Turkey’s Grand National Assembly has approved a major fiscal incentive package introduced by President Recep Tayyip Erdogan. The legislation introduces a long-term tax exemption regime aimed at attracting new high-net-worth residents and foreign capital into the country.

The centerpiece of the reform is a 20-year exemption on Turkish income tax for qualifying foreign-source earnings, marking a significant shift in Turkey’s approach to international tax competitiveness.

• Legislative Status

The package, passed on May 21, is now law and awaits formal promulgation by President Erdogan within 15 days and publication in the Official Gazette (Resmi Gazete). Since the proposal originated from the presidency, a veto is not expected, making implementation effectively certain.

• Personal Tax Exemption Rules

Under the new framework, individuals who had no Turkish domicile and no tax liability for the previous three years before relocation will qualify for the exemption.

Key provisions include:

• Foreign-source income fully exempt from Turkish income tax for 20 years 
• No reporting requirement for exempt foreign income on Turkish tax returns
• Domestic income remains taxable at progressive rates of 15%–40% 
• Inheritance and gift tax reduced to a flat 1%, down from up to 30%

• Asset Amnesty Program

The legislation also introduces a new wealth declaration and amnesty scheme, allowing individuals and companies to legalize offshore assets such as cash, gold, securities, and foreign currency.

Key features include:

• Declaration deadline: July 31, 2027 
• Funds must be transferred into Turkish financial institutions within two months
• Reduced tax rates based on holding period (0% to 4%)
• Protection from tax audits and penalties on declared assets

This marks Turkey’s eighth asset amnesty since 2008, though critics have raised concerns about potential misuse and past inflows of undeclared capital.

• Corporate Tax Incentives

The reform also introduces substantial corporate tax reductions, particularly targeting manufacturing and export-driven sectors.

Key measures include:

• Corporate tax reduced to 12.5% for manufacturing companies
• Export-related income taxed at reduced rates of 9%–11%
• Full corporate tax exemption for transit trade within the Istanbul Finance Centre (IFC)
• Financial services exports at IFC remain exempt until 2047
• Businesses outside IFC receive up to 95% tax relief

• Strategic and Economic Rationale

The reform reflects a broader strategy to position Turkey as a competitive financial hub in Eurasia. The Istanbul Finance Centre is highlighted as the structural foundation of this ambition, a long-term project developed over nearly two decades.

Commentary from industry figures suggests that Turkey is leveraging current geopolitical disruptions to attract capital flows from regions including the Gulf Cooperation Council, Europe, North America, and the UK.

Summary

Overall, the legislation represents a major shift in Turkey’s fiscal and investment policy, combining long-term tax exemptions, capital repatriation incentives, and corporate tax reductions.

It is designed to position Turkey as a destination for globally mobile wealth, while simultaneously strengthening its financial infrastructure through the Istanbul Finance Centre.In essence, Turkey is repositioning itself as a tax-competitive jurisdiction targeting high-net-worth individuals and international business capital through structured, long-term fiscal incentives.