Significant Tax Incentives on Türkiye’s Agenda

The government of the Republic of Türkiye has placed tax incentives for internationally active companies, group companies with cross-border structures, and service providers operating in export markets on its agenda.

I. Plans Relating to Foreign-Sourced Income and the Istanbul Financial Center

At the center of the investment incentive package announced by President Erdoğan on 24 April 2026 is a proposal to grant an income tax exemption for a period of 20 years in respect of foreign-sourced income earned by taxpayers meeting certain conditions. It is also envisaged that inheritance and transfer tax applicable to the same individuals will be fixed at a flat rate of 1%.

The same announcement further indicated that the tax advantages currently available to institutions operating within the Istanbul Financial Center will be expanded. In this context, it is proposed that the existing 50% deduction applicable to income derived from transit trade activities or intermediary services relating to the purchase and sale of goods abroad be increased to 100%, effectively exempting such income from corporate income tax. In addition, there are plans to extend the scope of these incentives beyond the Istanbul Financial Center itself, with 95% of the relevant income proposed to be exempt from taxation.

Although the details of the proposed measures have not yet been clarified, the announcements have been welcomed as a significant step towards increasing Türkiye’s attractiveness for regional management centers and international trade activities.

II. Amendments Entering into Force Immediately Regarding Foreign Subsidiary Income and Service Export Incentives

With Presidential Decree No. 11257, published in the Official Gazette dated 30 April 2026 and numbered 33239, several amendments were introduced regarding income tax and corporate income tax.

Amendments Relating to Income Tax

Prior to the new regulation, taxpayers could benefit from an income tax exemption for 50% of dividend/profit share income derived from foreign joint stock or limited liability companies, subject to certain conditions. In order to benefit from this exemption, the taxpayer was required to hold at least 50% of the paid-in capital of the relevant foreign company and transfer the relevant dividend income to Türkiye by the deadline for filing the annual income tax return. Under the new regulation, the minimum shareholding threshold has been reduced from 50% to 20%.

On the other hand, the tax deduction applicable to income derived from certain services rendered to persons resident abroad and utilized abroad has also been increased. Previously, 80% of such income could be deducted from the income tax base, whereas under the new regulation the entire amount of the income may now be deducted. In order to benefit from this incentive, the relevant income must also be transferred to Türkiye by the end of the tax return filing period. The scope of eligible services includes architecture, engineering, design, software development, medical reporting, accounting, call center services, product testing, certification, data storage, data processing, data analysis, as well as educational and healthcare services.

Amendments Relating to Corporate Income Tax

For corporate income taxpayers, the simplified exemption regime applicable to foreign subsidiary income has also been expanded. Previously, benefiting from this regime required holding at least 50% of the paid-in capital of the foreign company. Under the new regulation, this threshold has been reduced to 20%. In addition, the exemptible portion of the relevant income has been increased from 50% to 80%. The requirement that the relevant income be transferred to Türkiye by the deadline for filing the corporate income tax return remains unchanged.

With respect to service exports, the deduction available to Turkish companies has likewise been increased from 80% to 100%, in parallel with the amendment applicable to individual taxpayers. Accordingly, the entirety of the income derived from certain services rendered to non-resident customers and utilized abroad may now be deducted from the corporate income tax base. To benefit from this incentive, the relevant income must also be transferred to Türkiye by the end of the tax return filing period.

Conclusion

These developments may be viewed as part of Türkiye’s broader policy approach aimed at attracting international capital, regional management structures, and foreign currency-generating activities into the country. In particular, the plans relating to foreign-sourced income and the Istanbul Financial Center have attracted considerable attention within investment circles. These measures are expected to support Türkiye’s objective of positioning itself as a more competitive hub for international investors and cross-border commercial structures.