Türkiye also offers significant tax incentives for software exports and SaaS businesses, including a 100% Export of Services Tax Deduction (effectively reducing income or corporate tax to zero on qualifying income) and VAT exemption. However, to benefit from these incentives, the foreign income must be transferred to a Turkish bank account by the statutory tax return deadline. In addition, the Turkish tax system requires regular monthly and quarterly tax filings, and these declarations must legally be submitted through a licensed Certified Public Accountant (CPA) / Sworn-in Financial Advisor (SMMM).
How Are Foreign Software Developers Living in Türkiye Taxed?
Over the past few years, many software developers from Russia, Ukraine, Belarus, Germany, the United Kingdom, the United States, India, and Middle Eastern countries have relocated to Türkiye while continuing to work remotely.
Some provide project-based services to U.S. companies, others develop software for international clients, while many establish companies in Türkiye and operate globally.
So, how are these earnings taxed?
1. Not Being a Turkish Citizen Does Not Mean You Are Exempt from Turkish Taxes
Under Turkish tax law, citizenship is not the determining factor.
Instead, taxation primarily depends on:
- Whether you are considered a Turkish tax resident.
- Whether you are classified as a full or limited taxpayer.
- Where your income is generated.
- The applicable Double Taxation Agreement (DTA) between Türkiye and the relevant country.
2. The 183-Day Rule
If a foreign software developer generally spends more than 183 days in Türkiye within a calendar year, they may become a Turkish tax resident (full taxpayer).
This may require them to declare their worldwide income in Türkiye.
Important Note: Becoming a Turkish tax resident does not automatically mean all worldwide income will ultimately be taxed in Türkiye. Each situation must be evaluated individually, particularly under the applicable Double Taxation Agreement.
3. Freelancers Working Through Upwork, ******, Toptal, Deel, and Similar Platforms
If you regularly provide software development or other professional services through freelance platforms or directly to international clients, your activity is generally considered a commercial or professional business under Turkish tax law.
In most cases, this requires:
- Registering as a Turkish taxpayer.
- Issuing invoices for your services.
- Establishing a business entity in Türkiye.
4. 100% Export of Services Tax Deduction for Software Companies
Türkiye offers one of the most attractive tax incentives for software developers and technology businesses serving international clients.
Foreign entrepreneurs operating from Türkiye and providing services such as:
- Software development
- Mobile application development
- Game development
- SaaS solutions
- Data processing
- Design services
- Other qualifying digital services
This means that qualifying profits may be exempt from Turkish income tax or corporate income tax. In addition, these exported services are generally exempt from VAT.
Critical Requirement: Bringing the Income into Türkiye
To qualify for the 100% Export of Services Tax Deduction, the foreign-source income must be transferred to a Turkish bank account no later than the statutory deadline for filing the annual tax return.
If the funds remain in foreign banks or payment platforms, the taxpayer may lose the right to claim this valuable tax incentive.
5. Can Foreigners Establish a Company in Türkiye?
Yes.
Foreign individuals may establish:
- A Sole Proprietorship
- A Limited Liability Company (Ltd. Şti.)
- A Joint Stock Company (A.Ş.)
There is no legal requirement to have a Turkish shareholder. Foreign investors may own 100% of the company.
Please Note: Establishing a company does not automatically grant a work permit. Company formation and work permit procedures are separate legal processes.
6. Don’t Overlook Double Taxation Agreement
Türkiye has signed Double Taxation Agreements with numerous countries, including the United States, Germany, the United Kingdom, Russia, and the Netherlands.
These agreements help:
- Prevent double taxation of the same income.
- Allow foreign withholding taxes to be credited in Türkiye where applicable.
- Determine which country has the primary taxing rights.
7. The Six Most Common Mistakes Made by Foreign Software Developers
- “I’m not a Turkish citizen, so I don’t pay taxes.”
Incorrect. Tax residency — not citizenship — determines your tax obligations. - Working as a freelancer without establishing a business.
Regular commercial activities generally require business registration and proper tax compliance. - Keeping export income outside Türkiye.
Failing to transfer qualifying income to a Turkish bank account may result in losing the 100% Export of Services Tax Deduction. - Assuming taxes are filed only once a year.
Unlike many countries, Türkiye requires regular monthly and quarterly tax declarations for businesses. - Not working with a licensed CPA (SMMM).
Under Turkish law, tax returns for registered businesses must be prepared and submitted through a licensed Certified Public Accountant (SMMM). Businesses cannot legally submit most corporate tax declarations independently. - Ignoring Double Taxation Agreements.
This may lead to unnecessary double taxation or incorrect tax reporting.
Conclusion
Türkiye offers significant tax advantages for foreign software developers, SaaS founders, and technology entrepreneurs through incentives such as the 100% Export of Services Tax Deduction and VAT exemptions.
However, to fully benefit from these incentives while avoiding tax risks, penalties, and missed filing obligations, it is essential to structure your business correctly, comply with Turkish tax regulations, and work with an experienced Turkish Certified Public Accountant (SMMM).
If you have any questions or would like professional advice regarding your tax obligations in Türkiye, please feel free to contact us at info@nova360.org.tr or through our WhatsApp.
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