Software Company Formation in Turkey: Tax and Setup Guide

A foreign founder can form an ordinary Turkish company, own all of its shares and sell software services to customers abroad. Incorporation alone, however, does not lower the tax bill. The result depends on what the company actually supplies, who receives and uses the service, how much of the profit qualifies, when the foreign proceeds reach Turkey and whether a separate VAT test is met.

The incentive most founders hear about is the service-export deduction in Corporate Tax Law (KVK) Article 10/1-(ğ). For periods beginning on or after 1 January 2026 its rate is 100%. It is a deduction from qualifying earnings, not from revenue, and since 2025 it interacts with the domestic minimum corporate tax. This guide explains both, then covers VAT, Technopark, hiring and the formation checklist. For the general incorporation route, start with our guide to forming a company in Turkey.

The Short Answer

• A software company is an ordinary LLC or joint stock company. The LLC minimum capital is TRY 50,000, and the Ministry of Trade states that foreigners forming a company follow the same rules as domestic investors.
• The standard corporate tax rate is 25% (KVK Article 32).
• Qualifying service-export earnings can be deducted at 100% for 2026 periods, under Presidential Decision No. 11257. The conditions are strict: a listed service that appears among the main activities in the articles of association, a foreign customer, use exclusively abroad, an invoice in the foreign customer’s name and transfer of the earnings to Turkey by the return deadline.
• A newly formed company is outside the domestic minimum corporate tax for its first three accounting periods. After that, the service-export deduction cannot be subtracted when the 10% minimum is calculated.
• VAT has its own export test. Corporate tax eligibility does not make an invoice VAT-exempt.

What KVK Article 10/1-(ğ) Covers

The provision applies to earnings from services rendered in Turkey to persons not resident in Turkey, or to entities whose workplace, legal seat and business centre are abroad, where the service is used exclusively abroad. The statutory list covers architecture, engineering, design, software, medical reporting, bookkeeping, call-centre, product testing, certification, data storage, data processing, data analysis and specified vocational training services. A separate limb covers licensed education and health services provided to non-residents.

For a software business the contract has to show the deliverable. Custom development, testing, data processing or hosted support maps to the list more easily than a mixed contract that bundles licences, advertising, hardware resale and local implementation. Calling every invoice “software export” does not make the whole margin eligible.

The conditions in the law and the Communiqué

1. A listed service rendered from Turkey. The company performs the service in Turkey.
2. A foreign customer. The customer is not resident in Turkey, or its workplace, legal seat and business centre are abroad.
3. Use exclusively abroad. The benefit of the service arises only outside Turkey.
4. Invoice in the foreign customer’s name. The law makes this an express condition.
5. Transfer of the earnings to Turkey. The full qualifying earnings must be transferred to Turkey by the date the annual corporate tax return is due. Under KVK Article 14 the return is filed by the 25th day of the fourth month after the accounting period ends, which is 25 April for a calendar-year company. Do not plan around a possible filing extension.
6. Software in the articles of association. The Revenue Administration’s Corporate Tax General Communiqué No. 1 requires the listed service, here software, to be among the main activities written in the company’s articles of association. It also states that assistance, consultancy and intermediary services in these fields do not qualify.

The 2026 rate

The statutory rate in the law is 80%, and the President may raise it to 100%. Presidential Decision No. 11257, published in the Official Gazette on 30 April 2026 (No. 33239), set it at 100% for income of tax periods beginning on or after 1 January 2026. Our Decision 11257 guide covers the other rate changes in the same decision.

Earnings, Not Revenue: A Simplified Example

Assume a company invoices TRY 10 million to qualifying foreign customers and TRY 2 million to Turkish customers in 2026. Direct costs plus a fair share of common costs come to TRY 7 million on the export side and TRY 1.5 million on the domestic side. The figures are illustrative only.

The deduction removes the TRY 3 million of qualifying earnings, not the TRY 10 million of export revenue. Domestic profit is taxed at the normal rate, and the result holds only if every condition above is met, including the transfer of the qualifying earnings to Turkey on time. In practice, the allocation of common costs (salaries, rent, cloud, management) between qualifying and non-qualifying work is the part of the calculation that most needs documentation.

The Domestic Minimum Corporate Tax

KVK Article 32/C, applicable from 2025, says corporate tax cannot be lower than 10% of corporate income before deductions and exemptions. That starting figure is the commercial balance-sheet profit plus non-deductible expenses.

Two points matter for a software exporter:

• New companies are outside it for three periods. The minimum tax does not apply to a company that starts business for the first time, for three accounting periods beginning with its first period. Companies created by merger, transfer, change of type or division do not count as new.
• The service-export deduction does not reduce the minimum base. When the minimum is calculated, the law lets only certain items be subtracted, such as the Technopark income exemption, R&D and design deductions and some KVK Article 10 items. The KVK 10/1-(ğ) deduction is not among them, and the Revenue Administration’s minimum corporate tax guide lists it as a deduction that cannot be subtracted.

Continuing the example: from the fourth period, if the company’s only profit were TRY 3 million of qualifying export earnings, ordinary corporate tax after the deduction would be zero, but the minimum tax would be TRY 300,000 (10% of TRY 3 million), assuming no non-deductible expenses or other adjustments. Prior-year losses are an open point: the Revenue Administration’s consolidated Communiqué notes that the Council of State annulled, in November 2025, the sentence saying such losses are not deducted in the minimum-tax calculation, so confirm the current position before relying on them. The 100% rate is therefore not a promise of zero tax. Our corporate tax guide covers the wider rate framework.

VAT Service Export Is a Separate Test

VAT Law Article 11/1-(a) exempts services rendered for customers abroad. Article 12/2 defines a customer abroad as a buyer whose residence, workplace, legal seat and business centre are abroad, or a Turkish company’s independent foreign branch. Two conditions must both be met:

1. the service is rendered for a customer abroad; and
2. the service is used abroad.

Qualifying export invoices are issued without Turkish VAT under the applicable exemption. A foreign billing address is not enough where the software is implemented for, or effectively used by, a Turkish operation. Mixed projects should split Turkey-use and foreign-use components where the contract and the facts support it.

Input VAT on costs linked to exempt exports can be recovered through a refund file, but not automatically. Each expense must be attributable, documented and included in a valid refund calculation.

SaaS, Licences and App Stores Need Classification

A SaaS subscription can combine hosted access, a licence, support and data processing. Both corporate tax and VAT treatment follow the legal and commercial substance, so resolve these questions before the first invoice:

• Is the customer a business or a consumer, and where does it use the service?
• Is the Turkish company the principal seller or an agent?
• Does an app store or payment platform collect on the company’s behalf?
• Is tax withheld abroad? A credit for foreign tax is governed by KVK Article 33 and any applicable tax treaty; the rules in the customer’s country are a question for an adviser in that country.
• Does the contract transfer intellectual property, or does it only grant access?

Platform statements, invoices and bank receipts must reconcile. The gross customer sale, the platform commission, any foreign withholding and the net cash receipt should not be collapsed into one net revenue entry.

Standard LLC or Technopark?

A Technopark (Technology Development Zone) is not a company type. It is a regime for approved projects run inside a zone under Law No. 4691.

A Technopark can suit genuine R&D or software development, but admission, office cost, reporting and the separation of non-project revenue all add work. Our Technopark guide covers the application and the payroll rules.

Hiring Developers in Turkey

Outside a Technopark or a certified R&D or design centre, developers are paid under ordinary payroll rules, including any general employment incentives the company qualifies for. The service-export deduction applies to the company’s earnings; it does not make salaries tax-free.

Foreign employees need a work permit. The Ministry of Labour and Social Security publishes the evaluation criteria, and three of them shape a small company’s plan:

• Employment: in principle at least five Turkish citizens employed for each foreign employee, with an exception for workplaces with high net sales.
• Financial strength: a newly established workplace needs paid-in capital of at least TRY 500,000; an operating one needs TRY 500,000 of paid-in capital, TRY 8 million of net sales or USD 150,000 of exports.
• Salary: at least four times the gross minimum wage for engineers and architects, and at least twice the minimum wage for roles requiring expertise.

The criteria also set special routes: the general criteria can be relaxed for qualified workforce needs in advanced-technology work, and applications for R&D or design staff at certified centres, or for staff inside a Technopark, are assessed with the opinion of the Ministry of Industry and Technology. The TRY 50,000 legal minimum capital does not meet the TRY 500,000 financial criterion, so founders who plan to sponsor foreign staff, or a work permit for themselves, should set the capital with that in mind. Our guide to the work permit for a foreign company owner covers the shareholder route.

Formation and Accounting Checklist

1. Define the deliverable and customer geography

Separate custom development, SaaS, licences, data services, support, hardware and local implementation. Record where each customer is established and where it uses the service.

2. Form the company with the real activity scope

Choose LLC or JSC, managers, address and activity codes from the actual operation, and list software services among the main activities in the articles of association, which the Communiqué requires for the KVK 10/1-(ğ) deduction. A virtual office can work for a remote team if the address is genuinely usable and verifiable by the tax office.

3. Draft evidence-ready contracts

State the customer, deliverables, users, territory, acceptance, IP terms, price and payment. Avoid vague “consulting” wording where software work is being claimed.

4. Set up invoicing and revenue records

Issue invoices in the foreign customer’s name with the correct VAT treatment. Keep customer residence, use-abroad, acceptance and bank evidence, and allocate direct and common costs the same way every period.

5. Track the transfer of export earnings

Match foreign receipts to the invoices they settle and confirm the qualifying earnings reach Turkey before the return deadline.

6. Model the minimum tax before year four

Recalculate the deduction, the non-qualifying profit and the 10% minimum tax at each provisional and annual return, so the first year without the new-company exemption is not a surprise.

Official Sources Used for This Review

• Revenue Administration: Corporate Tax Law No. 5520 (Articles 10, 14, 32, 32/C and 33) and VAT Law No. 3065 (Articles 11, 12 and Temporary Article 20)
• Revenue Administration: explanatory note on Decision No. 11257
• Revenue Administration: consolidated Corporate Tax General Communiqué No. 1 (sections 10.5 and 32.5)
• Revenue Administration: domestic minimum corporate tax guide (2026)
• Revenue Administration: Technology Development Zones Law No. 4691
• Ministry of Trade: guide to setting up a company in Türkiye
• Ministry of Labour and Social Security: work permit evaluation criteria

Software Company Tax and Formation Support

Celikel CPA reviews the contract and invoicing model, the qualifying-earnings calculation, cost allocation, VAT export treatment and minimum-tax modelling for foreign-owned software companies, and handles the monthly bookkeeping and filings. Intellectual property, employment contracts and data-protection terms should also be reviewed by Turkish legal counsel. Official applications and filings are made in Turkish; we work with clients in English, Turkish, Russian, Chinese and Arabic.

Contact Celikel CPA with your customer locations and revenue model before you incorporate.

Reviewed against official sources available on 17 October 2026. Rates, thresholds and incentive rules change, so confirm the current position before filing or signing.