Turkey Taxes for US Expats: 2023 Guide
- Life as an Expat in Turkey
- Turkey at a Glance
- US Expat Taxes in Turkey
- Who Has to File Taxes in Turkey?
- Who Qualifies as a Tax Resident in Turkey?
- Income Tax in Turkey
- Other Tax Situations in Turkey
- What Turkish Tax Forms Do US Expats Need to File?
- Essential US Tax Forms for US Expats in Turkey
- Do the US and Turkey Have a Tax Treaty?
- Does Turkey Have a Totalization Agreement with the US?
- Navigating Tax Compliance for US Expats in Turkey
Life as an Expat in Turkey
Nestled partly in Europe and mainly in Asia, Turkey is a Middle Eastern country with a vibrant culture and deep history. With a mix of subtropical, coastal climates along the Aegean or Mediterranean Seas and snowy, cold winters in the eastern parts of the country, Turkey is home to 84.78 million people, including thousands of American expats. Knowing how Turkey’s taxes for US expats work is essential if you’re living in Turkey or considering moving.
Knowing your tax obligations can help you stay compliant while living and paying taxes in two countries.
Turkey at a Glance
- Primary Tax Form for Residents: Gelir Vergisi Beyannamesi (Income Tax Return)
- Tax Year: January 1st to December 31st.
- Tax Deadline: April 30th of the following year.
- Currency: Turkish Lira (TRY)
- Population: Approximately 84 million.
- Number of US Expats: Approximately 15,000.
- Capital City: Ankara.
- Primary Language: Turkish.
- Tax Treaty: Yes
- Totalization Agreement: No
US Expat Taxes in Turkey
In general, when living abroad, you must pay both your US taxes and taxes to the country where you’re living. As a US expat in Turkey, you’ll pay taxes to both countries. The good news is Turkey and the US have a tax treaty preventing you from getting taxed on the same income by both countries. This means you’ll still need to pay relevant taxes in Turkey but can write off the amount you paid on your US taxes (unless you are claiming another, more favorable tax break).
Who Has to File Taxes in Turkey?
Both residents and non-residents of Turkey must pay income tax. Residents must pay tax on all their income, both domestic and foreign-earned sources, while non-residents are only taxed on their Turkish-sourced income.
However, not all residents and expats have to file tax returns in Turkey. If your income is sourced from an employer that withholds taxes, you do not need to file a tax return. However, you’ll likely need to file an individual tax return if you have self-employment or business income.
Who Qualifies as a Tax Resident in Turkey?
If you’re a resident of Turkey, you’ll owe tax on both Turkish and foreign income. However, non-residents are only on the hook to pay tax on income earned in Turkey. Non-residents are not taxed on their foreign-earned income.
Turkey Resident Qualifications
You’re considered a resident of Turkey if:
- You live in the country for 183 or more during a calendar year
- You are a Turkish national but have tax residency in another country
Non-resident Qualifications in Turkey
If you lived in Turkey for less than 183 days during a calendar year (or if some of those days were not consecutive), you might not be a resident. In this case, you’re taxed as a non-resident. This means you’ll only owe taxes on income earned in Turkey,
Income Tax in Turkey
Turkey taxes residents progressively — the more you earn, the higher your income tax rate.
Income tax rate in Turkey
|Income tax bracket||Tax rate|
|1 TRY – 32,000 TRY||15%|
|32,001 TRY – 70,000 TRY||20%|
|70,001 TRY – 250,000 TRY||27%|
|250,001 TRY – 880,000 TRY||35%|
|880,001 TRY and up||40%|
Income tax rates for non-employment income (income earned outside wages) are slightly different.
Here’s how Non-employment Income is taxed in Turkey:
|Non-employment Income tax bracket||Tax rate|
|1 TRY – 32,000 TRY||15%|
|32,001 TRY – 70,000 TRY||20%|
|70,001 TRY – 170,000 TRY||27%|
|170,001 TRY – 880,000 TRY||35%|
|880,001 TRY and up||40%|
Other Tax Situations in Turkey
In Turkey, freelancers and self-employed individuals are prohibited from participating in the Social Security benefits system. There is no self-employment tax in Turkey.
For the 2022 tax year, businesses in Turkey pay a flat tax rate of 23% on all taxable corporate profits. This number will drop down to 20% in 2023.
Value-added Tax (VAT)
In Turkey, consumers pay value-added tax when purchasing goods or services. This is similar to sales tax in the US.
The flat VAT rate in Turkey is 18%. However, some items have a discounted rate, and VAT can range from 1% to 18%.
There is no wealth tax in Turkey.
If you receive a gift through inheritance or donation, it’s subject to inheritance and gift taxes ranging from 1% to 30%. You can pay inheritance and gift tax over three years.
In Turkey, property tax is paid to the Ministry of Finance. Property taxes vary depending on location but generally range from 0.01% to 0.03%. Turkey’s Residences valued at more than 6,173,000 million TRY are subject to a 0.3% to 1% tax.
Turkey requires employees and employers to contribute to Social Security premiums. The rate employees pay into Social Security breaks down to 14% for Turkish nationals and 15.5% to 20.5% for employers.
What Turkish Tax Forms Do US Expats Need to File?
Americans living abroad in Turkey may need to file a tax return in Turkey and the United States. However, you do not have to file a tax return form if you only earn income through an employer in Turkey.
If you own your own business or have self-employment income, you must file an annual tax return.
The Turkish tax year is the same as the US — January 1 – December 31 — and if you have to file an income tax return, it’s due by March 31.
Essential US Tax Forms for US Expats in Turkey
As an expat living in Turkey, there are certain US tax forms that you must be aware of to comply with tax laws in both Turkey and the US. Here are some essential tax forms you need to know about:
- Form 1040: This is the main US tax form for individuals. As a US citizen or green card holder, you must file this form every year regardless of where you live in the world. You must report your worldwide income, including income earned in Turkey.
- Form 2555 is used to claim the Foreign Earned Income Exclusion (FEIE). As a US expat in Turkey, you may be eligible for this exclusion if you meet certain criteria. This exclusion allows you to exclude up to a certain amount of your foreign-earned income from US taxes.
- FinCEN Form 114: If you have financial accounts in Turkey with an aggregate value of $10,000 or more, you must file this form with the US Treasury Department. This is known as the Foreign Bank Account Report (FBAR).
- Form 8938: This form is used to report foreign financial assets if their value exceeds certain thresholds. You must file this form with your US tax return if you have foreign assets worth more than $200,000.
Do the US and Turkey Have a Tax Treaty?
Yes, Turkey has a tax treaty with the US, which means you’re protected from paying double taxes on the same income. Under the treaty, US citizens and residents living in Turkey are generally taxed only in Turkey on their Turkish-source income. Likewise, Turkish citizens and residents living in the US are generally taxed only in the US on their US-source income.
The tax treaty also provides for a number of other benefits, such as reduced withholding rates on dividends, interest, and royalties and exemptions for certain income earned by students and researchers.
It’s important to note, however, that the tax treaty may not cover all types of income, and there are some situations where you may still be subject to double taxation. For example, if you have income from a business or rental property located in the other country, you may need to pay taxes in both countries.
If you’re unsure about your tax obligations as a US expat in Turkey, it’s recommended that you seek advice from a qualified tax professional service like Greenback, who can help you navigate the complexities of international tax law.
Does Turkey Have a Totalization Agreement with the US?
No. Turkey does not currently have a totalization agreement in place with the US. A totalization agreement helps protect expats from paying Social Security contributions on the same income in both the US and a foreign country like Turkey. This means US expats living in Turkey may pay into both countries’ social security systems.
Navigating Tax Compliance for US Expats in Turkey
Now that you know the tax rules US expats living in Turkey must follow, we hope you better understand how to file your tax return this year. If you still have questions or want help filing your return, reach out to Greenback Expat Tax Services.
If you’re ready to be matched with a Greenback accountant, click the get started button below. For general questions on expat taxes or working with Greenback, contact our Customer Champions.