Tax Residency in Turkey
1. Criteria for Determining Tax Residency in Turkey
According to Article 3 of the Turkish Income Tax Law, an individual is considered a tax resident in Turkey if they meet any of the following criteria:
- Residing in Turkey for more than six months in a calendar year.
- Having a domicile in Turkey.
- Having the center of their vital interests in Turkey.
The concept of "center of vital interests" is not clearly defined in the law but generally refers to the place where an individual has their closest personal and economic ties.
For legal entities, tax residency is determined based on the place of incorporation or management and control.
2. Impact of International Tax Treaties on Tax Residency Criteria
Turkey has entered into double taxation agreements (DTAs) with numerous countries to prevent double taxation and promote cross-border trade and investment. These DTAs may modify or provide exceptions to the standard criteria for tax residency as defined in domestic law.
For example, under the Turkey-United Kingdom DTA, an individual is considered a resident of Turkey if they have a permanent home available to them in Turkey and spend more than 183 days in Turkey in a calendar year.
The DTA also includes a tie-breaker rule for individuals who are considered residents of both Turkey and the United Kingdom under each country's domestic law. In such cases, the individual is deemed a resident of the country where they have their "habitual abode."
These treaty-specific modifications aim to provide clarity and prevent double taxation by establishing clear rules for determining tax residency in cases involving cross-border activities. They reflect the mutual agreement between Turkey and the other country to facilitate tax compliance and enhance economic cooperation.
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