Turkey Crypto Tax

Turkey is a candidate for EU membership, and its civil law system is largely based on continental European models. Moreover, the country is a member of such reputable organisations as the Organization for Economic Cooperation and Development (OECD) which means that its taxation system corresponds with global standards. The data show that Turkish residents are very open to the adoption of cryptoassets which is a good reason for crypto entrepreneurs to take this jurisdiction into consideration.

That said, the Central Bank currently prohibits the use of cryptoassets as payment instruments in transactions for products and services. The authority seeks to protect Turkish consumers against volatility and illegal activities related to the anonymity of crypto users, as well as prevent current payment infrastructure and instruments from being damaged. Read on if this restriction isn’t going to be a major issue for your crypto business.

Regarding international agreements, Turkey is a signatory to OECD’s Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) and has committed itself to adopt the minimum standards as well as meet several optional conditions. The OECD has also recently introduced a new international tax transparency framework, the Crypto-Asset Reporting Framework (CARF), the purpose of which is to raise crypto taxation and tax reporting standards through automatic tax reporting and taxpayer information sharing between international authorities.

In Turkey, taxation authorities are divided into two parts – Revenue Administration and Tax Inspection Board. The former is responsible for collecting and handling national taxes and ensuring the rights of the taxpayers within the framework of Constitutional Law and tax legislation. The latter is authorised to carry out inspections of the taxpayers in order to eliminate and prevent corrupt financial activities.

At present, there’s no robust guidance on the taxation of crypto activities. While crypto businesses are obligated to pay general taxes, there is no official categorisation of cryptoassets and various crypto-related activities (e.g., mining or staking) aren’t taxed in any distinctive way. However, the authorities are working on improved guidance that should enable crypto businesses to better structure their taxes.

Advantages of the Turkish Tax System

Turkey has signed around 90 international double taxation agreements, the purpose of which is to eliminate 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 notable advantage is 18 free zones with a special tax regime, encouraging the development of innovative and traditional businesses across the country. Natural and legal persons conducting research, trade, software development, and other activities can seek licensing from the Ministry of Commerce of Turkey in order to avail of such benefits as exemption from Corporate Income Tax, Individual Income Tax, Stamp Duty, VAT, and other relevant taxes.

Research and development (R&D) activities are supported through tax reliefs, which are provided in the form of an incremental R&D tax allowance and partial exemption from employer’s Social Security Contributions. The rate of the incremental R&D tax allowance is 50% and unused tax benefits can be carried forward for an indefinite period.  The exemption from Social Security Contributions is administered through the social security contributions system.

Corporate Income Tax

In Turkey, the standard Corporate Income Tax rate is 20%. Crypto companies whose registered office is located in Turkey or whose executive operations are centred and managed in Turkey are subject to paying Corporate Income Tax on their worldwide income. Non-resident companies are subject to tax only on income sourced in Turkey. The 25% rate applies to banking institutions, financial institutions defined in Law No. 6361, and other companies operating within the financial market.

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 must be necessary for the business, as well as thoroughly documented in accordance with the law. 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 aren’t deductible.

Capital Gains Tax

Capital gains received by a company are treated as ordinary income and are subject to Corporate Income Tax. 75% of capital gains received by corporate taxpayers after the sale of shares and 50% of capital gains received after the sale of immovable property owned by them for at least two years are exempt from tax provided that these gains are held in a dedicated bank account until the end of the fifth year following the year of sale. Another exemption applies to capital gains received from the sale 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 is levied on the provision of products and services to Turkish customers. For local businesses, there is no registration threshold and generally, every Turkish company should register as a VAT payer before starting business operations in Turkey.

Currently, there’s no detailed guidance on the VAT liability of different crypto companies, and therefore it’s necessary to examine every individual case. If you’re looking for further clarification, our dedicated legal team here at Regulated United Europe (RUE) will be pleased to schedule a personalised consultation for you.

The general Turkish VAT rules include a VAT mechanism of reverse-charge, which requires the calculation of VAT by resident companies on payments to persons in foreign countries. In accordance with this mechanism, VAT is calculated and paid to an appropriate tax office by the resident company. The resident company has to regard this VAT as input VAT and offset it in the same month.

Withholding Tax

As of December 2021, the rate of the Withholding Tax has been reduced to 10% and is levied on dividends paid to a resident or non-resident individual, or a non-resident company. No tax is imposed on dividends paid to a resident company. The Withholding Tax rate on professional services and royalty payments made to non-residents is 20%.

Recall that Turkey has an extensive network of international agreements on the elimination of double taxation that can be instrumental in reducing the Withholding Tax rate in your particular case.

Payroll Taxes in Turkey

According to Turkish legislation, Individual Income Tax, Stamp Tax, Social Security Contributions, and Unemployment Contributions are legal deductions from employees’ salaries. Every crypto company that is a resident of Turkey is obligated to include its employees in the local payroll and withhold taxes on income at source, whereas employees receive the net amount after the deductions.

The Individual Income Tax and the Stamp Tax should be declared by the employers filing Withholding Tax returns. The Social Security Contributions and the Unemployment Contributions should be declared by employers on a monthly basis by filing Social Security Contributions declarations.

Depending on the total earnings, the Individual Income Tax rate is applied progressively and varies from 15% to 40%. Among other types of income, it’s levied on all types of salaries, whenever there’s a relationship between an employer and an employee

In Turkey, the Individual Income Tax rates are applied as follows:

• If the taxable income doesn’t exceed 32,000 TRY (approx. 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 total up to 34.5%. Employers pay 20.5%, and 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% is paid by employees.

The rates of the Stamp Tax vary between 0,189% and 0,948%. It’s levied on a wide range of documents, including payrolls, agreements, and financial statements. The applicable percentage depends on the value stated in the document and the type of document. Employee salaries are subject to the rate of 0,759% applied to gross amounts.

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

In 2024, the regulation and taxation of cryptocurrencies in Turkey continues to adapt to the dynamic digital financial landscape. The Turkish government and tax authorities are focusing on creating clear and understandable rules to account for income generated from cryptocurrency transactions, recognising its growing impact on the country’s economy.

Basics of cryptocurrency taxation

Like many other countries, Turkey does not view cryptocurrencies as legal tender, but rather as a financial asset that can be used for investment and trading. This definition has direct implications for the taxation of cryptocurrency income.

Income declaration

For Turkish taxpayers who earn income in cryptocurrency, it is necessary to declare this income in their tax return as part of their total annual income. This includes profits from the sale of cryptocurrency, income from mining, as well as trading and investment income.

Taxation of income and capital gains

Income from cryptocurrency transactions may be taxable as capital gains. In Turkey, the capital gains tax rate varies and depends on the total amount of the taxpayer’s income. It is important to note that when calculating capital gains, the original acquisition cost of the cryptocurrency should be deducted from the sale amount to determine the taxable gain.

Value added tax (VAT)

Under Turkey’s current tax laws, cryptocurrency transactions are not subject to VAT. This means that buying and selling cryptocurrency is exempt from VAT, which makes these transactions more attractive for investors.

Accounting and reporting

To ensure tax compliance, taxpayers are advised to keep careful records of all cryptocurrency transactions, including transaction dates, volumes, purchase and sale prices, and profit or loss calculations. This information should be available for submission to tax authorities upon request.

Conclusion

The taxation of cryptocurrencies in Turkey in 2024 requires investors and users to take a conscious approach to accounting and declaring income. By following local tax laws and recommendations, tax problems can be avoided and tax liabilities can be optimised. It is important to follow updates of tax laws and recommendations of tax authorities, as rules and rates may change in response to the development of the cryptocurrency market and the country’s economy as a whole.

 

Table with the main tax rates in Turkey

These rates reflect Turkey’s tax structure, aimed at securing state budget revenues and stimulating the country’s economic development. A progressive personal income tax scale, a competitive corporate tax rate and a variety of VAT rates contribute to a balanced tax system.

 

If you’re determined to avail of all the benefits Turkey has to offer and wish to develop your crypto business in this vast market, our team of dedicated and quality-focused legal consultants here at Regulated United Europe (RUE) will be delighted to provide you with tailored, value-added support in structuring your taxes in accordance with local and international rules. We also offer Turkish crypto company formation, crypto licensing, and financial accounting services. Contact us now to schedule a personalised consultation.

Also, lawyers from Regulated United Europe provide legal support for crypto projects and help with adaptation to MICA regulations.

Turkey Crypto Tax 2024

In 2024, Turkey continues to evolve its approach to regulating and taxing cryptocurrencies, aiming to stimulate innovation while protecting investor interests and ensuring financial stability. The Turkish government recognizes the growing importance of cryptocurrency in the global economy and strives to create a favourable environment for the development of blockchain technologies and cryptocurrency projects.

Regulation of Cryptocurrency in Turkey

Regulation of cryptocurrencies in Turkey is carried out by the Central Bank of the Republic of Turkey (CBRT) and other financial regulators. In recent years, steps have been taken to tighten controls on cryptocurrency transactions, including anti-money laundering ( AML ) and anti-terrorist financing ( CFT ) requirements.

Taxation of Cryptocurrencies

In 2024, Türkiye continues to develop tax legislation aimed at cryptocurrency transactions. Important aspects of cryptocurrency taxation are:

• Capital gains : Income from the sale of cryptocurrencies is subject to capital gains tax. This includes profits made from the difference between the purchase and sale prices of crypto assets.
• Income Tax : Income from mining and staking cryptocurrencies is considered taxable income and is subject to taxation in accordance with general income tax rules.
• VAT : Cryptocurrency transactions are generally exempt from value added tax (VAT) since cryptocurrency is not treated as a good or service, but as a medium of exchange.

Features of Taxation

Turkey is actively working to adapt its tax system to the specifics of the cryptocurrency market, given its high volatility and unique aspects of digital asset transactions. An important step in this direction is the development of special tax returns for transactions with cryptocurrencies, as well as the establishment of clear criteria for the classification of different types of cryptoassets.

The Future of Cryptocurrency Taxation in Turkey

Turkish authorities continue to explore opportunities to improve the regulatory and tax environment for cryptocurrencies. This includes discussions with key stakeholders such as cryptocurrency exchanges, blockchain startups and investors to ensure that regulations promote innovation and market development, while also providing the necessary level of protection for users and investors.

Conclusion

In 2024, Turkey is taking significant steps towards creating a balanced and efficient tax regime for cryptocurrencies that will promote the growth of the cryptoeconomy while ensuring financial stability and investor protection. The continued development of the regulatory framework and tax policy for cryptocurrencies in Turkey shows the country’s desire to become one of the leading centres of the cryptocurrency industry internationally.