Income Tax Deduction for Software Developer/Self Employments in Turkey

Software services they provide to foreign companies are exempt from VAT. They have the right to receive VAT refund in case they cannot deduct the VAT they paid in the country.

• Young entrepreneurs under the age of 29 if their first employment, up to 75,000 Turkish Liras of these earnings (as of 2022) are exempt from income tax for three taxation periods starting from the calendar year in which they operate. In addition, social contribution premiums are also exempt for one year.

• With the aforementioned additions to both the Income Tax Law and the Corporate Tax Law, 50% of the revenues obtained from the following services provided from Turkey to those residing abroad can be deducted from their income and/or corporate income.

  1- It is obligatory to provide the specified services by companies residing in Turkey, to persons not residing in Turkey and to companies with workplace, legal and business centres abroad.

  2- It is necessary to benefit from the service provided abroad. In other words, the service provided should not be related to the activities of the foreign company in Turkey. The service provided must be used in full abroad.

  3- In order to benefit from this exemption, an invoice or a similar document must be issued to the customer abroad in return for the services provided.

  4- Software and design services should be specified among the main fields of activity written in your company’s main contract.

  5- As a rule, the service fee should be paid into Turkey in foreign currency. In order for the service to be qualified as a service export, it is also necessary to obtain a foreign currency purchase document.

  6- Service exports are also exempt from VAT. However, the exception can be used at the time the foreign currency is brought into the country, not at the time the invoice is issued. In other words, even if the invoice is issued on a date before the export value of the foreign currency enters the country, the service export exception will be declared in the declaration of the period in which the foreign currency is brought into the country.