As remote work and international hiring have become increasingly common, many foreign companies now employ individuals who live and work in Turkey without necessarily having an established business presence in the country. As a result, understanding the foreign employer income tax exemption in Turkey has become increasingly important for international businesses, HR professionals, and globally mobile employees. In practice, a foreign company may choose from different commercial structures depending on its operational and business preferences. Direct employment is one possible approach.
One question frequently raised by employers, HR professionals, and internationally mobile employees is whether salaries paid by a foreign employer can be exempt from Turkish income tax.
Although many people assume that receiving a salary directly from abroad automatically results in a tax exemption, Turkish tax law is considerably more nuanced. Article 23(14)(a) of the Turkish Income Tax Law provides an exemption for certain salaries paid by qualifying foreign employers, but the exemption is subject to specific legal conditions and should not be viewed as a general rule.
Understanding how this provision operates can help foreign employers identify situations where it may be relevant and avoid relying on assumptions that may not reflect either the legislation or current administrative practice.
Can Salaries Paid by Foreign Employers Qualify for the Foreign Employer Income Tax Exemption in Turkey?
Yes.
Under Article 23(14)(a) of the Turkish Income Tax Law, salaries paid by certain foreign employers may be exempt from Turkish income tax.
However, the exemption is not automatic simply because the employer is located outside Turkey or because the salary is paid from another country. The exemption may only be available if all applicable legal requirements are satisfied. In addition, current administrative guidance and Turkish Revenue Administration interpretations should also be considered when assessing whether the exemption applies in practice.
For that reason, eligibility should always be evaluated based on the specific facts of each case.
What Is the Foreign Employer Income Tax Exemption in Turkey?
Article 23 of the Turkish Income Tax Law lists various categories of employment income that are exempt from income tax.
One of these exemptions, contained in Article 23(14)(a), concerns certain salaries paid by foreign employers that do not have their legal seat or place of effective management in Turkey.
The legislative provision states that salaries paid in foreign currency from earnings generated outside Turkey by qualifying non-resident employers to employees providing services in Turkey may be exempt from Turkish income tax, provided the applicable conditions are met.
Although the statutory wording appears relatively concise, determining whether the exemption applies often requires a broader review of the legislation together with the relevant administrative guidance.
Why Does This Exemption Exist?
The exemption reflects the fact that certain employment relationships have a genuinely international character.
In some cases, an individual performs services from Turkey while working exclusively for a foreign employer whose business activities and income remain outside Turkey. Under these circumstances, the legislature has provided a limited exemption from Turkish income tax, subject to specific requirements.
The purpose is not to exempt all salaries paid from abroad. Rather, the provision addresses a particular category of cross-border employment relationships that satisfy the conditions established by the legislation and interpreted through administrative guidance.
For this reason, the exemption should be viewed as a narrowly defined rule rather than a general principle applicable to all remote work arrangements.
Why Is This Exemption Relevant for Foreign Employers?
Many foreign employers are unaware that this exemption exists.
As international recruitment has become more common, companies increasingly hire software developers, engineers, consultants, designers, marketing specialists, and other professionals who perform their work from Turkey.
Where an overseas employer is considering employing talent located in Turkey, understanding the existence and general scope of Article 23(14)(a) can help identify potential tax considerations at an early stage.
Equally important, employers should understand that simply paying an employee from abroad does not automatically satisfy the exemption requirements.
Assessing the relevant facts before employment begins can help reduce uncertainty regarding future Turkish tax obligations.
Before evaluating whether the exemption may apply, employers should first determine how they intend to engage talent in Turkey. Our guide to remote hiring in Turkey explains the main commercial structures commonly used by foreign companies.
Who May Benefit from the Foreign Employer Income Tax Exemption in Turkey?
The exemption may be relevant for various international employment arrangements, including situations involving:
- foreign companies employing individuals who perform their duties from Turkey;
- remote-first businesses hiring their first employee located in Turkey;
- international technology companies recruiting Turkish-based professionals;
- overseas consulting firms employing individuals who work from Turkey;
- multinational enterprises employing staff whose responsibilities relate primarily to operations outside Turkey.
Whether any particular employee qualifies depends on whether all applicable legal and administrative conditions are satisfied.
The existence of a foreign employment contract alone is not sufficient.
Similarly, receiving salary payments from an overseas bank account does not, by itself, establish eligibility for the exemption.
General Conditions for the Foreign Employer Income Tax Exemption in Turkey
Article 23(14)(a) establishes the legal basis for the exemption.
The legislation provides that qualifying salaries may be exempt where they are paid by a non-resident employer whose legal seat and place of effective management are outside Turkey, provided the statutory requirements are met.
In addition to the wording of the legislation itself, the 147 Series General Communiqué explains how the exemption is generally understood and applied.
According to the Communiqué, the following conditions should be satisfied:
- The employer should be a non-resident employer whose legal seat and place of effective management are outside Turkey.
- The foreign employer should not carry on activities in Turkey in a manner that generates income in Turkey.
- There should be an employer-employee relationship, and the payment should constitute employment income rather than another type of remuneration.
- The salary should be paid from the foreign employer’s income earned outside Turkey.
- The salary should be paid in foreign currency.
- The salary should not be recorded as an expense in the foreign employer’s Turkish accounts.
The explanatory guidance indicates that these conditions operate together rather than independently. Accordingly, failure to satisfy one of the applicable conditions may prevent the exemption from applying.
It is therefore important to distinguish between the statutory wording contained in Article 23(14)(a) and the additional conditions reflected in the 147 Series General Communiqué, which explains the administration’s approach to implementing the legislation.
How Is the Exemption Interpreted in Practice?
Although the statutory provision is relatively brief, the practical application of Article 23(14)(a) has been shaped by administrative guidance and Turkish Revenue Administration private rulings.
The Turkish Revenue Administration has published several private rulings addressing situations involving employees working remotely in Turkey for foreign employers. These rulings do not constitute statutory law and apply directly only to the taxpayers who requested them. Nevertheless, they provide insight into the current administrative approach.
One area where administrative practice appears broader than the wording of the legislation concerns multinational corporate groups.
Neither Article 23(14)(a) nor the relevant provisions discussed in the explanatory materials expressly state that the existence of another group company in Turkey automatically prevents the exemption from applying.
However, the private rulings referred to in the explanatory materials indicate that the Turkish Revenue Administration may also consider the activities of companies within the same corporate group when evaluating whether the exemption is available.
How Is the Exemption Interpreted in Practice?
According to the explanatory materials, the Turkish Revenue Administration has, in certain private rulings, taken the view that where a foreign employer forms part of a multinational group with business activities in Turkey, this may affect the availability of the exemption if the employee’s work is connected with those Turkish activities.
Importantly, the explanatory materials also note that this approach is not expressly stated in the wording of Article 23(14)(a) or in the relevant provisions of the 147 Series General Communiqué. Rather, it reflects the current administrative interpretation adopted in certain private rulings.
As a result, employers should distinguish between:
| Source | General position |
|---|---|
| Article 23(14)(a) | Establishes the statutory exemption for qualifying salaries paid by certain non-resident employers. |
| 147 Series General Communiqué | Explains how the exemption is generally implemented and identifies additional administrative conditions. |
| Turkish Revenue Administration private rulings | Illustrate how the administration has interpreted the exemption in specific factual situations. |
| Current administrative practice | Suggests that the broader business activities of multinational groups may also be considered in some cases, even though this is not expressly stated in the legislation. |
Because private rulings are fact-specific, employers should avoid assuming that a previous ruling automatically applies to another situation.
Instead, the exemption should always be assessed based on the particular facts and circumstances of the employment relationship.
Situations Where the Exemption Is Unlikely to Apply
Although every case should be considered individually, the explanatory materials suggest that the exemption is unlikely to apply where one or more of the applicable statutory or administrative conditions are not satisfied.
Examples may include situations where:
- the employer is not considered a qualifying non-resident employer;
- the salary is not regarded as employment income;
- the salary is not paid from the employer’s foreign-source earnings;
- the salary is not paid in foreign currency;
- the salary is recorded as an expense in Turkish accounts;
- the foreign employer carries on activities in Turkey that generate income in Turkey; or
- based on current administrative practice, the employee’s services are closely connected with the Turkish operations of a multinational group.
These examples should not be viewed as automatic outcomes. Each situation requires an assessment of the relevant legal and factual circumstances.
Where the exemption is unavailable, the explanatory materials indicate that the salary may instead become subject to the general Turkish income tax rules applicable to employment income.
Practical Business Examples
The following examples are intended only to illustrate how Article 23(14)(a) may be relevant in practice. They should not be interpreted as confirming whether the exemption applies in any particular case.
Example 1 – US software company employing a developer in Turkey
A software company incorporated in the United States hires a developer who permanently lives in Turkey and works remotely for its international engineering team.
The company pays the salary directly from the United States in foreign currency.
At first glance, Article 23(14)(a) may appear relevant. However, eligibility would depend on whether all applicable statutory conditions, together with the relevant administrative guidance, are satisfied.
Example 2 – UK consulting company with a remote employee
A consulting business established in the United Kingdom employs a Turkish resident who provides services exclusively to overseas clients while working from Turkey.
Again, the exemption cannot be assumed merely because the salary is paid from abroad.
The employer should evaluate whether all legal and administrative conditions are met before relying on the exemption.
Example 3 – Foreign startup hiring its first employee in Turkey
A technology startup headquartered outside Turkey decides to recruit its first employee based in Istanbul.
Many early-stage companies are unfamiliar with Turkish tax rules and may assume that overseas payroll automatically falls outside the Turkish tax system.
In practice, Article 23(14)(a) should be considered carefully together with the relevant administrative guidance before any conclusion is reached.
Example 4 – Multinational group with business operations in Turkey
A multinational group employs an individual through one of its overseas companies, while other companies within the same corporate group actively operate in Turkey.
The legislation itself does not expressly state that the existence of Turkish group companies prevents the exemption.
However, the explanatory materials indicate that Turkish Revenue Administration private rulings have, in some circumstances, considered the Turkish activities of the wider corporate group when determining whether the exemption is available.
Accordingly, additional analysis may be required.
Example 5 – A situation where the exemption would clearly not apply
A foreign employer pays an employee working from Turkey in Turkish lira instead of foreign currency.
Since payment in foreign currency is one of the conditions reflected in the 147 Series General Communiqué discussed in the explanatory materials, the exemption would generally not be expected to apply.
Common Misunderstandings About the Foreign Employer Income Tax Exemption
Several misconceptions frequently arise in relation to Article 23(14)(a).
“A foreign employer automatically means no Turkish income tax.”
No.
The exemption is available only if all applicable conditions are satisfied.
“Receiving salary from abroad is enough.”
No.
The source of payment alone does not determine eligibility.
“Every remote employee qualifies.”
No.
Remote working from Turkey does not, by itself, create an exemption.
“Administrative guidance is the same as statutory law.”
Not necessarily.
The legislation establishes the legal framework, while the 147 Series General Communiqué explains its implementation and private rulings illustrate how the Turkish Revenue Administration has interpreted particular factual situations.
Understanding these distinctions is important when evaluating eligibility.
Points to Consider Before Relying on the Exemption
Before assuming that Article 23(14)(a) applies, foreign employers should consider several practical questions.
For example:
- Is the employer a qualifying non-resident employer?
- Is there a genuine employer-employee relationship?
- Are all applicable statutory conditions satisfied?
- Are the additional conditions reflected in the 147 Series General Communiqué satisfied?
- Does current Turkish Revenue Administration guidance raise any issues based on the specific facts?
- Could the wider business activities of a multinational group become relevant under current administrative practice?
Many foreign employers are unaware that this exemption exists.
Equally, one common misunderstanding is that paying a salary from abroad automatically creates the exemption.
In practice, current administrative guidance should be reviewed alongside the legislation before relying on the exemption.
Frequently Asked Questions About the Foreign Employer Income Tax Exemption in Turkey
Does every foreign employer qualify for the exemption?
No.
Article 23(14)(a) does not provide a general exemption for all foreign employers. The availability of the exemption depends on whether the applicable statutory requirements are satisfied, together with the relevant administrative conditions reflected in the 147 Series General Communiqué and current Turkish Revenue Administration guidance.
Does the employee have to be a Turkish citizen?
The materials provided do not indicate that Turkish citizenship is a statutory requirement for the exemption.
Instead, the analysis focuses primarily on the nature of the employer, the employment relationship, the source of the salary, the manner of payment, and the other applicable statutory and administrative conditions.
Accordingly, eligibility should be assessed based on the legal requirements rather than the employee’s nationality.
Can salaries be paid in foreign currency?
Yes.
In fact, payment in foreign currency is one of the conditions reflected in the 147 Series General Communiqué discussed in the explanatory materials.
However, payment in foreign currency alone does not establish eligibility. The remaining applicable conditions must also be satisfied.
Does having a Turkish subsidiary affect the exemption?
It may.
The wording of Article 23(14)(a) does not expressly state that the existence of a Turkish subsidiary or another Turkish group company automatically prevents the exemption.
However, the explanatory materials refer to Turkish Revenue Administration private rulings indicating that, in certain cases, the administration has considered the activities of the wider corporate group in Turkey when assessing whether the exemption applies.
This reflects an administrative interpretation rather than an express statutory rule.
Does the exemption remove Turkish social security obligations?
Not necessarily.
The explanatory materials distinguish between income tax and social security obligations.
They explain that the existence of an income tax exemption does not automatically eliminate Turkish social security considerations. Social security obligations should therefore be reviewed separately under the applicable legislation.
What happens if the exemption does not apply?
According to the explanatory materials, where the exemption is unavailable, the salary may instead become subject to the ordinary Turkish income tax rules applicable to employment income.
The materials also explain that, in such cases, the employee may need to comply with the relevant tax declaration obligations under the Turkish Income Tax Law.
Is every remote employee working from Turkey covered?
No.
Working remotely from Turkey for an overseas employer does not automatically bring an employee within the scope of Article 23(14)(a).
The exemption depends on whether all applicable statutory requirements and the relevant administrative conditions are satisfied.
Should employers rely only on the wording of the legislation?
No.
Article 23(14)(a) provides the legal foundation for the exemption, but the explanatory materials demonstrate that the 147 Series General Communiqué and Turkish Revenue Administration private rulings also play an important role in understanding how the exemption is currently applied in practice.
For that reason, employers should review both the legislation and the relevant administrative guidance before concluding that the exemption is available.
Conclusion
Article 23(14)(a) of the Turkish Income Tax Law provides a potentially valuable income tax exemption for certain employees working in Turkey for qualifying foreign employers. However, the exemption has a limited scope and should not be viewed as a general rule applicable to every cross-border employment arrangement.
While the legislation establishes the legal basis for the exemption, understanding its practical application requires consideration of the 147 Series General Communiqué, relevant Turkish Revenue Administration private rulings, and current administrative practice. These sources help explain how the exemption is interpreted, while also highlighting that administrative practice may extend beyond the express wording of the legislation in certain areas.
For foreign employers, the key message is straightforward: the existence of a foreign employer, an overseas payroll, or salary payments made from abroad does not automatically result in an income tax exemption in Turkey.
Instead, each employment arrangement should be evaluated on its own facts to determine whether all applicable statutory and administrative conditions are satisfied.
As international hiring continues to grow, many foreign employers will encounter this provision for the first time. A clear understanding of its general scope and of its practical limitations, can help businesses identify potential tax issues early and make informed decisions before relying on the exemption.