Turkey considers anyone who has lived in the country for at least 6 months a resident for tax purposes. This has nothing to do with whether you have a work or residence permit. As a “tax resident,” you are liable to pay income tax on all of your income, regardless of where in the world it was generated.
Income tax evasion is common in Turkey, partly because of the high numbers of illegal, part-time workers, partly because many legal workers are pain in cash, and partly because tax authorities struggle to get a handle on enforcement. Thus, in spite of harsh legal penalties for those that are caught, roughly 30 % of Turks avoid paying their taxes.
While you may get away with evading your taxes, be aware that this “window of opportunity” will decrease as Turkey strengthens its tax infrastructure to appeal to the European Union.
Turkish income tax
Turkey uses a bracket system to determine income tax (gelir virgisi) liability. In Turkey, you are liable for tax on all of your income, no matter where in the world it is generated. These brackets range from people who earn up to 1,7000 Turkish lira a year (who pay 15 % tax) to those who earn over 40,000 lira a year (they pay a 35 % tax). If those numbers seem high, remember that there are numerous deductions and exemptions that will bring your payments down. All social security contributions are tax exempt, for example.
The Turkish tax year runs from January 1 to December 31, but your bracket is determined by your income from February-March of the present year. For instance, you will file a 2009 tax return by the end of March 2010, based on your earnings from February to March 2010.
Income tax is paid in four instalments (one every quarter) throughout the year. A 4% penalty is assessed for every late payment. If you work for a Turkish company, however, your employer will deduct income tax from your monthly salary.
Should you be lucky enough to work as a journalist or academic with a fixed contract, you are exempt from Turkish income tax.
If you sell property in Turkey, you are liable for capital gains tax between 15 and 25 % of your profit. Capital gains tax is also applied to profits from stock sales.
Value Added Tax (VAT or KDV) is charged on goods instead of sales tax. The VAT rate is usually fixed at 18%, but may occasionally be lower on certain items. This is the major revenue generator for the Turkish tax system. A Special Consumption Tax is also applied to so-called “luxury goods” (vehicles, alcohol, petroleum products). The rate varies depend on the item in question.
Environmental tax funds garbage collection, and is built into each person´s water bill. If you live in a property that is owned by a diplomatic mission (foreign embassy or consulate), or your rent is paid by a diplomatic mission, you are exempt from environmental tax.