I. Introduction
By Article 7 of the Law No. 7582 on the Amendment of Certain Laws dated 21/5/2026, a new deduction mechanism has been introduced into our tax system through subparagraph (j) added to the first paragraph of Article 10 of the Corporate Income Tax Law No. 5520 (“CITL”). The law allows a certain portion of the income that corporations operating as a qualified service center under the Foreign Direct Investment Law No. 4875 dated 5/6/2003 derive from abroad within the scope of exclusively these activities to be deducted from the corporate income. The subparagraph has entered into force to be applicable, beginning with the returns required to be filed as of 1/7/2026, to the corporate income pertaining to the taxation period beginning as of 1/1/2026. By Article 9 of the same Law, the deduction has further been included among those taken into account in the computation of the domestic minimum corporate income tax base under Article 32/C of the CITL, so that the benefit is not neutralised at the minimum tax floor.
A Communiqué Serial No. 26, amending the Corporate Income Tax General Communiqué Serial No. 1, has been prepared by the Turkish Revenue Administration in order to determine the implementation principles of the said regulation. The Communiqué sets out detailed explanations regarding the application of the deduction. In addition, by Article 5 of the Law No. 7582, an income tax exemption has been introduced in respect of the wages of the qualified service personnel employed in these centers, the implementation principles of which have been determined by the Income Tax General Communiqué Serial No. 334; that exemption is examined in Section V below.
II. The Statutory Deduction Mechanism
Pursuant to the provision of Article 10/1-(j) of the CITL, 95% of the income that corporations operating as a qualified service center under the Foreign Direct Investment Law derive from abroad within the scope of exclusively these activities may be deducted from the corporate income. This rate shall be applied as 100% for corporations operating in industrial zones established under the Industrial Zones Law No. 4737 and deemed appropriate by the President according to the intensity of foreign investment, as well as for corporations operating as a qualified service center in the Istanbul Finance Center (IFC) Zone by obtaining a participant certificate pursuant to the provisions of the Istanbul Finance Center Law No. 7412.
The basic conditions for benefiting from the deduction are as follows: that the income be derived exclusively from abroad within the framework of the qualified service center activity under the Law No. 4875; that the income be transferred to Türkiye by the date on which the annual corporate income tax return pertaining to the accounting period in which the income were derived is required to be filed; (for the application of the increased exemption rate of 100%) for those operating in the IFC Zone have a participant certificate; and that, for those operating in industrial zones, the zone be an industrial zone deemed appropriate by the President.
In the law, the deduction is limited in time. The deduction shall be applied for twenty accounting periods, including the accounting period in which the qualified service center commenced operations. The President has been authorized to reduce the rates set out in the subparagraph down to 50% and to increase them up to 100%.
III. The Meaning of Qualified Service Center and the Scope of the Deduction
Article 10/1-(j) of the CITL determines the meaning of qualified service center by referring to the Foreign Direct Investment Law No. 4875. Pursuant to Additional Article 1 contained in the said law, a qualified service center is defined as capital companies which are established in order to provide services to a related company or group of companies that is actively operating in at least three different countries and to carry out the activities specified in the second paragraph of the article, and which derive at least 80% of their annual revenues from related companies or group of companies abroad.
The second paragraph of Additional Article 1 names the services that may be provided by these centers in two groups. Subparagraph (a) includes financial consultancy, strategic management consultancy, risk management, cash and liquidity management, funding and borrowing transactions, investment and capital structure planning, budgeting, financial reporting and analysis, international accounting and compliance, auditing, digital transformation and technology consultancy, investment and data analysis, legal consultancy, promotion, brand management, human resources and training services, as well as the coordination and management services relating thereto. Subparagraph (b), on the other hand, names the coordination and management services relating to activities such as sales, after-sales support, technical support, research and development, external procurement, testing of newly developed products, and laboratory services as services that may be provided by the centers.
Within this framework, there are two separate elements determining the scope of the deduction. The first is the nature of the activity: the income must have been derived within the framework of the qualified service center activity named in the second paragraph of Supplementary Article 1. The second is the source of the income: Article 10/1-(j) of the CITL provides that only income derived exclusively within the scope of the qualified center activity and from abroad may be subject to the deduction. Since these two elements must be satisfied together, the income that a corporation holding the status of a qualified service center derives outside this activity or from within the country shall remain outside the scope of the deduction.
IV. The Explanations Introduced by the Communiqué Serial No. 26
The Corporate Income Tax General Communiqué Serial No. 26 (“Communiqué”), published in the Official Gazette dated 04/07/2026 and entered into force, contains detailed explanations on the matter.
According to the Communiqué, the amount of the deduction is calculated over the income to be found by deducting the expense and cost items incurred on account of these activities from the revenue derived from the activities within the scope of the deduction. The amount that cannot be deducted due to other deductions and exemptions and prior-year losses shall not be carried forward to the following periods; where the activity results in a loss, no deduction shall be in question. Moreover, the Communiqué requires that the revenue, cost and expense items relating to the activities subject to the deduction be monitored separately and not be associated with other activities.
In Section 10.8.3 of the Communiqué, it is stated that it is not possible to benefit from the deduction on account of income not transferred to Türkiye by the date on which the corporate income tax return pertaining to the accounting period in which the income were derived is required to be filed; and that income not transferred within this period may not benefit from the deduction even if they are transferred to Türkiye in later periods. Although at first glance this rule may be read as if it introduces a severe sanction not envisaged by the law, when the wording of the law is taken into account it is seen that this is not the case.
Since the law requires the transfer to be made by the return-filing period of a specific period, a transfer to be made after this period has elapsed is already incapable of satisfying the statutory condition. In this respect, the relevant expression of the Communiqué as "even if transferred in later periods" is a regulation of an explanatory nature.
However, disputes may arise in the determination of factual matters such as "whether the transfer has taken place" and "whether it has been made within the period": the moment at which the transfer is deemed to have been completed, and whether payments made by way of set-off or exchange are to be regarded as a transfer, are matters that may become the subject of dispute in concrete cases.
A. The Exclusion of Income Other Than That From the Principal Field of Activity
Section 10.8.6 of the Communiqué excludes from the scope of the deduction the income of the corporations benefiting from the deduction other than that derived from the activities subject to the deduction. This approach appears consistent with the aim of dedicating the deduction exclusively to the qualified service center activity. However, when the examples named in the Communiqué as (such as interest income arising from the valuation of cash on hand, exchange rate differences arising from the valuation of foreign currencies, and income arising from the disposal of economic assets) are compared with the scope drawn by the law, it is open to debate, since it introduces by an administrative act a limitation not brought by the law.
This particularly matters because, in subparagraph (a) of the second paragraph of Supplementary Article 1 of the Foreign Direct Investment Law, funding and borrowing transactions are expressly enumerated among the activities that the center itself may provide. Therefore, the income that a qualified service center derives from funding transactions directed at group companies falls within the scope of the activity to which the law refers; even if such income is, by its nature, in the appearance of "interest" or "financial income", it constitutes, for the purposes of the law, the principal activity income of the center.
In this case, the Communiqué’s approach of categorically excluding interest income and similar financial income from the deduction results in depriving of the deduction, by an administrative regulation, a type of income that the law has expressly included within the scope of the activity. While the wording of the law is apt to render the income arising from the financial services named within the scope of the activity subject to the deduction, the administration’s exclusion of such income from the scope by treating it as "non-principal activity" must be assessed as an interpretation exceeding the will of the legislator.
The concept of non-principal activity income must be interpreted narrowly so as to cover only the income of the center unrelated to the activities named in Supplementary Article 1 (for example, the passive income arising from the center’s valuation of its idle funds and unconnected with the group service activity). The general limitation introduced by the Communiqué without distinguishing between the income arising from the financial services expressly named within the scope of the activity and passive income of this nature constitutes, in this respect, a violation of the principle of legality of taxation.
B. The Separation of Revenue and Expenses in Mixed Activity
Article 10.8.4 contained in the Communiqué provides that, for the determination of the income subject to the deduction, the expense and cost items incurred on account of these activities must be deducted from the revenue derived from the activities accepted within the scope of the deduction. However, in order for the income forming the basis of the deduction to reflect the reality, not only the direct expenses but also the common general administrative expenses associated with the activity within the scope of the deduction and the expenses of the support personnel other than qualified service personnel must be allocated to this activity by a appropriate allocation key and taken into account in the determination of the income. Indeed, the said expenses relate at the same time both to the derivation of the income pertaining to the qualified service center activity and to the derivation of the income falling outside the said activities.
Nevertheless, since the Communiqué does not introduce any criterion as to by which allocation key (revenue ratio, number of personnel, working time, etc.) the common expenses are to be apportioned, it is possible that, in practice, disputes may arise between the administration and the taxpayer over the method of allocation.
C. The Uncertainties That May Arise in the Determination of the Scope of the Activity and the Status
Since the deduction is limited to the income derived exclusively from the qualified service center activity and from abroad, which income will be regarded as within this scope directly produces a tax consequence. Therefore, the determination of whether the services provided by the qualified service center fall among the activities named in the article is of importance, and it is likely that uncertainties will be experienced on this matter in practice. For example, in view of the expression "such as" in subparagraph (b) of the second paragraph of Supplementary Article 1, the other activities to which the coordination and management service may relate are open to interpretation.
V. The Income Tax Exemption Granted to the Wages of Qualified Service Personnel
The Law No. 7582 has not confined the incentive to the level of the corporation. By Article 5 of the same Law, subparagraph (20) has been added to the first paragraph of Article 23 of the Income Tax Law No. 193 (“ITL”), and the portion of the wages of the qualified service personnel employed in the qualified service centers defined in Supplementary Article 1 of the Law No. 4875 which does not exceed three times the gross minimum wage has been exempted from income tax. In respect of the qualified service centers operating in the industrial zones established under the Industrial Zones Law No. 4737 and deemed appropriate by the President according to the intensity of foreign investment of the zone, as well as those operating in the IFC by obtaining a participant certificate, this limit is applied as five times the gross minimum wage. The President has been authorized to reduce these multiples, jointly or separately, down to one time and to increase them up to twofold. The provision entered into force on 4/6/2026, being the date of publication of the Law.
The implementation principles of the exemption have been determined by the Income Tax General Communiqué Serial No. 334, published in the Official Gazette dated 4/7/2026 and numbered 33300, which entered into force on the date of its publication. Thus the deduction granted at the level of the center and the exemption granted at the level of the personnel constitute the two pillars of a single incentive scheme, and both regimes rest on the same statutory definition contained in Supplementary Article 1 of the Law No. 4875.
A. The Personal Scope of the Exemption: Qualified Service Personnel and Support Personnel
The exemption is not attached to the status of the employer alone; it is applied exclusively to the wages of the employees holding the status of qualified service personnel. Pursuant to Supplementary Article 1, the employees who actually perform the activities named in the second paragraph of the said article and who are not evaluated within the scope of the support personnel are regarded as qualified service personnel, whereas the support personnel employed in administrative, auxiliary or indirect services remain outside the scope of the exemption. Where an employee is engaged at the same time both in the activities within the scope and in the support functions, the exemption may be applied only to the portion of the wage corresponding to the qualified service activities, that is, on a pro rata basis.
However, the Communiqué does not introduce any criterion as to the key according to which this apportionment is to be made. The matter repeats, at the level of the wage, the problem observed in Section IV.B above concerning the allocation of the common expenses; and since it is the employer who bears the liability of the withholding agent, the risk arising from the uncertainty is in practice borne by the employer. Moreover, the regulation which the Ministry of Industry and Technology is to issue in order to determine, among other matters, the scope of the qualified service personnel and of the support personnel has not yet been published. The exemption has therefore entered into force while its personal scope has not been definitively drawn, which is open to debate in terms of the principles of legality of taxation and of legal certainty.
The same uncertainty becomes more visible in intra-group secondment arrangements. In order for the personnel temporarily assigned to the center by the parent company to benefit from the exemption, it must be established that such personnel actually carry out the qualified service activities within the center and that the employment relationship in Türkiye has been constituted in accordance with the legislation; in these arrangements the consequences arising in terms of taxation, social security and work permits should be assessed in advance and together.
B. The Wages Within the Scope and the Computation of the Exemption
The Communiqué determines the wage within the scope by reference to the definition contained in Article 61 of the ITL. Accordingly, in addition to the monthly wage, the payments made under the names of overtime, premium, bonus, expense allowance and the like, together with the benefits capable of being represented in money, are also taken into account within the scope of the exemption. The portion of the wage exceeding the limit is taxed according to the general provisions, that is, over the progressive tariff contained in Article 103 of the ITL.
An explanation of the Communiqué that carries importance in practice concerns the prevention of duplication with the minimum wage exemption. Since the portion of the wage corresponding to the minimum wage is already contained within the exempt block of three or five times the gross minimum wage, the exemption regulated in subparagraph (18) of the first paragraph of Article 23 of the ITL is not deducted once again in the taxation of the exceeding portion. On the basis of the gross minimum wage of TRY 33,030 taken as a basis in the examples of the Communiqué for the year 2026, the monthly exemption limit corresponds to TRY 99,090 in the standard centers and to TRY 165,150 in the industrial zones and in the IFC.
The papers drawn up in relation to the exempt portion of the wage, such as the payroll, are likewise exempt from stamp duty, while the exceeding portion remains subject to stamp duty according to the general principles (at the rate of 7.59 per thousand for the year 2026). On the other hand, the relief is confined to income tax and stamp duty; the social security premiums are not affected by the exemption. In this respect, the effect of the exemption upon the total employment cost is more limited than the effect of the deduction granted at the level of the corporation.
C. The Relationship With the Istanbul Finance Center Regime
By Article 12 of the Law No. 7582, the expression “financial institutions which have obtained a participant certificate” contained in the first sentence of the second paragraph of Article 6 of the Istanbul Finance Center Law No. 7412 has been changed to “the participants”, and the income tax reduction applied in the case of the employment of personnel having experience abroad has thereby been extended so as to cover all participants. By the sentence added to the same paragraph, it has been provided that the exemption contained in subparagraph (20) of the first paragraph of Article 23 of the ITL shall not be applied to the personnel of the qualified service centers who benefit from that reduction. Accordingly, in respect of a qualified service center operating in the IFC Zone, the two reliefs are mutually exclusive, and a comparative computation is required in order to determine which of them is the more advantageous. Since neither the law nor the Communiqué contains a provision as to whether this choice may be exercised separately for each employee, or as to whether it may be changed in the course of the year, it is likely that clarification will be needed in practice.
It should further be noted that, by Article 13 of the same Law, the period of the corporate income tax deduction applied at the rate of 100% in respect of the institutions carrying out financial activities in the IFC by obtaining a participant certificate has been extended until 2047, and the period of the exemption granted in respect of the financial activity fees has been increased from five years to twenty years. Together with the twenty accounting period duration of the qualified service center deduction, these amendments indicate that the incentive framework has been designed with the intention of predictability over the long term.
D. Assessment
Considered as a whole, whereas the relief granted at the level of the center has been designed over the rate of the income (95% or 100%), the relief granted at the level of the personnel has been designed over an absolute ceiling expressed in multiples of the minimum wage. In the case of the senior personnel who constitute the target population of the incentive, the exemption is therefore capable of covering only a part of the remuneration, and the real value of the ceiling remains dependent upon the annual determinations of the minimum wage. In this respect, the capacity of the exemption to close the difference in the wage costs vis-à-vis the competing jurisdictions in which the regional center functions are located is limited; the principal function of the exemption appears rather to be that of reducing the cost of the medium level qualified employment.
VI. Conclusion
The qualified service center deduction introduced by the Law No. 7582 is an incentive mechanism attractive in terms of both rate and duration. Although the Communiqué has, to a large extent, clarifies the application of the deduction in a manner consistent with the law, the rule wholly excluding the income arising from the financial services from the scope of the deduction is problematic in terms of the principle of legality of taxation, in that it narrows the scope drawn by the law by an administrative act. The lack of a criterion regarding the allocation of common expenses in mixed activity is also among the matters that may give rise to disputes in practice. The exemption granted on the wages of the qualified service personnel completes the scheme at the level of the personnel; however, the tying of the ceiling to multiples of the minimum wage limits the effect of the exemption in respect of the senior personnel, and both the absence of an allocation criterion in the pro rata application and the circumstance that the secondary regulation determining the scope of the qualified service personnel has not yet been published constitute the principal points of uncertainty of the regime.
