Türkiye’s 20-Year Foreign Income Tax Exemption: A New Opportunity for International Entrepreneurs and Investors For internationally mobile entrepreneurs, investors, family-business owners and executives considering Türkiye as a place to live, invest or establish a business, a major change introduced in 2026 deserves particular attention. Türkiye has introduced a new tax regime under Repeated Article 20/D of the Turkish Income Tax Law, allowing qualifying individuals who become tax residents of Türkiye to benefit from an income tax exemption on foreign-source income and gains for 20 years. The regime may be particularly relevant for internationally mobile individuals who have businesses, investments, real estate or financial assets outside Türkiye but are considering establishing residence and business activities in Türkiye. What is the 20-year exemption? Under the new regime, qualifying individuals who become resident in Türkiye may enjoy a 20-year Turkish income tax exemption on income and gains derived outside Türkiye. The regime applies to individuals, rather than companies. For qualifying taxpayers, foreign-source income covered by the exemption is not included in the Turkish annual income tax return. If the individual is required to file a Turkish tax return because of other taxable income, the qualifying foreign income is still excluded from that return. This creates a potentially important distinction between: income and gains arising outside Türkiye, which may qualify for the exemption; and income and gains arising in Türkiye, which remain subject to the ordinary Turkish tax rules. Who can qualify? The principal condition is historical. Before becoming resident in Türkiye, the individual must generally have had neither a domicile nor a relevant tax liability in Türkiye during the preceding three calendar years. The regime applies to individuals becoming resident in Türkiye from 1 January 2026 onwards. Nationality is not stated as a condition of the exemption. Accordingly, the regime is potentially relevant to qualifying individuals regardless of nationality or country of origin. However, the individual’s circumstances during the three-year look-back period must be reviewed carefully. The Communiqué contains important distinctions. For example, certain previous Turkish tax liabilities arising from rental income, investment income or capital gains do not automatically prevent an individual from qualifying. On the other hand, certain employment or business activities in Türkiye during the relevant period may prevent eligibility. For internationally active individuals, this makes a pre-arrival review particularly important. What types of foreign income may benefit? The statutory provision is drafted broadly by reference to income and gains derived outside Türkiye. Depending on the facts and the source rules applicable to the relevant income, the exemption may therefore be particularly relevant to individuals receiving income such as: dividends from foreign companies; rental income from real estate located outside Türkiye; income from foreign investments and financial assets; and gains derived from assets or investments situated outside Türkiye. The Turkish tax administration’s Communiqué specifically illustrates a qualifying individual receiving a dividend from a Spanish company and rental income from real estate in Monaco, with both foreign-source items falling within the exemption. The classification of income as Turkish-source or foreign-source is therefore one of the most important technical issues under the regime. Merely receiving money from a foreign bank account does not necessarily make income foreign-source. For example, professional services physically performed in Türkiye may constitute Turkish-source income even where the customer is abroad and payment is received from outside Türkiye. Is the money required to be transferred to Türkiye? The Article 20/D regime does not impose a general requirement to remit the exempt foreign income to Türkiye. In other words, the exemption is structured around the individual’s residence status, historical conditions and the source of the income, rather than around a requirement that the relevant funds must be transferred to a Turkish bank account. Accordingly, the tax analysis is fundamentally different from a traditional asset-repatriation or remittance-based programme. Can a qualifying individual establish and operate a business in Türkiye? Yes and this is one of the potentially important aspects of the regime for entrepreneurs. The Communiqué includes an example in which an individual becomes resident in Türkiye and subsequently commences a retail business in Türkiye while still being able to obtain the Article 20/D exemption certificate, provided the historical eligibility requirements are satisfied. This means that, in principle, an individual may live in Türkiye, establish or operate a Turkish company and conduct business activities in Türkiye, while separately benefiting from the Article 20/D exemption for qualifying foreign-source income. The two sides must, however, be kept clearly separated for tax purposes. Profits and income arising from Turkish business activities remain subject to the applicable Turkish corporate and personal tax rules. The Article 20/D exemption should not be interpreted as an exemption for income generated from activities carried out in Türkiye. For entrepreneurs who already own or have previously established a Turkish company, the historical facts should also be reviewed carefully to determine whether the company or the individual’s relationship with it created any personal Turkish tax liability during the relevant three-year period. An application is required The exemption is not simply applied automatically. A qualifying individual must apply to the competent Turkish tax office and obtain an Exemption Certificate for Income and Gains Derived from Abroad. As a general rule, the application must be made by the end of the calendar year in which the individual becomes resident in Türkiye. For individuals becoming resident during the last two months of the calendar year, the application may be made until the end of the second month of the following year. Missing the application deadline may result in the exemption certificate not being issued. Therefore, timing should be considered before or at the time of relocation, rather than after the individual’s Turkish residence position has already been established. What happens to Turkish-source income? The exemption applies only to qualifying foreign-source income and gains. Turkish-source income continues to be taxed under the ordinary Turkish rules. For example, Turkish rental income, dividends received from Turkish companies and income from services or business activities performed in Türkiye may continue to give rise to Turkish tax… Okumaya devam et 20-Year Tax Exemption and Foreign Income Exemption in Türkiye | TEMA Grup
