Domestic Minimum Tax

Turkey’s Implementation of the Pillar Two Framework
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Turkey has embraced the Pillar Two global minimum tax framework, broadly aligning with the OECD’s GloBE Model Rules. The main goal of these regulations is to ensure that large multinational enterprises (MNEs) pay an effective tax rate (ETR) of at least 15% on profits earned in each jurisdiction. Where the ETR falls below this threshold, a top-up tax will be levied to bridge the gap.
 
Current Corporate Tax Environment in Turkey
Turkey’s standard corporate income tax (CIT) rate stands at 25%, with financial sector companies subject to a higher 30% rate.

• Resident companies are taxed on their worldwide income.

• Non-resident companies are taxed solely on income sourced within Turkey.

Taxable income is based on net accounting profits, adjusted for allowable exemptions, deductions, and limited use of carry-forward losses.
 
Introduction of a Domestic Minimum Tax (Effective January 1, 2025)
Starting from 2025, Turkey will introduce a domestic minimum tax to ensure companies pay at least 10% tax on income before certain deductions and exemptions.
Companies will calculate their tax liability using two methods:

1. The standard method — applying a 25% CIT rate on net taxable income after deductions.

2. The new minimum tax method — applying a 10% rate to income before specified deductions and exemptions.

The final tax payable will be whichever amount is higher.
 
Calculation of the Domestic Minimum Tax
The minimum tax will be calculated by:

1. Starting with the period’s profit or loss.

2. Adding back non-deductible expenses.

3. Deducting specific exemptions and deductions (with some exclusions).

4. Applying the 10% tax rate to the resulting amount.

Important:
Carry-forward losses will not reduce the minimum tax base.
 
Exemptions from the Minimum Tax Regime
Temporary exemptions will apply for newly established companies:

• Established in 2025: exempt for 2025, 2026, and 2027

• Established in 2024: exempt for 2025 and 2026

• Established in 2023: exempt for 2025

Note: Companies created via mergers, divisions, or legal reorganizations will not qualify as newly established entities.
 
Specific Exemptions Maintained in the Minimum Tax Base
Certain exemptions and deductions will continue to apply when calculating the minimum tax, including:

• Participation exemptions for dividends from Turkish resident companies

• Exemptions for emission premiums

• Incentives under the Technology Development Zones Law

• Allowances for qualified R&D and design activities

• Deductions like venture capital allocations or protected workplace incentives under the Corporate Income Tax Code

 
Interaction with Other Tax Incentives
The minimum tax liability can be reduced through various incentives, such as:

• A 2-point reduction for companies conducting an initial public offering (with at least 20% float on Borsa Istanbul)

• A 5-point reduction on export income

• A 1-point reduction for certified manufacturers with industrial registration

• Incentives from Investment Incentive Certificates issued before August 2, 2024

 
Final Corporate Tax Liability
At the end of each tax period, the corporate tax payable will be determined as the higher of:

• The amount calculated under the standard CIT system, or

• The amount calculated under the domestic minimum tax regime.