Turkish President Recep Tayyip Erdogan has announced a fiscal stimulus package that, among other things, will grant new foreign residents a 20-year exemption from income tax from foreign sources. The proposal requires parliamentary approval, but Erdogan has not yet announced a date for introducing the bill.
The Head of state called the measures a "radical step" and stated that his government was "determined to turn Turkey into a global center of gravity."
What is the essence of the proposal?
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Individuals who have not been tax residents of Turkey for at least three years will be able to move to the country and not pay Turkish tax on their foreign income for 20 years. Only income earned within Turkey will be subject to Turkish taxation.
- Inheritance and gift taxes for eligible individuals will be reduced to 1%. Standard rates in Turkey currently range from 1% to 30%.
The Italian lump-sum tax program is designed for 15 years. The Greek non-dom regime covers the same period. The successor to the Portuguese Regime for New Resident Residents (NHR) offers a Tax Incentive for Scientific Research and Innovation (IFICI) for only 10 years. Turkey's offer is twice the Portuguese deadline and surpasses all others.
European regimes charge a fee for the privilege. In its Budget Law for 2026, Italy raised the annual lump-sum tax to 300,000 euros, while Greece set its own at 100,000 euros. Turkey's proposal, according to the description, does not provide for any fixed fee for foreign earnings.
Tax benefits in the context of the Citizenship by Investment program
A 20-year exemption from foreign income tax would add an additional advantage Turkish Citizenship by Investment (CIP) program. Passport holders who become tax residents are currently facing progressive income tax rates ranging from 15% to 40% on global income, with double taxation avoidance agreements providing only partial relief.The proposed tax holidays will completely eliminate this risk for new passport recipients.
Other tax measures
Erdogan also announced a reduction in corporate tax rates for exporters: from the usual 25% to 9% for producer exporters and up to 14% for other exporting companies.
Income from transit trade for companies operating within the framework of the Istanbul Financial Center (IFC) will become fully exempt from corporate tax, compared with the current 50 percent deduction. Companies outside the IFC will receive a 95% exemption from income tax on transit trade. Regional headquarters operated from Turkey will enjoy a 95-100% exemption for 20 years.
What does the war with Iran have to do with it?
The time chosen by Ankara is not accidental. The war in Iran caused damage to the infrastructure of the UAE, Saudi Arabia and Qatar, while Turkey, protected by NATO air defense forces, suffered significantly less. Earlier in April, Erdogan called instability an opportunity: "Just like during the pandemic, we sincerely believe that this global crisis will open new doors for our country."
Turkey's economy is still suffering from double-digit inflation and a depreciating lira. Istanbul ranks 101st in the latest Index of Global Financial Centers. Dubai is in seventh place, Abu Dhabi in 21st, Riyadh in 61st. Tax benefits alone are not enough to close this gap.
Erdogan rejected the usual characterization of Turkey as a bridge between East and West, calling the country instead an "indispensable base for the region's energy and trade corridors." The full package of bills is still awaiting submission to Parliament.
Source: IMI
