Turkey Crypto Tax

Being a candidate to the EU membership, Turkey has a great part of its civil law based on the continental European model. Furthermore, the country is included in respectable organizations, such as the Organization for Economic Cooperation and Development, which means that its system of taxation corresponds to world standards. Indeed, these statistics indicate that the residents of Turkey are very open to the adoption of crypto assets—a good enough reason for crypto entrepreneurs to consider this jurisdiction.

That said, the cryptoasset market is currently barred by the Central Bank from using cryptoassets as payment instruments in product and service-related transactions. In this regard, the relevant authority seeks protection for Turkish consumers against volatility and illegal activities related to the anonymity of users of crypto, and also aims to avoid damage to the current infrastructure and instruments of payment. Read on if this restriction isn’t going to be a big problem for your crypto business.

About Turkey, on the international agreement side, it has signed the OECD’s MLI or the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting and committed to the minimum standards plus several optional conditions. Very recently, the OECD also proposed a new international tax transparency framework for crypto-asset reporting; this is called Crypto-Asset Reporting Framework, or CARF in short form. Through automatic tax reporting and taxpayer information sharing between international authorities, the CARF proposes to raise crypto taxation and tax reporting standards.

Taxation authorities in Turkey are divided into two parts, namely the Revenue Administration and the Tax Inspection Board. The former is responsible for collecting and handling national taxes and ensuring the rights of taxpayers within the framework of Constitutional Law and tax legislation. The latter is authorized to carry out the inspections of the taxpayers with the purpose of eliminating and preventing corrupt financial activities.

Currently, there is limited guidance on the taxation of crypto activities. Crypto businesses pay general taxes; however, there is no official classification of cryptoassets, and different crypto-related activities, such as mining or staking, are not taxed in any specific manner. The authorities are continuously working on better guidance that should help crypto businesses with optimally structuring their taxes.

Advantages of the Turkish Tax System

Turkey has signed nearly 90 international double taxation agreements. The purpose of these agreements is to avoid juridical double taxation of natural and legal persons. These agreements allocate taxing rights on various sources of income or gains between two countries and enable the optimisation of taxation.

Another great advantage is the availability of 18 free zones with a special tax regime for promoting innovative and traditional businesses all over the country. In this regard, natural and legal persons carrying out research, trade, software development, and other activities may apply to the Ministry of Commerce of Turkey to obtain licenses and obtain opportunities for exemption from Corporate Income Tax, Individual Income Tax, Stamp Duty, Value Added Tax, or all relevant taxes in general. To support research and development activities, a tax relief is available in the form of an incremental R&D tax allowance and partial exemption from employer’s Social Security Contributions. The incremental R&D tax allowance is given at a rate of 50%. The unused tax benefits can be carried forward indefinitely. The exemption from Social Security Contributions is administered through the social security contributions system.

Corporate Income Tax

In Turkey, the standard rate for Corporate Income Tax is 20%. The cryptocurrency companies, whose legal headquarters are in Turkey or whose the management of executive activities is located and carried out in Turkey, pay Corporate Income Tax on the worldwide income of the firm. The income of non-resident companies is only taxable to the extent that it is sourced in Turkey. Banks, financial institutions defined under the Law No. 6361, and other companies conducting activities in the financial market are subject to the corporate income tax rate of 25%.

Turkish Corporate Income Tax legislation allows for deductions for all ordinary and necessary business expenses incurred for the generation of income during the taxable year. Eligible expenses are those which must be necessary to the business, as well as duly documented in line with legislation. However, there are certain expenses that generally don’t qualify as deductible business expenses. For instance, interest on shareholders’ equity or on advances from shareholders, reserves set aside from profits, Corporate Income Tax, fines, tax loss penalties and interest imposed on such tax are not deductible.

Capital Gains Tax

The capital gains derived by a company are deemed as ordinary income and are liable for tax under Corporate Income Tax. Seventy-five percent of the capital gains received by corporate taxpayers upon the sale of shares and fifty percent of capital gains received upon the sale of immovable property owned by them for at least two years are exempt from tax on condition that such capital gains are held in a separate bank account until the end of the fifth year following the year of sale. The other exemption deals with the capital gains obtained from the disposal of foreign participations that have been held for at least two years by a holding company resident in Turkey.

Value-Added Tax

In Turkey, the standard VAT rate is 18% and it is applied on provision of goods and services to Turkish clients. For local businesses, no registration threshold is available. Typically, every Turkish company should register as a VAT payer before starting business operations in Turkey.

Presently, there is no detailed guidance on the VAT liability of different crypto enterprises, and thus each case needs to be examined separately. To learn more, get in touch with our specialized legal team at Regulated United Europe to book a custom consultation in person or virtually.

Under the general Turkish VAT rules, there is a reverse-charge VAT mechanism that makes the resident companies obliged to calculate VAT on the payments they have made to persons in foreign countries. Under this mechanism, the VAT will be calculated and paid to an appropriate tax office by the resident company. The resident company needs to regard this VAT as input VAT and offset it in the same month.

Withholding Tax

As of December 2021, the Withholding Tax rate is now 10%, and it can be charged on dividends paid to a resident or non-resident individual or a non-resident company. No tax has been levied on dividends if it is paid to a resident company. The rate of withholding tax on professional services and royalty payments that are made to non-residents stands at 20% for both.

Note that Turkey is a party to a wide network of international agreements on the avoidance of double taxation that might considerably reduce the Withholding Tax rate in your particular case.

Payroll Taxes in Turkey

The lawful deductions under the Turkish legislation are Individual Income Tax, Stamp Tax, Social Security Contributions, and Unemployment Contributions. Every crypto company resident of Turkey is obliged to cover its employees with local payroll and withholding taxes on income at the source, although in practice, the net amount would be received by the employees after such deductions.

Employers who are obliged to file Withholding Tax returns shall declare Individual Income Tax and Stamp Tax. Social Security Contributions and Unemployment Contributions shall be declared by employers on a monthly basis by filing Social Security Contributions declarations.

The progressive rate of the Individual Income Tax, depending on total earnings, ranges from 15% to 40%. From all types of salary, it is levied on every kind, whenever there is a relationship between an employer and an employee.

Individual Income Tax rates are applied in Turkey in the following order:

• For income up to 32,000 TRY (about 2,000 EUR): 15%
• If the taxable income is between 32,000 TRY (approx. 2,000 EUR) and 70,000 TRY (approx. 3,500 EUR) – 20%
• If the taxable income is between 70,000 TRY (approx. 3,500 EUR) and 250,000 TRY (approx. 12,500 EUR) – 27%
• If the taxable income is between 250,000 TRY (approx. 12,500 EUR) and 880,000 TRY (approx. 44,000 EUR) – 35%
• If the taxable income exceeds 880,000 TRY (approx. 44,000 EUR) – 40%

Social Security Contributions are paid jointly by employers and employees and amount to 34.5%. Employers pay 20.5%, while employees pay 14% of their salaries. The annual ceiling of the contributions is 48,532 TRY (approx. 2,420 EUR). The total rate of Unemployment Contributions is 3%, where 2% are paid by employers and 1% by employees.

Stamp Tax rates fluctuate between 0.189% and 0.948%. The tax is gathered on various papers starting from payrolls and agreements but also involves financial statements. The percentage to be applied depends on the value expressed in the paper but also the type of paper. For employee salaries, the rate is 0.759% of the gross amounts.

How do I pay taxes on crypto in Turkey in 2024?

For 2024, this Turkish crypto regulation and taxation of cryptocurrencies go on continuously to adapt to the dynamically changing digital financial world. The Turkish government and tax authorities focus on clear and understandable rules that enable incomes accounted for by cryptocurrency transactions and recognize it for the increasing contribution it gives to the country’s economy.

Cryptocurrency Taxation Basics: Like many other countries, Turkey does not regard cryptocurrencies as legal tender but rather as financial assets to be used for investment and trading. This definition has direct implications for the taxation of income from cryptocurrencies.

Income Declaration: Income obtained from cryptocurrency shall be considered within the total annual income of Turkish taxpayers and must be declared in the tax return. Profits derived from the sales of cryptocurrency, revenues obtained from mining, revenues obtained from trading, and investment incomes are included in this category.

Taxation of Income and Gains in Capital: Gains from the disposal of cryptocurrency could form part of the taxpayer’s total income and could be liable to capital gains tax. The effective capital gains tax rate applicable in Turkey varies and depends upon the total amount of the taxpayer’s income. Capital gains would thus be the difference between the sale amount of the cryptocurrency and the original acquisition cost deducted therefrom.

Value Added Tax (VAT): According to current tax laws in Turkey, crypto transactions fall outside the ambit of VAT. Accordingly, there is an exemption from paying VAT on sales and purchases, making this type of transaction more attractive to investors.

Accounting and Reporting: For compliance with tax regulations, it is recommended that taxpayers keep comprehensive records of cryptocurrency transactions, including the date of the transaction, volume, purchase and sale prices, and profit or loss calculations. Such data should be readily available to present to the corresponding tax authority upon demand.

Taxation of cryptocurrencies in Turkey for 2024 requires investors and users to adopt a more conscious approach to accounting and declaration of income. Observance of local tax laws and recommendations will, therefore, assist in avoiding any tax issues and optimizing respective tax liabilities. It should be underlined that it is highly crucial to follow the updates of both the local tax laws and recommendations from the tax authorities since rules and rates will keep developing as a response to the growth of the cryptocurrency market and, respectively, the state economy.

Table with the main tax rates in Turkey

These rates reflect the tax structure of Turkey, which tries to ensure state budget revenues in a way that would ensure the stimulation of economic development in the country. There is a scale of progressive personal income tax, an aggressive corporate tax rate, and different levels of VAT-all within an extremely balanced tax system.

Determined to take advantage of all the benefits that Turkey has to offer and to develop your crypto business in such a vast market, our dedicated and quality-focused team of legal consultants here at Regulated United Europe will be in a position to help you by giving tailored, value-added support to structure your taxes in conformity with local and international rules. We can also offer services of Turkish crypto company formation, crypto licensing and financial accounting. Feel free to now reach us to book your personal consultation.
Also, lawyers from Regulated United Europe support crypto projects in legal issues and assist in adaptation to MICA regulations.

Turkey Crypto Tax 2024

In the year 2024, Turkey is still in the process of forming its position within the regulations and taxation of cryptocurrency so that it creates a balance in stimulating innovation while protecting investor interests and financial stability. The Government of Turkey is aware that cryptocurrency will play a more important role in the world’s economy; therefore, this country tries to provide favorable conditions for the development of blockchain technologies and projects based on cryptocurrency.

Conclusion

In 2024, Turkey will make the most crucial step to build a balanced and efficient crypto tax regime that will strike a proper balance between the growth of the crypto-economy and financial stability on the one hand and investor protection on the other. The establishment of such a regulatory framework and tax policy for cryptocurrencies within Turkey is proof of the desire to make it an international hub of the cryptocurrency industry.