Turkey’s Grand National Assembly on May 21 passed the fiscal incentive package that President Recep Tayyip Erdogan proposed in late April. The centerpiece, a 20-year exemption from Turkish income tax on foreign-source earnings for qualifying new residents, is now legislation rather than a presidential pledge.
Erdogan has 15 days to promulgate the law and publish it in the Official Gazette (Resmi Gazete). Given that he initiated the package himself, a veto is not on the table.
How the personal tax exemption works
Individuals who had no domicile and no Turkish tax liability during the three calendar years before relocating qualify for the 20-year holiday. Foreign-source income covered by the exemption will not need to appear on annual Turkish tax returns. Domestically earned income remains taxable at standard progressive rates of 15% to 40%.
Inheritance and gift tax for qualifying individuals drops to a flat 1%, down from Turkey’s standard graduated rates of 1% to 30%.
Asset amnesty: Turkey’s eighth since 2008
The law also introduces a wealth amnesty allowing individuals and companies to declare assets held abroad, including cash, gold, foreign currency, and securities, through Turkish banks or brokerage firms. Declarations must be filed by July 31, 2027, and foreign assets transferred to Turkey within two months.
Tax rates slide according to how long declared assets remain in qualifying Turkish instruments: 0% for five years, 1% for four, 2% for three, 3% for two, and 4% for one. Assets withdrawn sooner face the base rate of 5%.
Declared amounts receive protection from tax inspections and penalties. Opposition parties have criticized the amnesty provision, with lawmakers arguing during debate that similar past measures allowed illicit funds into the country.
Corporate tax and Istanbul Finance Centre
Parliament also halved the general corporate tax rate for manufacturing companies to 12.5% from 25%. Export income receives steeper cuts: 9% for manufacturers who export their own goods, and 11% for other exporters, according to reporting by Hürriyet Daily News on the enacted text.
Transit trade income for companies operating within the Istanbul Finance Centre (IFC) receives a full corporate tax exemption, up from 50% under the previous framework. Companies outside the IFC receive 95% relief. Financial services export income at the IFC remains fully exempt from corporate tax through 2047.
“The government has smelt blood in the streets”
Aran Hawker, who in 2011 provided trading technology to Istanbul’s banks and stock exchange as part of the broader financial center buildout, sees the legislation as the end product of planning that stretches back nearly two decades.
Former Deputy Prime Minister Nazim Ekren championed making Atasehir the anchor of Istanbul’s bid to become Eurasia’s financial capital as far back as 2009; the Istanbul Finance Centre is that plan made concrete.
“The Turkish government has smelt blood in the streets and wants to capitalize on the situation,” Hawker observed, referring to the disruption in Gulf Cooperation Council (GCC) financial hubs caused by the Iran conflict. Beyond the Gulf, he expects the incentives to draw capital from further afield. “I expect a lot of wealth repositioned not only from the GCC but also North America, Europe, and the UK, from people not happy with political situations in those respective countries.”
