Turkey 2026: What the new tax law means for foreign investors
Turkey 2026: What the new tax law means for foreign investors
Batumi Investment Club | May 2026
On 21 May 2026, the Grand National Assembly of Turkey passed the tax package that President Erdoğan had announced at the end of April. The centrepiece — a 20-year exemption from Turkish income tax on foreign income for qualifying new residents — is now law. Erdoğan has 15 days to promulgate it in the official gazette (Resmi Gazete). Since he initiated the package himself, a veto is out of the question.
The opening move had already been made by Presidential Decree No. 11257 of 30 April, which, with four targeted amendments to two tax laws, reset the thresholds for foreign participation income and service exports. What parliament has now passed goes considerably further.
What does this mean concretely for us as investors with an international focus?
The personal tax exemption: 20 years, zero tax on foreign income
The core of the law applies to private individuals who move their tax residence to Turkey — provided they had neither residence nor tax liability in Turkey in the three calendar years before the move.
Anyone meeting this condition pays no Turkish income tax on foreign income for 20 years. This income does not even have to be declared in the tax return. Turkish income remains taxable — at the regular graduated rates of 15 to 40%.
On top of this comes a remarkable ancillary rule: for qualifying new residents, inheritance and gift tax falls from the previously graduated 1 to 30% to a flat rate of 1%.
One special case is explicitly regulated: anyone who in the past was liable to tax in Turkey solely because of Turkish real estate income, capital gains or disposal gains nevertheless counts as qualifying — so the three prior years are not automatically compromised.
For comparison: Italy charges a flat 300,000 euros per year for its flat-tax regime. Greece 100,000 euros. Turkey charges: nothing. No flat fee, no minimum investment — only taking up residence and three clean prior years without Turkish tax liability.
The 30 April decree: Four amendments with real bite
Even before the parliamentary vote, Presidential Decree No. 11257 came into force retroactively for all tax years from 1 January 2026 — meaning: anyone who has already earned qualifying income across the whole of 2026 benefits from the new rules for the entire year, not just from 30 April. It amends four provisions in Income Tax Law No. 193 and Corporate Tax Law No. 5520 and is relevant to everyone who already has Turkish tax residence or holds participations through Turkish companies.
Dividend exemption for private individuals (Art. 22 GVK): threshold from 50% to 20%
Anyone holding at least 20% in a foreign corporation and transferring the dividend to Turkey by the deadline for filing the Turkish tax return can receive half of that dividend tax-free. Someone holding 25% in a German GmbH, a US LLC or a Georgian company and liable to tax in Turkey therefore benefits directly. Under the old 50% threshold: not at all.
Service exports: deduction from 80% to 100% (Art. 89 GVK / Art. 10 KVK)
The deduction applies equally to private individuals and companies. Three conditions must be met cumulatively: the client must be resident abroad, the service must be consumed abroad, and the activity must come from the legally defined catalogue. This includes: architecture, engineering, design, software development, medical reporting, accounting, call-centre operation, product testing and certification, data storage, data processing and data analysis, education and training, and healthcare services. Activities outside this catalogue are not favoured — not even if the client is located abroad.
A concrete example: a software developer resident in Istanbul earning USD 120,000 a year from foreign clients now pays no Turkish income tax on this income thanks to the 100% deduction — provided the service is demonstrably consumed abroad and correctly documented.
Simplified gateway for corporate tax (Art. 5/1-(b) KVK): 5% effective
Turkish corporations have two routes to exemption on foreign participation dividends. The standard gateway — requiring at least 10% participation, a one-year holding period and a minimum tax rate of 15% abroad — remains unchanged and still grants a 100% exemption.
The simplified gateway (without holding-period and tax-burden tests), on the other hand, has been considerably improved: the ownership threshold falls from 50% to 20%, the exemption rate rises from 50% to 80%. The effective corporate tax rate on qualifying foreign dividends thus falls from 12.5% to 5%. Anyone holding 20% in a foreign joint venture and transferring the dividend in time therefore pays just 5 units of corporate tax on 100 units of dividend.
Corporate tax and the Istanbul Finance Centre
The parliamentary law also goes far for companies. The general corporate tax rate for manufacturing industrial companies is halved from 25% to 12.5%. Exporters benefit even more: manufacturers exporting their own goods directly pay just 9%. All other exporters come to 11%.
For the Istanbul Finance Centre (IFC), the rules become significantly more generous. Transit-trade income of IFC companies is now fully exempt from corporate tax — previously only a 50% exemption applied. Companies outside the IFC still receive 95% relief. The tax exemption on financial-services export revenue in the IFC has been extended to 2047.
The asset amnesty: the eighth since 2008
The law also contains a new asset amnesty. Private individuals and companies can, until 31 July 2027, declare assets held abroad — cash, gold, foreign currency, securities and other capital-market instruments — with Turkish banks or brokers and transfer them to Turkey within two months.
Taxation depends on the holding period in Turkish instruments: those who hold for five years pay 0%; four years: 1%; three years: 2%; two years: 3%; one year: 4%. Those who exit earlier pay the base rate of 5%. Declared amounts are protected from tax audits and back-claims.
It is the eighth amnesty of this kind since 2008 — and opposition parties in parliament again criticised that such measures have in the past washed funds of unclear origin into the system.
The law also contains two further measures which Hürriyet Daily News notes in its reporting on the adopted text: the maximum instalment period for public debts is extended from 36 to 72 months, and the limit for unsecured deferrals rises to 1 million Turkish lira (around USD 22,000). In addition, employees in qualified service centres (nitelikli hizmet merkezi) receive an income-tax exemption on the part of their salary that does not exceed three times the minimum wage.
What this means for us
With this package, Turkey enters a category previously reserved for few countries. The combination is unusual: 20 years of tax freedom on foreign income with no flat fee, 1% inheritance tax, 5% effective tax on foreign participation dividends via the simplified gateway, 0% on service exports from the catalogue, and halved corporate tax for producers.
For profiles that appear frequently in our club — international entrepreneurs, service providers with foreign clients, holders of minority participations in several countries, people engaged in estate planning — a serious review is worthwhile.
Some points still require clarity through subordinate ministerial regulations: the exact definition of foreign consumption for services in practice, the treatment of persons physically working in Turkey for foreign clients, and the interplay with international tax reporting standards (CRS, FATCA).
Practical notes
The transfer requirement is a hard deadline. Dividends — both for private individuals (Art. 22 GVK) and for companies (simplified gateway, Art. 5/1-(b) KVK) — must actually have been transferred to Turkey by the filing deadline of the respective annual tax return. Anyone who misses the deadline loses the exemption for that year entirely — making it up in later years is not possible.
Use the retroactivity, but act immediately. Since the decree applies retroactively from 1 January 2026, dividends and service income from the whole of 2026 are favoured — provided the documentation is correct and the transfers occur within the deadlines. Anyone only learning of this now should immediately check which transactions have already occurred in 2026.
Documentation from the outset, not retroactively. Proof of non-residence in the three prior years, of the ownership level at the time of the dividend distribution, and of foreign consumption for services must be kept promptly and completely. Anyone who only gathers these records at year-end risks gaps that jeopardise the exemption.
Review existing structures. Anyone previously geared to the old 50% threshold — for example through oversized participation quotas — should check whether adjustments are worthwhile. Conversely, 20% participations in foreign joint ventures now open up access that did not previously exist.
The official legal text is available in the Turkish official gazette at resmigazete.gov.tr (decree: issue 33239 of 30 April 2026; parliamentary law: from 21 May 2026). The consolidated text of the amended tax laws can be found at mevzuat.gov.tr.
Interested? We can help.
If you would like to check whether the Turkish tax regime is relevant to your personal or business situation, you can reach us at:
Our expert Ibrahim Shaikh is available for individual advice on the process — in English.
This article is for general information only and does not constitute tax or legal advice. For individual structuring questions, consulting a Turkish tax advisor or lawyer is recommended.
