above mentioned conditions, they will be liable to pay tax upon their worldwide income. If they can be deemed as limited taxpayer, then they will be liable to pay tax on the earnings they acquire in Turkey.

However, another point must be noted when determining taxation regime of relevant limited taxpayer and this is whether a double taxation treaty exists between Turkey and the country which such person resides in or not. If there is a treaty, such treaty will be applied. Turkey has negotiated tax treaties with over 70 countries around the world.

As per the Income Tax Law, the persons staying in Turkey more than 6 months in one calendar year even if his/her residency is not in Turkey, they will be deemed as Full-fledged taxpayer and pay tax upon all earnings and revenues they acquire inside or outside of Turkey. However, there are certain exemptions.

After determining the taxpayer kind, expatriates should know the taxes they need to pay. The taxation structure in Turkeycan be separated in 3 categories:

  • The first category is “taxes levied on income”. Income taxes are direct taxes. In such category, there exist:

i. Income Tax,
ii. Corporate Income Tax.

  • The second category is “expenditure taxes”. Such taxes are deemed as indirect taxes. Indirect taxes are taken on consumption or in return certain services the state provide. The share of indirect taxes in total tax incomes is approximately 70%. We can divide such taxes into 7 sub-categories:

i. Value Added Tax
ii. Special Consumption Tax
iii. Customs Duty
iv. Banking and Insurance Transaction Tax
v. Stamp Tax
vi. Valuable Papers Tax
vii. Fees

  • The third category is “wealth taxes”. These are direct taxes. These taxes are:

i. Motor Vehicles Tax,
ii. Real Estate Tax,
iii. Inheritance and Transfer Tax.

The abovementioned taxes mainly constitute the Turkish Taxation System.

In Tax Procedural Law, the duties of the taxpayer are regulated in certain articles such as bookkeeping, submitting declaration, drawing up deed, safekeeping documents, refraining from incomplete declaration etc. The Tax Administration controls whether taxpayers fulfil such duties or not. Furthermore, it is provided certain tax misdemeanours and penalties in Tax Procedural Law such as tax loss and smuggling.

Therefore expatriates living in Turkey should be aware of which kind of taxpayer they are and they should know which taxes they need to pay in Turkey and what the duties and consequences of being a limited or full-fledged taxpayer are.