Recent Developments
In line with the objectives of Türkiye’s economic programme aimed at enhancing international competitiveness and strengthening the investment climate, Law No. 7582 on the Amendment of Certain Laws (“Law“), which introduces significant and wide-ranging amendments to tax legislation, was adopted by the Grand National Assembly of Türkiye and is expected to be published in the Official Gazette in the near future.
The Law includes provisions on regulations concerning qualified service centres, a reduced corporate income tax rate for manufacturing companies, tax exemptions for foreign-source income, an expansion of the incentive applicable to transit trade income, provisions relating to the Istanbul Finance Centre (“IFC“) and an income tax exemption applicable to benefits provided to employees through share-based compensation.
This bulletin summarizes the key amendments introduced by the Law with respect to income tax and corporate income tax. Our separate bulletin addressing the newly introduced asset repatriation regime under the same Law is available here.
Key Amendments Introduced by the Law
Qualified Service Center Regime
The Law introduces a new “Qualified Service Centre” (“QSC“) regime aimed at encouraging multinational groups to conduct regional management, coordination and support functions from Türkiye.
Under Additional Article 1 added to the Foreign Direct Investment Law, a QSC is defined as a capital company established to provide services to related companies or a corporate group actively operating in at least three different countries, deriving at least 80% of its annual revenues from related parties abroad.
Services that may be provided by QSCs include intragroup support and coordination activities such as financial advisory, treasury and funding services, reporting, audit, legal advisory services (covering activities directed at foreign related parties, such as international contract management, global compliance and intragroup legal coordination), human resources, brand management and technology and digital transformation services, as well as operational coordination activities relating to after-sales support, R&D, external procurement, and product testing and laboratory services.
Significant tax incentives are granted to QSCs under the new regime:
- 95% of income derived exclusively from abroad within the scope of QSC activities (100% for QSCs operating within the IFC or corporations in designated industry zones approved by the President) may be deducted from the corporate income tax base, provided that the relevant income is transferred to Türkiye by the corporate income tax return filing deadline. The deduction applies for twenty fiscal periods from the fiscal period in which the QSC commences operations and may also be taken into account in the calculation of the domestic minimum corporate income tax base.
- Salaries paid to qualified service personnel are exempt from income tax up to three times the gross minimum wage. This threshold is increased to five times for QSCs operating within the IFC and for corporations operating in designated industry zones approved by the President.
The Law also introduces various conforming amendments to the existing IFC incentive regime applicable to QSCs operating within the IFC.
The corporate income tax provisions will enter into force on the date of publication of the Law, and will apply to corporate income derived from taxation periods beginning on or after 1 January 2026 (for corporations subject to a special accounting period, in respect of the accounting period beginning on or after 1 January 2026), for tax returns to be filed as of 1 July 2026; the salary exemption provisions will also enter into force on the same date.
Corporate Income Tax Rate Reduction for Manufacturing Companies
The Law provides that corporate income derived exclusively from manufacturing activities by companies holding an industrial registration certificate and actively engaged in production, as well as income derived from agricultural production activities, will be subject to corporate income tax at a rate of 12.5% rather than the one-percentage-point reduced rate of 24% currently applicable. However, income benefiting from this reduced rate will not be eligible for the additional five-percentage-point corporate income tax reduction applicable to export income under the Corporate Income Tax Law.
The regulation will enter into force on the date of publication of the Law and apply to income derived in the 2027 and subsequent taxation periods, and, for corporations subject to a special accounting period, to income derived in the special accounting period commencing in the 2027 calendar year and subsequent taxation periods.
Income Tax Exemption for Foreign‑Source Income and Revenues
Pursuant to Repeated Article 20/D added to the Income Tax Law by the Law, foreign-source income derived by individuals deemed to be resident in Türkiye is exempt from income tax for a period of twenty years, provided that such individuals had neither a domicile nor tax residency in Türkiye during the three calendar years preceding the year in which they are deemed to have become resident in Türkiye.
Under this regulation:
- The existence of a prior tax liability in Türkiye arising from real property income, income from capital or capital gains derived in Türkiye before falling within the scope of the exemption will not prevent the individual from benefiting from the exemption.
- No annual income tax return will be required for exempt income, and where a return is required on account of other income, such exempt income will not be included in the return.
- Expenses and costs relating to exempt income may not be taken into account in the determination of taxable income. Foreign taxes paid on exempt income may not be credited against income tax assessed in Türkiye.
- Where it is subsequently determined that the conditions for the exemption were not satisfied, unpaid taxes will be deemed to constitute a tax loss.
In addition, a significant facilitation has been introduced in inheritance taxation in connection with the exemption. In the event of the death of an individual benefiting from the exemption during the twenty-year exemption period, assets transferred by inheritance will be subject to inheritance and gift tax at a flat rate of 1%.
The regulation will enter into force on the date of publication of the Law and applies to individuals deemed to have become resident in Türkiye as of 1 January 2026.
Expansion of the Incentive for Transit Trade Income
Previously applicable only to companies operating within the IFC and allowing a deduction of 50% of income derived from transit trade and the offshore purchase and sale of goods from the corporate income tax base, the scope of the incentive has been significantly expanded by the Law.
Under the new regulation, the deduction rate for income derived from the sale of goods purchased abroad without being brought into Türkiye, or from intermediation in such transactions, has been increased to 95%. This rate applies as 100% for companies operating within the IFC and for companies operating in designated industry zones approved by the President. The deduction may also be taken into account in the calculation of the domestic minimum corporate income tax base.
To benefit from the incentive:
- the goods must be sold abroad without being brought into Türkiye,
- both the buyer and the seller must be located outside Türkiye,
- the income must be transferred to Türkiye by the corporate income tax return filing deadline.
These amendments will enter into force on the date of publication of the Law and will apply to corporate income derived from taxation periods beginning on or after 1 January 2026 (for corporations subject to a special accounting period, in respect of the accounting period beginning on or after 1 January 2026), for tax returns to be filed as of 1 July 2026.
Other Key Amendments Relating to the Istanbul Finance Center
As outlined above, more favourable rates apply to companies operating within the IFC in respect of corporate income tax deductions applicable to transit trade income and foreign-source income derived from QSC activities. Accordingly, while the general income deduction rate is 95%, it will apply as 100% for IFC participants.
In addition, a higher incentive level has been adopted in favour of the IFC with respect to the income tax exemption applicable to qualified service personnel employed by QSCs; the upper limit of the salary exemption is set at five times the gross minimum wage for QSCs operating within the IFC.
Furthermore:
- The corporate income tax deduction rate applicable to income derived from financial services exports conducted within the IFC has been increased from 75% to 100%, and the duration of the incentive has been extended until 31 December 2047. The deduction may also be taken into account in the calculation of the domestic minimum corporate income tax base, applicable to tax returns to be filed as of 1 July 2026 in respect of income relating to taxation periods beginning on or after 1 January 2026.
- The exemption period from financial activity fees under the Fees Law applicable to the headquarters and branches of financial institutions holding participant certificates within the IFC has been extended from five years to twenty years.
- The scope of the existing income tax exemption applicable to personnel employed within the IFC has been expanded to cover all IFC participants, having previously applied only to financial institutions holding participant certificates.
These amendments will enter into force on the date of publication of the Law.
Expansion of Tax Incentives for Employee Share Ownership in Tech Start‑ups
The Law introduces significant amendments aimed at promoting employee share ownership by expanding the scope of equity-based compensation incentives provided to employees of technology-driven start-ups.
Under the amendment to Article 17 of the Income Tax Law, the upper limit of the income tax exemption applicable to shares provided free of charge or at a discount by employers qualifying as technology-driven start-ups, and treated as employment income, has been increased from one year’s gross salary to two years’ gross salary.
The claw-back mechanism linked to the shareholding period has also been significantly softened in favor of employees. While the previous regime required a minimum holding period of twelve years for full exemption, the new regulation reduces this threshold to six years.
Under the new regime:
- where shares are disposed of within two years of acquisition, 100% of the exempted tax will be collected from the employer together with late payment interest, without a tax loss penalty;
- where shares are disposed of between two and four years, 75% will be collected;
- where shares are disposed of between four and six years, 25% will be collected.
No claw-back applies where shares are held for more than six years. The regulation will enter into force on the date of publication of the Law.
Conclusion
When considered as a whole, the amendments introduced by the Law reflect a broader economic policy approach aimed at strengthening Türkiye’s position within the international investment, finance, technology and services ecosystem. In particular, the Qualified Service Centre regime, the transit trade incentives, the additional advantages granted to the IFC and the newly introduced exemptions for foreign-source income, taken together, indicate an intention to position Türkiye as a more competitive hub for regional management, financing, supply chain and high value-added service activities.
The new regulations are expected to have significant implications for multinational groups in particular, in terms of group structuring, service models, financing flows and employee incentive arrangements.
