In general, residency criterion is applied in determining tax liability for individuals. This criterion requires that an individual whose domicile is in Turkey is liable to pay tax for his worldwide income (unlimited liability). Any person who resides in Turkey more than six months in one calendar year is assumed as a resident of Turkey. However; foreigners who stay in Turkey for six months or more by the reason of a specific job or business or particular purposes which are specified in the PIT Law are not treated as resident. Therefore, unlimited tax liability is not applicable for them.
In addition to residency criterion, within a limited scope, nationality criterion also applies regardless of their residency status, Turkish citizens who live abroad and work for government or a governmental institution or a company whose headquarter is in Turkey, are considered as unlimited liable taxpayers. Accordingly, they are subject to PIT on their worldwide income. Non-residents are only liable to pay tax on their income derived from the incomes in Turkey (limited liability). For tax purposes, it is especially important to determine in what circumstances income is deemed to be derived in Turkey. The provisions of Article 7 of the PIT Law regulate this issue.
In the following circumstances, the income is assumed to be derived in Turkey.
Business Profit: A person must have a permanent establishment or permanent representative in Turkey and income must result from business carried out in this permanent establishment or through such representatives.
Agricultural Income: Agricultural activities yielding income must take place in Turkey.
Wages and Salaries:
– Services must be rendered or accounted for in Turkey,
– Fees, allocations, dividends and as such paid to the chairmen, directors, auditors and liquidators of the establishment situated in Turkey must be accounted for in Turkey.
Income from Independent Personal Services: Independent personal services must be performed or accounted for in Turkey.
Income from Immovable Property:
– Immovable must be in Turkey,
– Rights considered as immovable must be used or accounted for in Turkey.
Income from Capital Investment (interest, dividends, etc.): Investment of the capital must be made in Turkey.
Other Income and Earnings: The activities or transactions generating for other income, specified in the PIT Law, must be performed or accounted for in Turkey.
The term “accounted for” used above to clarify tax liability of the non-residents means that a payment is to be made in Turkey, or if the payment is made abroad, it is to be recorded in the books in Turkey.
Source: Revenue Administration
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