A draft law proposal introducing various tax amendments has been submitted to the Turkish Grand National Assembly. The proposal includes several provisions that are particularly relevant for employment taxation, individuals considering relocation to Turkey, and taxpayers holding foreign assets in Turkey.
Key highlights are summarized below.
1. Income tax exemption for foreign-source income
A new provision is introduced to the Income Tax Law granting a significant tax exemption for individuals relocating to Türkiye, as of January 1st, 2026.
Accordingly, individuals who become tax resident in Türkiye will benefit from an income tax exemption on their foreign-source income for a period of 20 years, provided that they have not been tax resident in Türkiye during the preceding three calendar years.
For the purposes of this exemption:
It is also stipulated that individuals benefiting from the foreign-source income exemption will be subject to a reduced inheritance tax rate of 1% on inheritances received by way of succession during the exemption period.
2. Incentives for qualified service centers
The draft law introduces the concept of “qualified service centers” under the foreign direct investment framework.
Qualified service centers are defined as companies operating in at least three countries and deriving at least 80% of their annual revenue from related foreign entities.
These centers are intended to provide a wide range of headquarter and shared service functions, including financial and strategic management advisory, risk and treasury management, funding and debt operations, investment and capital structure planning, budgeting, financial reporting, international accounting and compliance, audit, digital transformation and technology advisory, legal advisory, HR and training services, as well as coordination of sales, after-sales support, R&D, procurement, product testing, and laboratory services.
From an employment tax perspective, significant incentives are introduced for the individuals employed in the qualified service centers:
This framework is expected to support the establishment of regional service hubs in Türkiye, while increasing the volume of cross-border assignments and internationally mobile workforce structures.
3. Amendments to equity-based compensation taxation
The draft law introduces amendments regarding the income tax treatment of shares granted to employees in techno startup companies.
Under the existing rules set out in Article 17 of the Income Tax Law No. 193, shares granted free of charge or at a discount to employees of qualifying techno startup companies benefit from an income tax exemption, provided that the fair market value of the shares at the grant date does not exceed the employee’s annual gross salary for the relevant year. In addition, recapture mechanism currently applies if the shares are disposed of within certain holding periods, as follows:
The draft law maintains the exemption regime but introduces several favorable amendments. In particular, the exemption cap will be increased to two times the employee’s gross annual salary for the relevant year, while the applicable holding periods will be shortened.
Accordingly:
Any income tax arising from such cancellation will be collected from the employer, along with late payment interest.
These amendments increase the complexity of equity compensation planning and internationally mobile employee structuring, particularly in relation to vesting schedules and exit scenarios.
4. Tax amnesty for asset repatriation
A new tax amnesty-type regime is introduced to encourage the transfer of funds and financial assets held abroad (including cash, foreign currency, gold, shares, bonds, and other capital market instruments) into Türkiye.
The regime is available to:
Non-tax resident individuals are allowed to benefit from the regime without being subject to certain domestic registration and accounting requirements, provided that the assets are transferred to Türkiye or properly deposited into bank or brokerage accounts within the prescribed timelines.
Under the regime, eligible assets must be notified to banks or brokerage firms by 31 July 2027 and transferred to accounts in Türkiye within two months following the notification. The framework also allows the regularization of unrecorded domestic assets through declaration and registration in statutory records where applicable.
Assets are subject to a 5% advance tax, collected by banks or brokerage firms acting as withholding agents upon notification.
A reduced effective tax rate is available depending on the holding period commitment of the assets:
While the regime provides preferential tax treatment and protection from tax audits and assessments in relation to the declared assets, strict compliance requirements apply. Failure to meet the conditions results in loss of the regime benefits, with taxation applied together with late payment interest.
This draft law will be discussed at the Parliament and may be subject to changes before being put into force.
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:
Cumhur Dülger
Partner
Münevver Gaynetullah
Senior Consultant
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