When it comes to taxation, one of the most common terms we encounter is "income tax." Income tax is a fundamental aspect of any country's tax system, including Turkey. It is a tax levied on the income earned by individuals and companies in accordance with the rates determined by the Tax Laws of the country. In this article, we will delve into the intricacies of income tax in Turkey, exploring its definition, taxpayer identification, types of liability, the concept of income, and the calculation process.
What is Income Tax?
Income tax, as defined in Article 1 of the Income Tax Law No. 193, refers to the net amount of earnings and revenues earned by an individual in a calendar year. It is essential to note that income tax applies not only to individuals but also to companies. The taxation process is determined based on the level of income earned, the source of income, the type of professional activity, and other relevant factors.
Who is The Taxpayer of Income Tax?
The taxpayer of income tax, according to the Law, is a "real person" who has earned income during a calendar year as specified in the regulations. This distinction is crucial, as income tax differs from corporate tax, which primarily targets legal entities. While corporate tax is levied on companies, income tax is imposed exclusively on real individuals.
What Are The Types of Liability in Income Tax?
In Turkey's income tax system, two types of liabilities are adopted to determine the scope of taxable income in terms of taxpayers and the location where the income is earned.
Full Liability
Under Article 3 of the Law, Turkish citizens and residents are subject to full liability, meaning they are taxed on the total income earned both in Turkey and abroad. The definition of "Residence in Turkey" is established in Article 4, stating that individuals residing in Turkey for more than six months within a calendar year will be considered residents. Individuals falling under this category will be taxed on all income earned worldwide during that period.
However, Article 5 of the Law provides some exceptions to this residency requirement. Individuals who come to Turkey for specific and temporary assignments or work, scientists, experts, officials, press correspondents, and others visiting for educational, medical, rest, or travel purposes will not be considered residents, even if they stay for more than six months.
Limited Liability
Limited liability applies to individuals who are not considered residents in Turkey but have earned income within the country. In this case, only the income earned in Turkey is subject to taxation, and the income earned abroad is not taxed. The determination of taxation in this type of liability depends on the income earned within Turkey.
What Falls Under The Concept of Income?
Income tax in Turkey encompasses various types of earnings and revenues that are subject to taxation. The Law specifies which gains and revenues fall under the scope of income tax and which situations are exempt from taxation.
Commercial Gains
Under Article 37 of the Law, commercial gains are defined as "all gains arising from commercial and industrial activities." This includes gains from operating mines, quarries, production sites, and factories, cobbling, running private schools and hospitals, engaging in real estate activities, and participating in securities trading activities.
Agricultural Income
Income obtained from agricultural activities is considered agricultural income, as defined in Article 52. Agricultural activity includes the production, cultivation, breeding, and utilization of plants, animals, and their products by utilizing nature on land, sea, lake, and rivers.
Wages
According to Article 61, wages refer to money and benefits provided in exchange for services rendered to employees under an employer's authority. Various forms of remuneration, including bonuses, benefits, and allowances, are considered part of wages.
Freelance Income
Freelance income, as specified in Article 65, refers to income obtained from freelance activities. This includes work based on personal effort, knowledge, or expertise, carried out independently in one's name and account.
Real Estate Capital Revenues
Income obtained from leasing specific property and right holders is defined as real estate capital income under Article 70. This includes revenues from leasing real estate, movable goods, and intellectual and industrial rights.
Capital Income
Capital income includes profit, interest, rent, and similar earnings obtained from cash capital or values represented by cash, excluding commercial, agricultural, or professional activities.
Other Earnings, Gains, and Revenues
Other gains and revenues, as per Article 80, include gain increases and occasional gains that are not continuous. This encompasses the increase in the value of capital assets and non-continuous commercial or industrial gains.
How is Income Tax Calculated?
The calculation of income tax in Turkey is based on the taxable income declared by the taxpayer, considering deductible expenses. The applicable rates vary depending on the type of income.
Remember, if you require legal assistance related to income tax or any other legal matter in Turkey, don't hesitate to seek advice from a qualified Lawyer in Turkey or a reputable Law Firm in Turkey, such as an Istanbul Lawyer with expertise in tax law. Knowing your rights and obligations can make a significant difference in your financial well-being and compliance with the law.
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