Turkey Foreign Income Tax Exemption: what is covered

What the law covers

Article 20/D of the Income Tax Law exempts "kazanç ve iratlar" earned outside Turkey. The phrase means earnings and income of every kind. The law does not list categories and does not exclude any. Tebliğ 333, the communiqué that sets out how the exemption is applied, adds worked examples.

• Example 8: rent from a property abroad is exempt and is left out of the Turkish return.
• Example 11: a certificate holder receives rent from a property in Monaco and dividends from a Spanish company. Both are exempt.

Foreign interest, gains on foreign assets and pensions paid from abroad are not named in the examples. They fit the plain wording of the law, and EY describes the regime as covering "foreign-sourced income and gains".

Covered and not covered, by income type

Why work done in Turkey is not foreign income

Income Tax Law Article 7 decides where income comes from. Wages are Turkish-source when the service is performed in Turkey or evaluated in Turkey. Self-employment income follows the same rule. The location of the employer, the client or the bank account does not change this.

Tebliğ 333, Example 10, applies the rule to the exemption. An engineer lives in Turkey and gives advice to clients resident abroad. Because he performs the service in Turkey, the fees are taxed in Turkey, and Article 20/D does not cover them.

This has a direct result for remote workers. If you live in Istanbul and work for a company in London or New York, your salary is Turkish-source income. The same is true for a freelancer with only foreign clients. That income is taxed at the normal 2026 rates of 15% to 40%. A digital nomad who becomes tax resident is in the same position.

So the regime mainly helps two groups:

• people whose income is passive and comes from abroad: foreign dividends, interest, rent and capital gains;
• owners of businesses abroad, where the work that earns the income is not done from Turkey.

For what stays taxed and at which rates, see Turkish-source income.

Rules that apply to exempt income

No return

You do not file a Turkish annual return for exempt foreign income. If you file a return for Turkish income, you leave the exempt income out of it (Article 20/D; Tebliğ 333, Art. 3(6) and Example 8).

No deduction for related costs

Expenses linked to exempt income cannot be deducted when your taxable Turkish income is calculated (Tebliğ 333, Art. 3(8)).

No credit for foreign tax

Foreign tax paid on exempt income cannot be credited against Turkish income tax (Tebliğ 333, Art. 3(9)). The exemption removes Turkish tax, but it cannot stop the country where the income arises from taxing it. If a foreign company withholds tax on your dividends, that withholding is a final cost. A double tax treaty between Turkey and that country may limit the rate, and Turkey reports 89 tax agreements in force.

Other taxes are not affected

The exemption covers income tax only. VAT, stamp duty and property tax in Turkey apply as normal.

Grey areas

A foreign company you run from Turkey

On the wording of the law, dividends from a foreign company are foreign-source. But if you manage that company from Turkey, Turkey could treat the company as managed from Turkey, or apply its rules on controlled foreign companies. Neither Article 20/D nor Tebliğ 333 deals with this. If you own and run a company abroad, take advice before you rely on the exemption for its profits.

Crypto

The law and the communiqué do not mention crypto. Commentators note that the law has no limit by income type. Whether a gain on a foreign exchange is "obtained outside Turkey" when you are sitting in Turkey is unsettled. We do not treat crypto gains as covered.

Next step

To use the exemption at all you need the certificate, applied for by the end of your residence year: see how to claim. For the conditions and the full overview, see who qualifies and the 20-year tax exemption.