Income Tax, VAT, Corporate Tax, Withholding, and Complete Tax Overview for Entrepreneurs
Understanding the tax system is crucial for anyone operating a business in Turkey.
This guide explains the structure of income tax, corporate tax, VAT, withholding (stopaj), temporary tax, and filing obligations in 2025.
Entrepreneurs encounter the following types of taxes:
Income Tax (for sole proprietorships)
Corporate Tax (for limited companies)
VAT – Value Added Tax
Withholding Tax (Stopaj)
Stamp Duty
Temporary Tax
Withholding & Premium Returns (Muhtasar)
Income tax is based on personal income.
The 2025 income tax brackets:
| Income Range | Tax Rate |
|---|---|
| 0 – 110,000 TL | 15% |
| 110,000 – 280,000 TL | 20% |
| 280,000 – 1,500,000 TL | 27% |
| 1,500,000 – 3,000,000 TL | 35% |
| Above 3,000,000 TL | 40% |
As income increases, tax percentage increases.
This is the primary disadvantage of sole proprietorships.
Limited and joint-stock companies pay Corporate Tax.
2025 rate: Flat 20%
It does not increase with income, which is why large or scaling businesses prefer limited companies.
Standard VAT rate: 20%
Reduced rates:
10% for specific goods/services
1% for certain essential goods
VAT operates through two components:
Collected VAT (sales)
Deductible VAT (purchases)
Formula:
Payable VAT = Sales VAT – Purchase VAT
A refund can occur if deductible VAT exceeds collected VAT.
Withholding is a tax collected at the source.
Applies to:
Rental payments → 20%
Freelance service invoices → 20%
Employee wages → Income tax withholding
Specific service purchases
Paid four times a year as an advance tax.
Offset against final annual tax.
Paid on different official documents and tax filings.
Amount varies depending on the document.
Examples:
VAT return
Withholding return
Corporate tax return
Covers the declaration of:
Wage withholding
Rental withholding
Freelance service withholding
Filed monthly or quarterly.
| Tax Type | Sole Proprietorship | Limited Company |
|---|---|---|
| Main Tax | Income Tax (15–40%) | Corporate Tax (20%) |
| VAT | Yes | Yes |
| Withholding | Yes | Yes |
| Temporary Tax | Yes | Yes |
| Social Security | Mandatory | Mandatory |
| Advantage | Cheap setup | Stable tax rate |
| Disadvantage | Higher tax at high income | Harder closure |
VAT → Monthly
Withholding (Muhtasar) → Monthly / Quarterly
Temporary Tax → 4 periods
Annual Income Tax → March
Corporate Tax → April
Turkey’s tax system has a predictable structure:
Sole proprietorship: lower startup cost but increasing tax rates
Limited company: higher credibility and stable tax
VAT applies to all businesses
Withholding applies to specific payments
Temporary tax is prepaid
Understanding these mechanics is essential for financial planning and compliance.
Turkey (Türkçe)