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The new incentive regime put on the agenda with the aim of turning Türkiye into an investment and technology hub, and known to the public as the "20-year tax advantage", is capable of producing significant consequences for Turkish citizens living abroad, foreign investors and international companies. In the article on our website, we examine in detail the basic logic of the regulation, the types of income that may fall within its scope, the incentives for Istanbul Finance Centre and regional management centre structures, the exemptions for software and service exports, asset-peace-type schemes and the points that have yet to be clarified.
Recently, it has been observed that a new tax incentive system aimed at attracting foreign investors, Turkish citizens living abroad and international companies to Türkiye has come onto the agenda in public discussion and investment circles. Although the regulation in question, known as the "20-year tax advantage", has not yet become final legislation, it is being intensely discussed in economic circles and among investors, and is being taken into account for both individual and corporate structuring. It is understood that the main objectives of the regulation are to turn Türkiye into a regional management centre and an investment and technology hub, to channel capital held abroad into Türkiye, and to encourage high-income individuals to relocate to Türkiye. In this article, we will address the basic logic and scope of these draft proposals, the aspects that have yet to be clarified, and their possible consequences in practice.
1. The Basic Logic of the Regulation
The main approach that stands out in the draft proposals is that the foreign-source income of persons meeting certain conditions would not be taxed in Türkiye for a long period of time. One point that is particularly noteworthy in the draft is the approach that, in order to benefit from the regime in question, a person must not have been treated as a full taxpayer in Türkiye, and must not have had tax residence in Türkiye, during the last three years before the date of return or relocation to Türkiye. According to the assessments reported in the public domain, it is understood that this criterion is envisaged as one of the fundamental conditions, in particular for Turkish citizens living abroad, foreign investors and persons earning international income.
2. Types of Income That May Fall Within the Scope
Within the framework of the draft proposals, it is being discussed that foreign-source dividend income, investment income, foreign company earnings, interest income, income derived from offshore structures and various types of passive income may be assessed under the favourable regime. By contrast, it is envisaged that income arising within Türkiye will continue to be subject to the current tax system. In this respect, it may be said that the regulation does not constitute an alternative to the existing full liability regime, but rather a limited exception for persons who satisfy certain criteria.
3. Istanbul Finance Centre and Regional Management Centre Structures
It is understood that a significant part of the regulations is directed at the Istanbul Finance Centre and regional headquarters structures. In this context, it is on the agenda that, in particular, companies engaged in holding, fintech, investment fund, technology and regional management activities would obtain substantial corporate tax advantages if they were structured in Türkiye. The structure in question is consistent with the objective of positioning Türkiye as a regional hub country in the international investment landscape.
4. Incentives for Software and Service Exports
It is stated that work is under way to broaden the existing exemptions for companies exporting software, technology, gaming, engineering and similar services, and to reduce the effective tax burden significantly. In this context, it is assessed that SaaS, mobile application, artificial intelligence and digital service companies in particular are being targeted.
5. Asset-Peace-Type Regulations
It is also indicated that the package may include new asset-peace-type schemes, involving low-rate financial obligations, for bringing money, gold, securities and similar assets held abroad into Türkiye. It appears likely that the mechanisms in question will be designed on a structure parallel to similar regulations put into force in the past.
6. Points That Have Yet to Be Clarified
At the present stage, the scope of the regulations and the principles of their application have not been finalised. In particular, whether Turkish citizens will be included within the scope, the position of dual citizens, the effective place of management criteria, the effect of double taxation treaties, CFC (Controlled Foreign Corporation) rules, and how the criteria for residence in Türkiye will be applied have not yet been clarified. It is anticipated that these matters will be shaped by the final text of the regulation and by secondary legislation.
7. Conclusion and Assessment
If the regulations in question enter into force, they are capable of producing significant consequences for Turkish investors, technology entrepreneurs, consultancy firms and regional structures operating abroad, above all in Dubai. However, since the details of the system have not yet been finalised, it is important that individual or corporate structures be assessed separately once concrete legislation has been published. In this process, it is of great importance, for the prevention of legal and financial risks that may arise in the future, that planned structures be assessed both in light of the basic logic of the current draft proposals and within the framework of the final legislation that will enter into force.
