Under the Income Tax Law and the Corporate Tax Law in Turkey, tax liability arises when a taxpayer becomes liable for taxes. Therefore, it is mandatory for each taxpayer to register with the relevant tax office. Registration is essential for the proper submission of tax returns and compliance with other tax obligations.

Turkey operates a unified tax numbering system, meaning a single tax identification number covers corporate income tax value-added tax (VAT), and other taxes. For companies, tax liability arises upon formation and registration with the Chamber of Commerce and Industry. This registration is automatically reported to the relevant tax office, which then assigns a tax number to the company. The tax office also sends officers to verify the company’s registered address (note that P.O. box addresses are not permitted), and the company’s tax number becomes active only after this verification process is completed.

For individuals, residents of Turkey are automatically assigned a tax ID linked to their Turkish ID number, which enables them to fulfill obligations once a taxable event arises. Foreign individuals can obtain a potential tax number by visiting a tax office and presenting their passports. Individuals wishing to engage in business activities (e.g., tradesmen, artisans, self-employed professionals) can also obtain a tax number for commercial purposes either by visiting tax offices or through the Interactive Tax Office (online tax portal). The verification process by tax officers also applies to personal business establishments.

In Turkey, the tax system primarily operates on a self-assessment basis. Taxpayers are responsible for calculating their own tax liabilities and filing their tax returns accordingly. The self-assessment system means that the taxpayer’s calculation of their tax obligations generally stands unless the tax authority decides to audit or review the return. While the tax authority (Revenue Administration) may conduct audits or request additional information to verify the accuracy of the tax return, there is no automatic issuance of a tax assessment unless discrepancies are found.

A taxpayer may amend their return after it has been filed, subject to specific rules and time limits set out in the Tax Procedure Law (TPL).

• Right to File an Additional Declaration (TPL Article 371): If a taxpayer discovers an error in a filed return, they may submit an additional declaration to correct the mistake or complete missing information. If the correction is filed within the original filing deadline and up to 15 days thereafter, no tax loss penalty is imposed.
• Time Limitations and Penalties: Corrections made more than 15 days after the filing deadline may trigger a tax loss penalty under TPL Article 344, in addition to the underpaid tax and late payment interest. However, under the “repentance and correction” procedure in TPL Article 371, if the taxpayer voluntarily discloses the error before any audit or investigation has commenced, penalties can be avoided, and only interest is collected.

Tax authorities in Turkey have several methods to challenge the amount of tax a taxpayer has paid under the self-assessment system:

• Tax Audits: The tax authority may conduct full or limited audits to review the accuracy of financial statements and records. This process includes examining income, deductions, and credits to ensure compliance with tax laws.
• On-Site Inspections and Verifications: Tax officers may visit the taxpayers’ premises to verify the existence of business activities, employees, or assets, and to confirm whether tax obligations are being properly fulfilled.
• Supplementary and Ex Officio Assessments: If discrepancies are discovered or if a return has not been filed, the tax authority can issue additional or ex officio assessments. These reassessments result in adjustments to the taxpayer’s declared liability and may lead to additional taxes, interest, and penalties.
• Cross-Checks with Third Parties: The authority may obtain data from banks, suppliers, or business partners to identify inconsistencies in reported transactions. This mechanism is frequently used in practice.
• Requests for Additional Information: The administration may request supporting documentation from the taxpayer to clarify specific transactions. Failure to respond may lead to further scrutiny or the issuance of an assessment.

Overall, the Revenue Administration has broad investigative powers under the Tax Procedure Law, and any findings are typically formalized in a tax inspection report, which then forms the basis for additional assessments, interest, and penalties.

The tax office may initiate a tax audit to verify the accuracy of a taxpayer’s declarations. If the audit reveals that the taxpayer has made an incomplete or incorrect declaration, the tax office may recalculate the tax due and issue an additional assessment. Alongside such reassessment, tax loss penalties and late payment interest may also be imposed.

Tax audits and assessments must be carried out within the five (5)-year statute of limitations for the relevant tax period, as stipulated by Article 114 of the Tax Procedure Law (TPL). This period begins at the start of the calendar year following the year in which the tax liability arises. After this limitation period has expired, the tax authority is barred from issuing assessments.

If an assessment is issued, the taxpayer has the right to challenge it. Under Article 7 of the Law on Administrative Judicial Procedure (LAJP, Law No. 2577), the taxpayer may file a lawsuit with the tax court within 30 days of notification. Alternatively, the taxpayer may first submit an administrative application under Article 11 of the LAJP to the tax office within the same 30-day period; in that case, the litigation period is suspended during the administrative review and resumes upon rejection (or deemed rejection). If the initial administrative application is rejected by the tax office, the taxpayer may still apply to the tax court within the remaining period under Article 11 of the LAJP. Tax court proceedings result in a binding judicial decision.

According to Article 359 of the Tax Procedure Law (TPL), tax fraud is defined as the unlawful preparation, use, falsification, concealment, or destruction of books, records, invoices, or other documents required to be kept or issued under tax legislation. It also covers accounting fraud committed within such documents and records. In practice, the most frequent form of tax fraud is the issuance or use of fake invoices in order to obtain unlawful tax deductions or refunds.

In Turkey, tax fraud is considered a serious crime, and the procedures related to it are stringent. When there is suspicion of tax fraud, the tax office initiates a tax inspection to assess the situation. If tax fraud is detected during the inspection, tax loss penalties and/or evasion penalties are imposed, depending on the nature of the fraud. However, tax offices or related tax audit and inspection authorities do not have the authority to prosecute. Instead, they forward their findings to the relevant Chief Public Prosecutor’s Office.

The investigation and prosecution of tax fraud offenses are conducted under the general provisions of the Criminal Procedure Law No. 5271. Tax fraud is not an offense that can be resolved through reconciliation.

There is no complaint period for these offenses, and the criminal statute of limitations is generally 8 years. However, for serious document forgery cases linked to tax fraud (under Articles 359 of the TPL in conjunction with the Turkish Penal Code), this period may extend up to 15 years. The Public Prosecutor’s Office may file a criminal case for tax fraud. The Public Prosecutor’s Office may file a criminal case for tax fraud. While the criminal court of first instance generally has jurisdiction over tax offenses, if the offense involves more serious crimes, such as forgery of official documents, the case may be transferred to the high criminal court.

To initiate criminal proceedings for tax offenses, two types of reports are prepared by the tax office: the tax technical report and the tax offense report. The penalty for tax fraud committed in the manner specified in Articles 359/a-1 and a-2 of the Tax Procedure Law (TPL) is imprisonment ranging from 18 months to 5 years. Examples of these offenses include account and accounting fraud, illegal bookkeeping (e.g., double-entry bookkeeping), creating fake accounts for fictitious or unrelated transactions, falsifying books, documents, and records, or using falsified documents.

Under Article 359-b of the Tax Procedure Law, the penalty for offenses involving the alteration or destruction of books and documents or the issuance and use of false documents is imprisonment from 3 to 8 years. Additionally, individuals convicted of tax fraud may face further sanctions, such as deprivation of financial rights, loss of public rights, and suspension or restriction of their commercial activities.

In Turkey, tax authorities do not operate on a systematic or fixed audit cycle for all taxpayers. An audit may be initiated at any time within the five-year statute of limitations for tax assessments. The Turkish Revenue Administration (TRA) applies a risk-based selection system, under which taxpayers with higher risk profiles—such as those with significant income, complex corporate structures, or irregularities in their returns—are more likely to be audited.

In addition to risk-based reviews, the TRA also conducts random audits as part of its overall compliance strategy. The TRA does not need to provide a specific justification to commence an audit and holds broad authority to review any taxpayer’s return at its discretion. While no formal justification is required, the authority’s practice is primarily guided by risk analysis and compliance priorities.

The tax authorities in Turkey have the right to audit taxpayers to ensure they fulfill their tax obligations correctly, identify instances of tax fraud or misreporting, and take necessary corrective measures. The framework for tax audits is outlined in Articles 134 to 141 of the Tax Procedure Law (TPL). In this context, the tax authorities must adhere to certain basic standards to conduct the audit process fairly, transparently, and legally.

• Objectivity and Transparency: During a tax audit, the taxpayer’s declarations and records are examined objectively. The audit must be conducted impartially, with decisions made based on evidence without external influence.
• Compliance with Legislation: The general principles of conducting tax audits, as well as the powers and responsibilities of tax audit officers, are defined by legislation. Tax authorities are therefore required to conduct audits in accordance with the legal framework established by the law.
• Examination and Research: A tax audit involves a thorough examination and research process, where the taxpayer’s declarations, financial records, and transactions are scrutinized in detail.
• Legal Procedure: Any tax fraud or errors detected during an audit are addressed through legal proceedings. Taxpayers also have the right to appeal the results of the audit using the legal mechanisms provided by the law.

The Revenue Administration and the Tax Inspection Board periodically publish guidelines and reports on audit practices. These documents provide general information on how audits are conducted and help ensure that taxpayers are informed about the audit process.

According to Article 148 of the Turkish Tax Procedure Law (TPL), public administrations, institutions, taxpayers, and other individuals or entities that have dealings with taxpayers are required to provide information requested by the Ministry of Finance or authorized tax auditors. Failure to comply may give rise to criminal liability, although individuals cannot be physically compelled to appear before the tax office.

Natural and legal persons from whom information is requested cannot refuse disclosure on the grounds of confidentiality provisions under other laws, except for specific legally protected cases. Examples include the confidentiality of communications under postal and telecommunications laws, medical secrecy for doctors and other health professionals, and attorney–client privilege.

Regarding electronic communications, the TPL does not expressly mention emails. However, the broad language of Article 148 may be interpreted to include electronic data if it is deemed necessary for a tax investigation. Any such collection must nevertheless comply with constitutional guarantees, data protection legislation, and other applicable privacy rules.

As for remedies, if an information request is considered unlawful or disproportionate, the affected party may challenge it before the administrative courts. The court will assess whether the request falls within the scope of the tax authority’s legal powers and whether it infringes fundamental rights or other statutory protections.

Under Articles 148 and 149 of the Turkish Tax Procedure Law (TPL), third parties—including banks, suppliers, business partners, and public institutions—are obliged to provide information requested by the tax authority. While requests may be made verbally or in writing, in practice they are generally issued in writing, and a deadline is granted for submission if the information is not provided immediately.

Article 149 goes further by imposing continuous reporting obligations on certain public bodies and financial institutions, requiring them to share data with the Revenue Administration at regular intervals. This framework enables the tax authority to perform extensive cross-checks between a taxpayer’s declarations and third-party records.

Yes. Turkish tax law provides mechanisms that allow taxpayers to resolve disputes arising from tax audits by way of settlement with the tax authority, without resorting to litigation.

• Pre-assessment settlement: During an ongoing audit, the taxpayer and the tax authority may negotiate before an assessment is formally issued. If a settlement is reached, it is binding on both parties and the taxpayer may not subsequently litigate the matter.
• Post-assessment settlement: After an assessment notice is served (typically for supplementary, ex officio or administrative assessments), the taxpayer may apply to the Settlement Commission within 30 days. A settlement report signed by the parties is final and binding, and closes the path to litigation.

In addition to settlement, there are other alternative procedures which may prevent litigation but are not strictly “binding agreements”:

• Statutory penalty reduction (TPL Art. 376): Taxpayers may benefit from reduced penalties by paying the tax and interest due, thereby avoiding litigation.
• Invitation to explain (TPL Art. 370): The authority may invite the taxpayer to explain potential irregularities. If the explanation is accepted, no audit is initiated.
• Repentance and correction (TPL Art. 371): Taxpayers may voluntarily disclose undeclared taxes before an audit starts, pay the taxes and interest, and thereby avoid penalties and prosecution.

A taxpayer has several remedies available if they are concerned about how they are being treated during an audit or the speed at which it is being conducted:

• Filing a Complaint: The taxpayer can file a written complaint directly with the relevant tax office regarding any issues they have with the tax office or its personnel. This is the first step to addressing concerns about the treatment received.
• Reporting to the Revenue Administration: The taxpayer may also submit their complaint to the Revenue Administration. The Revenue Administration has the authority to investigate such complaints and, if necessary, initiate a formal investigation.
• Lodging a Complaint with the Ombudsman: The taxpayer can lodge a complaint with the Ombudsman concerning the behavior of the tax office or audit personnel, or the method by which the audit is being conducted. The Ombudsman serves as an intermediary to address grievances related to public administration.
• Judicial Remedies: If the taxpayer suffers significant harm due to unfair practices by the tax administration or audit staff, they may seek compensation through judicial remedies. The taxpayer can file a lawsuit for the cancellation of administrative actions or claim damages.
• Delays in Issuing the Tax Inspection Report: If the tax inspection report is not issued within the legally required time, the delay must be reported in writing to the tax offices by the authorized inspectors, along with the reasons for the delay. Disciplinary measures may be applied to the inspector responsible for the delay. If the taxpayer is dissatisfied with the reasons provided for the delay, they may file a lawsuit challenging the extension of the audit, potentially requesting a stay of execution and the discontinuation of the audit until the lawsuit is resolved.

Yes, a taxpayer has the right to appeal a tax assessment if they disagree with it. The Turkish tax system provides several avenues for challenging a tax assessment, allowing the taxpayer to seek a review or correction of the assessment. The taxpayer can file an objection with the relevant tax office within 30 days of receiving the assessment notice, as regulated under Articles 122–124 of the Tax Procedure Law (TPL). If the objection is rejected or if the taxpayer is not satisfied with the outcome, they have the right to take the matter to the tax court within 30 days from the date of the decision, in accordance with Article 7 of the Law on Administrative Judicial Procedure (LAJP, Law No. 2577).

Appeals against tax assessments in Turkey are primarily judicial in nature. Once an assessment is notified, the taxpayer has 30 days either to file an administrative objection with the tax office under Articles 122–124 of the Tax Procedure Law (TPL) or to proceed directly to litigation before the tax courts in accordance with Article 7 of the Law on Administrative Judicial Procedure (LAJP, Law No. 2577).

If the taxpayer is dissatisfied with the tax court’s decision, they may appeal to the regional administrative court (court of second instance) within 30 days, and in certain cases a further appeal lies to the Council of State, which is the highest administrative court, under the LAJP.

Administrative remedies such as reconciliation or objection to the Revenue Administration are available but are not mandatory prerequisites to litigation. As a final safeguard, taxpayers may also lodge an individual application with the Constitutional Court under Article 148 of the Constitution and Law No. 6216, once all ordinary remedies have been exhausted.

While the principle of written proceedings is fundamental in tax cases, a hearing may be held under certain conditions if requested by the parties or if the court decides to do so ex officio. According to Article 17 of the Law on Administrative Jurisdiction Procedures (LAJP), a hearing is held upon the request of one of the parties in annulment and full remedy lawsuits filed at the Council of State, administrative and tax courts, as well as in lawsuits related to taxes, duties, fees, and similar financial liabilities exceeding TRY 388,000 for the year 2025.

As per Article 18 of the LAJP, hearings are generally held publicly. However, if the court deems it necessary to protect morality or public safety, part or all of the hearing may be conducted in private. Despite this provision, there is no system in place that allows public access to the decisions of local courts. Only attorneys, judges, and prosecutors have the right to visit courthouses to examine the files and decisions of local courts.

The decisions of higher courts, such as the Council of State, are sometimes published and may be accessible through legal databases or official publications, but this is not the case for all decisions. Access to specific case information or documents by third parties typically requires legal standing or a direct interest in the case.

In tax proceedings in Turkey, the examination is primarily based on the written procedure. The principle of a written procedure is fundamental, meaning that most of the proceedings are conducted through the submission of written documents, evidence, and arguments. However, the law does allow for the possibility of holding a hearing in certain circumstances. A hearing may be conducted if requested by one of the parties involved in the case, or if the court itself decides that a hearing is necessary, either for clarification or for other reasons within the court’s discretion.

In Turkish tax legislation, there is no formal discovery process comparable to those found in common law jurisdictions like the United States. In Turkey, tax-related cases are generally handled within the administrative court system, where the courts take a more active role in investigating and gathering evidence. According to Article 20 of the Law on Administrative Judicial Procedure (LAJP), the Council of State, regional administrative courts, administrative courts, and tax courts are responsible for conducting all necessary examinations related to the cases before them. These courts have the authority to request documents and information from the parties or other relevant entities within a specified timeframe, as they deem necessary. This grants the courts broad powers to carry out any investigations required for the resolution of the case.

In principle, witness testimony is not a standard form of evidence in Turkish tax litigation. Tax disputes are generally resolved on the basis of documentary evidence, such as books, records, and official documents, rather than oral testimony.

Under Article 20 of the Law on Administrative Judicial Procedures (LAJP No. 2577), administrative courts and the Council of State may, where deemed necessary, conduct all forms of examination and investigation, which could include hearing witnesses. However, in practice, witness statements are accepted only in exceptional circumstances, and the witness must have a direct and material connection to the taxable event.

Ordinary or indirect relationships are insufficient for witness testimony to be treated as valid evidence in tax proceedings.

In Turkish tax litigation, the burden of proof generally lies with the taxpayer to demonstrate that a tax assessment is incorrect. The taxpayer must present sufficient evidence—such as financial records, contracts, receipts, and accounting documents—to convince the court that the assessment is unfounded or excessive.

At the same time, the tax authority is not entirely relieved of this burden. It must justify its assessment with proper documentation and reasoning, and demonstrate that the reassessment is based on lawful grounds. If the taxpayer provides credible evidence disputing the assessment, the burden may shift back to the tax authority to substantiate its position further.

According to Article 20/5 of the Law on Administrative Judicial Procedure (LAJP): “In the Council of State, regional administrative, administrative, and tax courts, cases shall be examined according to the date of their submission, considering the priority or urgency specified in this Law and other laws, as well as the priority cases determined by the Council of Presidents for the Council of State and by the High Council of Judges and Prosecutors for other courts, as announced in the Official Gazette. Cases must be concluded in the order in which they are finalized and within six months at the latest from the date of submission.”

However, the six-month period begins after the submission of petitions from both the plaintiff and the defendant, and the completion of the petition exchange process. In practice, it may take longer than six months for an appeal to conclude, depending on the court’s workload.

Article 20/A of the LAJP sets forth a “summary procedure” for specific disputes, which mandates a shorter time frame for concluding appeals. These disputes include:

• Tender procedures, excluding decisions prohibiting bidding.
• Urgent expropriation transactions.
• Decisions of the High Council of Privatization.
• Sales, allocation, and leasing transactions according to the Tourism Incentive Law No. 2634.
• Decisions taken because of environmental impact assessments under the Environmental Law No. 2872, except for administrative sanction decisions.
• Presidential decisions taken under the Law on Transformation of Areas Under Disaster Risk No. 6306.

For the above-mentioned cases, the appeal process must be concluded within two months.

In practice, however, this statutory time limit is rarely met. While the law requires conclusion within six months, very few tax cases are finalized in that timeframe. The practical reality is that appeals in tax cases often take between two to four years across all levels of the judiciary, depending on the workload of the courts.

According to Article 27/4 of the Law on Administrative Judicial Procedure (LAJP), the filing of a lawsuit arising from tax disputes before the tax courts automatically suspends the collection of the taxes, duties, fees, and similar financial obligations, including their increases and penalties, that are the subject of the litigation. This means that the taxpayer is not required to pay the assessed taxes and penalties while the appeal is pending.

However, Article 112 of the Tax Procedure Law (TPL) stipulates that if the taxpayer loses the case, default interest will be applied to the unpaid portion of the taxes from the normal due date until the date the court decision is served. Although the collection is generally suspended during litigation, the taxpayer has the option to pay the disputed taxes and penalties partially or entirely during the lawsuit in order to avoid such interest.

While the general rule is that collection stops automatically when a lawsuit is filed before a tax court, there are exceptions. Article 52 of the LAJP states that filing an appeal or cassation does not automatically stop the execution of the decisions made by judges, courts, or the Council of State. However, the suspension of execution may be granted by the Council of State (if examining the cassation) or by the regional administrative court (if examining the appeal), often in return for a security deposit. Decisions regarding requests for suspension of execution during cassation and appeal are final.

A taxpayer may appeal an action or decision taken by the tax authorities by representing themselves in person. For legal entities such as companies, only the company’s legal representatives may file an appeal on its behalf.

Additionally, Article 35 of the Legal Profession Law No. 1136 stipulates that only attorneys registered with a bar association are authorized to provide legal opinions, file lawsuits, defend the rights of individuals or legal entities before courts, arbitrators, or other judicial bodies, follow up on judicial proceedings, and prepare all related documents. The law does allow individuals to represent themselves, meaning that anyone who has the legal capacity to file a lawsuit may draft the necessary documents, file the lawsuit personally, and manage their own case.

In accordance with the relevant legislation, only lawyers registered with the bar association, or the taxpayer personally may appeal or follow judicial proceedings before the courts. No other individuals or entities may appear in the appeal on behalf of the taxpayer.

Yes, Turkey has a “loser pays” system for legal costs. Article 31 of the Law on Administrative Judicial Procedures (LAJP) specifies that where the LAJP does not provide guidance, such as on trial expenses, the provisions of the Code of Civil Procedure will apply. According to Article 326 of the Civil Procedure Law, unless otherwise specified by law, the losing party is responsible for covering the trial costs, including the winner’s legal and professional costs.

If both parties are partially successful, the court will apportion the trial expenses according to the degree to which each party is justified. Thus, under Article 326 of the Civil Procedure Law, the “loser” in an appeal is typically required to pay the legal and professional costs of the winning party.

Alternative dispute resolution methods, such as voluntary mediation or binding arbitration, are not available in Turkish tax disputes. Tax matters are regarded as issues of public order, and the determination and collection of taxes cannot be left to the discretion of the parties. Disputes are therefore resolved through administrative appeals and judicial proceedings before the tax courts.

However, there are two specific alternative dispute resolution mechanisms available within the Turkish tax system: pre-assessment reconciliation and post-assessment reconciliation. These reconciliation processes involve an agreement between the taxpayer and the tax administration on the amount of taxes and penalties, but they differ from voluntary mediation or binding arbitration because they are subject to strict legal rules and are not entirely based on the parties’ free will.

• Pre-assessment reconciliation: Available to taxpayers under audit but not yet formally assessed. Taxpayers may request reconciliation any time until the final audit report is issued. If settlement is reached, the reconciliation minutes are final and binding, and no subsequent lawsuit may be filed. According to Article 17 of the Reconciliation Regulation, such minutes must be immediately executed by the tax offices. Pre-assessment reconciliation covers taxes and tax loss penalties assessed during audits, as well as irregularity and special irregularity penalties exceeding TRY 33,000 (2025), except for penalties related to tax fraud under Article 359 of the Tax Procedure Law.
• Post-assessment reconciliation: Applicable to taxes, duties, and fees assessed by tax offices, including tax loss penalties, irregularity and special irregularity penalties exceeding TRY 33,000 (2025). It does not apply to penalties arising from tax fraud or participation offenses. Taxpayers must request reconciliation within 30 days following the notification of the tax/penalty notice.

While these reconciliation processes provide alternative avenues for resolving tax disputes, they are not as flexible as voluntary mediation or binding arbitration and are governed by strict legal regulations.

Yes, there is a right of onward appeal in the Turkish legal system under certain conditions. Before a case reaches the highest appellate court, which is the Council of State (Danistay), it must first be reviewed by the Regional Administrative Courts.

Article 45 of the Law on Administrative Judicial Procedure (LAJP) regulates the right of appeal, stating that “An appeal may be filed against the decisions of administrative and tax courts, even if a different remedy is provided for in other laws, to the regional administrative court in the judicial circuit where the court is located, within 30 days from the notification of the decision.”

The levels of onward appeal are as follows:

• First Instance Court (Administrative or Tax Court): The initial decision is made here. If the taxpayer or the tax authority disagrees with the decision, they can appeal.
• Regional Administrative Court: The first level of appeal is to the Regional Administrative Court. This court reviews the decision of the first instance court. The decision of the Regional Administrative Court is typically final for many cases. However, under certain circumstances, its decisions can be further appealed.
• Council of State (Danistay): The highest appellate court in administrative and tax cases. Some decisions of the Regional Administrative Court can be appealed to the Council of State within 30 days of notification. The Council of State can uphold, overturn, or partially modify the decision.

Under Turkish tax legislation, several penalties may be imposed when additional tax is assessed:

• Tax loss penalty: The standard penalty is equal to the amount of the underpaid tax. Where the underpayment results from acts listed in Article 359 of the Tax Procedure Law (e.g., use of false or misleading documents), the penalty is increased to three times the underpaid tax. In some cases, the penalty may be reduced—for example, to 20% if the taxpayer accepts the error under the “invitation to explain” procedure, or by 50% in transfer pricing cases where full documentation obligations are met.
• Special irregularity penalties: Imposed for failures such as not issuing invoices, not using cash registers properly, or non-compliance with accounting standards. These penalties are linked to annually updated monetary thresholds. As of 2025, penalties range from several thousand TRY per document up to multi-million TRY ceilings, depending on the type and number of violations, and are subject to annual revaluation.
• General irregularity penalties: Applied for formal breaches of tax obligations (e.g., late filing, incomplete records). For 2025, amounts range from TRY 14,000 to TRY 28,000 for companies depending on the degree of violation.
• Default interest: Unpaid taxes accrue daily default interest from the statutory due date until payment. The interest rate is periodically set by the Ministry of Treasury and Finance to reflect market conditions.

Several factors can contribute to the reduction or mitigation of tax penalties in Turkey:

• Voluntary Disclosure and Cooperation: A sincere admission of error and active cooperation with the tax authorities can lead to a reduction in penalties. Taxpayers who voluntarily disclose errors before an audit begins may benefit from lower penalties under the “Regret and Reclamation” provisions of Article 371 of the Tax Procedure Law (TPL).
• Payment of Tax Debt: Paying the full amount of the tax debt promptly, along with any applicable interest, can also lead to a reduction in penalties. Article 376 of the Tax Procedure Law provides for a reduction in penalties if the taxpayer agrees to pay the assessed tax and the penalty within a specified period.
• First-Time Offenders: First-time taxpayers or those who commit an offense for the first time may be eligible for lighter penalties, especially if the violation is not serious and does not involve fraud.
• Nature of the Mistake: If the error is unintentional or due to a minor oversight, the penalty may be reduced. Tax authorities may differentiate between deliberate fraud and inadvertent mistakes, imposing lighter penalties for the latter.
• Contribution to Public Good: Although not explicitly stated in the law, a taxpayer’s contribution to the public good, such as fulfilling corporate social responsibility obligations, may be considered when deciding on penalty mitigation.
• Prompt Correction: Correcting errors promptly and making necessary adjustments in tax filings can also help mitigate penalties.

In Turkey, the tax authorities are increasingly focused on certain areas where they frequently raise objections and initiate challenges. These areas typically align with the objectives of preventing tax loss and curbing tax irregularities. Some of the key areas where tax authorities are more inclined to bring challenges include:

• Transfer Pricing: Tax authorities are particularly vigilant about preventing base erosion and profit shifting (BEPS) through transfer pricing practices. This scrutiny often targets international companies and transactions between related parties, where prices may be manipulated to shift profits to low-tax jurisdictions.
• Tax Exemptions: Incorrect or unjustified claims for tax exemptions are frequently analyzed by the tax authorities. Taxpayers attempting to take advantage of certain tax benefits without proper justification may find their claims rejected or subject to appeal.
• Reduced Rates and Refund Claims: Value-Added Tax (VAT) refund requests and claims for reduced tax rates are areas of close examination by the tax authorities. These claims are scrutinized to ensure compliance with tax laws and regulations.
• Tax Deductibility of Costs and Expenses: The tax authorities may challenge the deductibility of certain business expenses, particularly those that appear to be luxury or personal in nature but are claimed as company expenses. This includes scrutinizing whether the expenses are genuinely related to business activities.
• Tax Fraud and Irregularity Inspections: Tax irregularities and fraud, such as issuing or using fraudulent invoices, are regularly inspected by the tax authorities. These areas are of particular focus, and serious tax offenses often result in both objections and criminal sanctions.

Taxpayers in Turkey face several challenges when dealing with tax authority challenges, particularly in the following areas:

• Frequent Changes in Tax Legislation: Turkish tax laws are highly dynamic and often subject to frequent changes. This makes it difficult for taxpayers to stay updated and fully compliant with new regulations. The constant need to adapt to these changes can be overwhelming, especially for small and medium-sized enterprises with limited resources for legal and tax advice.
• Digitalization of the Tax System: The ongoing efforts to digitalize the tax system in Turkey, including the implementation of e-invoice and e-ledger systems, have introduced technical and compliance challenges. Many taxpayers, particularly those unfamiliar with digital tools, experience difficulties in transitioning to these new platforms. Technical issues, lack of guidance, and the complexity of these systems add to the challenges.
• Uncertainty Around Tax Deductions and Incentives: Taxpayers often face uncertainties regarding how tax deductions and incentives are implemented. This is particularly challenging for small businesses that may lack detailed knowledge of available tax incentives and supports. Without clear and consistent guidance, taxpayers may struggle to fully benefit from these advantages.
• Communication with Tax Authorities: Effective communication with tax authorities remains a significant challenge. Taxpayers often find it difficult to receive timely and accurate responses to their inquiries, which can hinder their ability to manage tax obligations effectively. Improving the responsiveness and transparency of tax authority services would help alleviate these issues.

In the next twelve months, several areas are expected to be at the forefront of tax disputes in Turkey. Transfer pricing will remain a central focus, with the authorities closely examining related-party transactions, particularly among multinational groups, and scrutinizing the adequacy of documentation in line with OECD BEPS principles. Digital services tax is another area where controversies are likely, given the difficulties in assessing revenues of non-resident technology companies. Alongside this, VAT compliance in e-commerce and online transactions will continue to attract attention, with disputes centering on liability, documentation, and reporting obligations.

Combatting tax evasion and fraud, especially through the use of fake invoices and undeclared income, will also be a priority, resulting in more audits and criminal referrals. In addition, disagreements over withholding tax on cross-border payments, particularly regarding treaty interpretation and applicable rates, are expected to increase. Turkey’s periodic tax amnesty and reconciliation programs may further give rise to disputes over eligibility and conditions. Finally, as Turkey seeks alignment with international tax standards, the authorities are increasingly likely to challenge the economic substance of certain transactions or entities, questioning whether they genuinely justify the tax treatment claimed.