What Is Corporate Income Tax in Turkey, Who Pays It and How Is It Calculated?

The shortest answer to a company owner asking what corporate income tax is: corporate income tax is an income tax levied on the net earnings that capital companies and other entities listed in the law derive in an accounting period, assessed through an annual return. The earnings of a sole proprietorship are subject to personal income tax, while the earnings of a limited liability company or joint stock company are subject to corporate income tax. What gives rise to the tax is not the company’s turnover but the profit remaining after statutory adjustments.

In this article, we explain who the taxpayers are, the distinction between full and limited tax liability that directly concerns foreign companies, how the tax base is determined, and a simple calculation example with hypothetical figures. We also briefly cover the link with advance tax and the domestic minimum corporate income tax applied from 2025.

What is corporate income tax, and which law is it based on?

Corporate income tax is a direct tax on the earnings of structures that have legal personality or that the law treats as entities. The corporate income tax law is Law No. 5520, published in the Official Gazette of June 21, 2006, which replaced the former Law No. 5422. The Law states that corporate earnings consist of the income elements that fall within the scope of personal income tax. In other words, commercial income, rent, interest or dividends are aggregated within the company as a single corporate earnings figure.

You can access the text of the law in force, together with its subsequent amendments, on the Corporate Income Tax Law No. 5520 (mevzuat.gov.tr) page. The Law has been amended many times since 2006. For this reason, looking at the current text rather than old summaries circulating online prevents you from planning based on an incorrect rate or an exemption that has been abolished.

Who are corporate income tax payers?

Corporate income tax payers are listed in five groups in Article 1 of the Law. Whether a structure is subject to corporate income tax is determined by the nature of its activity and whether it falls within this list in the law.

• Capital companies: Joint stock companies, limited liability companies, partnerships limited by shares and foreign entities of a similar nature. Funds supervised by the Capital Markets Board are also treated as capital companies.
• Cooperatives: Cooperatives established under the Cooperatives Law or their own special laws.
• Public economic enterprises: Commercial, industrial and agricultural enterprises affiliated with the state, municipalities or other public administrations that operate on a continuous basis.
• Economic enterprises belonging to associations or foundations: It is not the association or foundation itself but the enterprise belonging to it that carries out continuous commercial activity that is the taxpayer. Trade unions are treated as associations and religious communities as foundations.
• Joint ventures: Partnerships formed to carry out a specific job together that request to be registered as taxpayers in this form.

The point most often confused in practice is the enterprises of associations and foundations. The Law clearly states that the fact that these enterprises do not pursue profit, or allocate their profit to their founding purpose, does not affect their tax liability. An association’s cafeteria or a facility leased out by a foundation may in itself be subject to corporate income tax.

General partnerships and ordinary limited partnerships, on the other hand, are not on this list. In these companies, earnings are taxed under personal income tax in proportion to the partners’ shares. Which company type you choose therefore also directly determines your tax regime; we compared the options in our how to set up a company guide.

Full and limited tax liability: what is the difference for foreign companies?

A fully liable entity is taxed on all of its earnings derived inside and outside Turkey. A limited liability (non-resident) entity pays tax only on the earnings it derives in Turkey. The distinction is determined by where the entity’s legal seat and place of effective management are located.

The legal seat is the seat stated in the articles of association or the founding statute. The place of effective management is where business is actually concentrated and managed. If either of these two is in Turkey, the entity is fully liable; if both are abroad, it has limited liability.

For foreign investors, the practical consequence can be summarized as follows. A foreign-owned limited liability company or joint stock company established in Turkey has its legal seat in Turkey; even if all its partners are foreign, the company is fully liable. In contrast, a branch opened in Turkey by a foreign company does not have separate legal personality, so it is taxed through its place of business under the limited tax liability of the parent company.

When setting up a new structure, the question of branch or company often starts with this table. The decision is not made on tax alone; liability, reporting and the double taxation treaty with the parent company’s country also come into play.

How is the corporate income tax base determined?

Under Article 6 of the Law, the corporate income tax base is the net corporate earnings derived in an accounting period. In determining net earnings, the commercial income provisions of the Personal Income Tax Law apply. As a rule, the accounting period is the calendar year; entities that obtain permission may use a special accounting period.

The path to the tax base starts with the commercial balance sheet profit and continues with four adjustments in the following order:

• Non-deductible expenses are added. Items that the law does not treat as expenses, such as tax penalties, thin capitalization interest or earnings distributed as disguised profit through transfer pricing, are added back to profit.
• Exempt earnings are deducted. Earnings meeting the conditions in Article 5 of the Law are not included in the tax base.
• Prior-year losses are offset. Losses shown in returns can be deducted, provided they are not carried forward for more than five years.
• Statutory deductions are made. Items such as the R&D and design deduction, sponsorship expenses, and donations and grants are deducted by showing them separately on the return.

The order matters, because some deductions are limited to a certain percentage of corporate earnings. For example, under Article 10 of the Law, donations made against a receipt to public administrations and associations working for the public benefit can be deducted up to 5% of that year’s corporate earnings.

Main exemptions and deductions

Article 5 of the Law contains a long list of exemptions; here we summarize the items companies encounter most often:

• Participation exemption: Dividends derived from participation in the capital of another fully liable entity are exempt from corporate income tax. For dividends from foreign subsidiaries, additional conditions are required, such as a holding of at least 10%, uninterrupted holding for one year and repatriation.
• Gain on sale of participation shares: The portion specified in the law of the gain arising from the sale of participation shares held on the balance sheet for at least two full years is exempt, provided that the sale price is collected on time and the gain is kept in a special fund.
• Share premium: The amount exceeding the nominal value of shares issued by joint stock companies at formation or in a capital increase is exempt.
• Fund and investment company earnings: Portfolio earnings of securities investment funds, pension investment funds and certain investment companies established in Turkey are within the scope of the exemption.

The real estate sale gain exemption, on the other hand, was largely abolished from July 15, 2023 by Law No. 7456. Planning a real estate sale by relying on this exemption, which still appears in old sources, may result in an unexpected tax burden. Before using an exemption, we recommend reading the current text of the article together with its transitional provisions.

Corporate income tax calculation: a simple example

To see the logic of the corporate income tax calculation, let’s set up a hypothetical example. The figures below are purely illustrative and do not belong to a real company. Consider a fully liable trading company operating in Ankara in its fourth year of activity.

In the example, the calculated tax (232,500 TL) is above the minimum tax amount (95,000 TL), so the company pays the normally calculated tax. In the minimum tax check, the participation earnings are deducted because the law preserves this exemption in the minimum tax calculation as well; the donation deduction, however, is not deducted because it is not on this list. If the advance taxes had exceeded the calculated tax, the difference would be subject to offset or refund, provided the conditions are met.

In real life, this table would be longer. Exchange differences, depreciation, provisions, related-party transactions and a reduced rate tied to an incentive certificate can each change the result. Doing the calculation with the same discipline not only at year end but also in advance tax periods reduces surprises.

Rate, advance tax and domestic minimum corporate income tax

Article 32 of the Law sets the general rate at 25%. For banks, financial leasing, factoring and financing companies, insurance companies and certain financial institutions, the rate is 30%. There are also reduced rates for export earnings and for manufacturing earnings tied to an industrial registry certificate; we will cover these rates and their conditions in a separate article.

Advance tax is tax paid in advance on quarterly earnings at the current period’s corporate income tax rate, to be offset against the current year’s corporate income tax. With Law No. 7566, the fourth advance tax period was reinstated from the 2025 tax period. Advance tax is filed and paid by the 17th of the second month following the period.

The domestic minimum corporate income tax began to apply to earnings for 2025 and subsequent periods under Article 32/C, added by Law No. 7524. Under this rule, no matter how high the exemptions and deductions are, the calculated corporate income tax cannot be less than 10% of corporate earnings before deductions and exemptions. Certain exemptions listed in the law (such as domestic participation earnings, R&D deductions and free zone earnings) are also deducted in this calculation. For entities starting operations for the first time, this rule does not apply for three periods starting from the accounting period in which they start operations.

When are filing and payment made?

The corporate income tax return is filed in the fourth month following the month in which the accounting period closes, and the tax is paid by the end of the same month. For companies using the calendar year as their accounting period, this means April; for the 2025 accounting period, the filing and payment period was April 1-30, 2026. Each taxpayer files a single return; no separate return is filed for branches.

The attachments to the return and the preparation timeline are the subject of a separate article. You can follow all filing dates during the year in our tax legislation articles.

Mistakes we often see in practice

Three corporate income tax mistakes stand out in our clients’ questions.

The first is viewing profit only as an accounting entry and leaving non-deductible expenses until year end; these items should also be added to the tax base in advance tax periods. The second is treating dividends from a foreign subsidiary as exempt without checking the conditions. The third is assuming that a new company’s minimum tax exemption is indefinite; this exemption is limited to the first three accounting periods only.

There is also making tax the sole criterion when choosing a company type. Limited liability companies and joint stock companies are subject to the same general rate; the difference lies more in the rules on capital, management and liability. We explained these differences in detail in our article what is a limited liability company .

As Akal CPA, we view corporate income tax not as a form filled in at year end but as an account managed throughout the year. Tax advisory and planning is our service in which we monitor the tax base in line with the legislation from the advance tax periods through the year-end close, and check the conditions of exemptions and deductions in advance.

Last updated: 17.10.2026