Turkey Introduces New 20-Year Foreign Income Tax Exemption Regime

Turkey has approved one of the most significant tax incentive packages in recent years, aimed at attracting Turkish citizens living abroad, international entrepreneurs, investors, and globally mobile families.

Under the legislation adopted by the Turkish Grand National Assembly in May 2026, eligible individuals relocating to Turkey may benefit from a tax exemption on certain foreign-source income for a period of up to twenty years. The package also introduces a 1% inheritance tax regime for qualifying individuals and includes various investment-related incentives.

This article outlines the general framework of the new regime, who may qualify, which types of income may be covered, and why the reform could be relevant for foreign investors considering Turkish residence or citizenship options.

Current Legislative Status

The legislative package was approved by the Turkish Grand National Assembly on 21 May 2026. The next steps are Presidential approval and publication in the Official Gazette.

The government has indicated that, once enacted, the regime is expected to apply to individuals who become Turkish tax residents from 1 January 2026 onwards. Therefore, retroactive application may be possible. Further implementation details are expected to be published by the Ministry of Treasury and Finance.

What Is the New 20-Year Tax Exemption?

The core feature of the reform is a long-term tax exemption for foreign-source income.

Individuals who have not been Turkish tax residents during the previous three calendar years and subsequently become Turkish tax residents may be exempt from Turkish income tax on qualifying foreign-source income for a period of twenty years.

Income generated from Turkish sources will continue to be taxed under the ordinary Turkish tax rules.

The purpose of the regime is to encourage internationally mobile individuals, entrepreneurs, investors, retirees, and Turkish citizens living abroad to choose Turkey as their place of residence without creating additional Turkish taxation on income generated abroad.

Who May Qualify?

Although detailed regulations have not yet been published, the regime appears primarily targeted at three groups:

• Turkish citizens residing abroad who have not been Turkish tax residents during the previous three calendar years.

• Foreign nationals who relocate to Turkey and satisfy the non-residency requirements.

• Entrepreneurs, investors, and high-net-worth individuals whose primary sources of income are located outside Turkey.

The requirement of not being a Turkish tax resident during the previous three calendar years is expected to be one of the key eligibility criteria. Documentation proving foreign tax residency will likely play an important role in future applications and compliance procedures.

Which Foreign Income May Be Covered?

Based on the adopted legislation and existing Turkish tax principles, the following categories of foreign-source income are expected to fall within the scope of the exemption:

• Employment income earned from work performed outside Turkey.

• Dividends and interest received from foreign companies and foreign financial institutions.

• Capital gains derived from foreign securities, shares in foreign companies, and foreign real estate.

• Rental income generated from real estate located outside Turkey.

• Pensions and retirement payments received from foreign pension systems.

• Royalties and intellectual property income earned abroad.

By contrast, the following categories are generally expected to remain subject to ordinary Turkish taxation:

• Salaries paid by Turkish employers.

• Business profits generated from activities carried out in Turkey.

• Rental income derived from Turkish real estate.

The 1% Inheritance Tax Regime

One of the most notable aspects of the reform is the introduction of a favorable inheritance tax regime.

Individuals benefiting from the 20-year foreign income exemption may qualify for a 1% inheritance tax rate on transfers occurring through inheritance during the exemption period.

This represents a significant departure from Turkey’s existing progressive inheritance tax system, under which rates can increase depending on the value of the inherited assets.

For internationally mobile families engaged in long-term wealth planning, this provision could substantially affect succession and estate planning strategies.

Other Incentives Included in the Package

The reform is not limited to personal taxation. It also contains several measures intended to strengthen Turkey’s position as an investment destination and regional business hub.

Asset Repatriation Program

Foreign assets, including cash, foreign currency, gold, securities, and other capital market instruments, may be transferred to Turkey under the new Asset Repatriation Program until 31 July 2027. Depending on the structure chosen and applicable holding requirements, favorable tax treatment may be available.

Export Incentives

Reduced corporate income tax rates are expected to apply to qualifying export income. Manufacturing exporters and other exporters may benefit from lower effective tax rates compared to the standard corporate income tax regime.

Istanbul Financial Center Incentives

Certain international trading and intermediary activities may benefit from significant corporate tax advantages when structured appropriately, further enhancing Turkey’s attractiveness as a regional financial center.

Regional Headquarters Incentives

International companies relocating regional management functions to Turkey may benefit from additional tax incentives and employment-related support measures.

Citizenship and Tax Residency Are Not the Same

One of the most important points for applicants to understand is the distinction between citizenship and tax residency.

Holding Turkish citizenship alone does not automatically entitle an individual to benefit from this regime.

Likewise, a foreign national may benefit from the regime without obtaining Turkish citizenship, provided that the relevant conditions are satisfied and the individual becomes a Turkish tax resident.

The determining factor is tax residency status rather than citizenship.

Strategic Considerations

This reform combines:

• Long-term tax exemption for foreign-source income.

• Preferential inheritance tax treatment.

• Asset repatriation opportunities.

Taken together, these elements may create significant planning opportunities for internationally mobile families, business owners, retirees, and investors considering Turkey as a residence destination.

However, each case should be assessed individually. Tax residency rules, double taxation treaties, foreign tax obligations, estate planning considerations, and controlled foreign corporation (CFC) rules may all influence the ultimate outcome.

Professional legal and tax advice should therefore be obtained before making any relocation, investment, or wealth-planning decisions.

Additional Questions

What Changes Are Introduced for Companies?

The reform proposes a 9% corporate income tax rate on profits derived by manufacturing companies from exported goods.

For other exporters, a 14% corporate income tax rate is proposed on export-related profits.

Are These Changes Currently Effective?

The legislation was approved by Parliament on 4 June 2026.

The government has indicated that eligible taxpayers may potentially benefit retroactively from 1 January 2026, subject to the final enactment and implementation of the legislation.

Is the 20-Year Tax Exemption Particularly Beneficial for Our Clients?

In practice, the regime is unlikely to provide substantial benefits to individuals who continue living outside Turkey.

As long as a person remains a non-resident of Turkey for tax purposes, foreign-source income is generally not subject to Turkish taxation under existing rules.

The primary benefit of the reform is therefore aimed at individuals who intend to live in Turkey but whose income originates abroad. For such individuals, the regime may significantly reduce the tax burden associated with relocating to Turkey.

How Does the Inheritance Tax Reform Work?

To benefit from the 1% inheritance tax rate, an individual must also satisfy the requirements applicable to the 20-year foreign income tax exemption regime.

If those conditions are not met, the preferential 1% inheritance tax rate would not apply.

Under the current inheritance tax system, the rates are generally as follows:

Taxable Amount (Inheritance Transfers)

• First TRY 3,000,000: 1%

• Next TRY 7,000,000: 3%

• Next TRY 15,000,000: 5%

• Next TRY 30,000,000: 7%

The new regime therefore introduces a potentially significant reduction for qualifying individuals.

What Are the Advantages of the Asset Repatriation Program?

Individuals transferring foreign assets to Turkey under the program before 31 July 2027 may benefit from protection against tax audits and tax investigations relating to the declared assets.

Under ordinary circumstances, a standard tax charge of 5% generally applies to declared assets.

Reduced Rate

If the declared assets are maintained for at least one year in qualifying instruments such as time deposits, government bonds, or lease certificates (sukuk), the applicable rate may be reduced gradually to as low as 2%.

Transfer Requirement

Assets declared abroad must be transferred to accounts opened with Turkish banks or intermediary institutions within two months from the declaration date.

What Additional Advantages Does the New Reform Provide Compared to the Previous System?

The key additional advantages include:

• A formal guarantee against tax examination regarding qualifying declared assets.

• Reduced taxation under the asset repatriation framework.

• Long-term foreign income tax exemption for qualifying Turkish tax residents.

• Access to the preferential 1% inheritance tax regime.

• Additional planning opportunities for internationally mobile individuals and families relocating to Turkey.

As a result, the reform may significantly enhance Turkey’s attractiveness as a destination for residence, wealth preservation, and international investment planning.