Income tax exemption for wages paid in foreign currency by an employer abroad
The tax exemption under GVK 23/14 for wages received in foreign currency from an employer abroad: who benefits, the five conditions and their documents, what is not covered, worked examples, stamp duty, tax returns, double taxation and the SGK side.
With the spread of remote work, more people live in Türkiye while working on the payroll of a company abroad. Their first question is usually the same: is my salary taxed in Türkiye? Clause 14 of Article 23 of the Income Tax Law exempts this wage from income tax under certain conditions. Known in practice as the "foreign salary tax exemption", the provision is not new; however, its conditions are read narrowly, and breaking one condition means losing the exemption entirely.
The provision and its history
The clause was added to the Income Tax Law by Article 42 of Law No. 3239 (RG 11.12.1985, No. 18955). Income Tax General Communiqué (Serial No: 147) (RG 09.02.1986, No. 19014) explains that the exemption applies to wages paid in foreign currency after 01.01.1986.
Under the provision, wages that limited-taxpayer employers whose legal and business centres are not in Türkiye pay in foreign currency to their employees out of income earned outside Türkiye are exempt from income tax. Because Law No. 6728 (RG 09.08.2016, No. 29796) added a second sub-clause on regional management centres, the core rule is now referred to as sub-clause (a).
Who benefits?
The exemption looks not at who the employee is but at the employer and the nature of the payment. According to Communiqué Serial No: 147, it does not matter whether the person receiving the wage is a full or a limited taxpayer. Therefore a Turkish citizen and a foreigner living in Türkiye can both benefit on the same conditions. Typical situations in which GİB rulings apply the exemption are:
- People working from home under an employment contract with a company abroad,
- Employees of representative and liaison offices that have no commercial activity in Türkiye and whose expenses are covered by the head office abroad,
- Employees of non-profit offices of international organisations in Türkiye.
Conditions of the exemption
GİB rulings require the following conditions to be met together:
| Condition | What it means | How to document it |
|---|---|---|
| The employer's legal and business centre is not in Türkiye | The employer is a limited taxpayer; it has no company, branch or place of management in Türkiye | Foreign trade register entry, articles of association |
| The employer has no income-generating activity in Türkiye | No sales, service or project income is earned in Türkiye | Activity letter from the employer, statement that there is no workplace in Türkiye |
| The payment is a wage | The employee is bound to the employer by an employment contract and works under its instructions | Written employment contract, payslips issued abroad |
| The wage is paid out of the employer's income abroad and in foreign currency | The money comes from income abroad, not from a source in Türkiye | Bank receipts showing foreign currency transfers from abroad |
| The wage is not booked as an expense in Türkiye | The wage is not deducted from, or recharged to, the income of any company or branch in Türkiye | Letter confirming that no invoice or cost recharge is made to a group company in Türkiye |
When one of the conditions is broken, the exemption is lost not just for part of the wage but for all of it. For the general rules on taxing wages: Taxation of wages
What is not covered
- People who invoice. The exemption covers only wages under an employment contract. The income of a person who issues a freelance receipt or invoice to a client abroad is self-employment income; for that person the service export income deduction is assessed: Service exports: VAT and income deduction
- Employers running projects in Türkiye. GİB has ruled that a wage funded from abroad for a project carried out in Türkiye cannot benefit from the exemption, because it is not paid out of the employer's income abroad unrelated to Türkiye.
- Wages recharged to a company in Türkiye. If a wage paid by the parent company is invoiced to the subsidiary in Türkiye or deducted from its income, the exemption does not apply.
- Payments made in Turkish lira. If the employer sends the payment in Turkish lira, the foreign currency condition is not met.
- Employees sent abroad by an employer in Türkiye. This is a different situation with its own rules: Sending an employee abroad
How it differs from similar rules
| Rule | Who it covers | Key difference |
|---|---|---|
| GVK 23/14 (a) | Salaried employee of a limited-taxpayer employer abroad | The employer must have no activity in Türkiye |
| GVK 23/14 (b) | Employees working within the permit of a regional management centre set up with Ministry of Trade permission | The centre's permit and scope of activity are required; the application is explained in Communiqué Serial No: 293 |
| GVK 89/13 service export deduction | Sole proprietors and self-employed professionals serving clients abroad | It is not an exemption but an income deduction applied in the tax return |
Worked examples
The amounts in the examples are hypothetical; for converting to Turkish lira in the annual return, check current rates: Currency converter
Example 1: Remote employee meeting the conditions
Ayşe lives in Istanbul and works remotely under an employment contract for a German company that has no activity at all in Türkiye. Each month the company sends 4,000 EUR from its account in Germany to Ayşe's foreign currency account in Türkiye; the wage is not recharged to anyone in Türkiye.
- Annual wage: 4,000 EUR × 12 = 48,000 EUR
- Income tax in Türkiye: exempt
- Annual return for this wage: not filed
Example 2: Employer with a client in Türkiye
The same company starts selling software to a client in Türkiye and links Ayşe's work to this client project. Because the employer now has income-generating activity in Türkiye, the exemption is lost. As the wage is not subject to withholding in Türkiye, it is declared in the annual return.
- Annual wage: 48,000 EUR
- Assumed average rate: 1 EUR = 45 TL
- Wage to be declared: 48,000 × 45 = 2,160,000 TL
The tax is calculated using the wage tariff. To compare the net amount that would result if the wage were paid through a payroll in Türkiye: Salary calculator · Annual income tax return
Example 3: Software developer who invoices
Mehmet invoices a US company 3,000 USD each month and has no employment contract. His income is self-employment income, not a wage; the exemption does not apply. Mehmet registers as a taxpayer, falls under 4/b for SGK purposes and, if he meets the conditions, can use the service export income deduction.
Stamp duty, tax returns and double taxation
- Stamp duty: GİB has stated that stamp duty is not sought either for a wage payment that meets the exemption conditions.
- Tax return: A wage within the exemption is not subject to withholding and is not declared. If the exemption is lost, a wage received from abroad without withholding is declared in the annual return.
- Double taxation: Treaties, as a rule, give the right to tax the wage of a person who lives in Türkiye and does the work in Türkiye to Türkiye; they give no taxing right to the employer's country. In a ruling on the treaty with Finland, GİB stated that in this case taxation follows Turkish domestic law. If tax is withheld in the employer's country, a Turkish certificate of residence may be needed for a refund: Double taxation · DTTs and certificate of residence
The SGK side
The income tax exemption does not remove social security obligations. In brief:
- 4/a: A person working in Türkiye under an employment contract is, as a rule, covered by 4/a, and reporting is the employer's obligation. For a foreign employer without a registered workplace in Türkiye this reporting does not happen automatically; and if the employer registers a workplace in Türkiye, this may also affect the tax conditions.
- Social security agreement: An employee posted temporarily from a country with an agreement can remain insured in their home country with a posting certificate: Social security of foreign employees
- Voluntary insurance: According to SGK, people resident in Türkiye who are 18 or older and do not work in a way that requires compulsory insurance can apply. Whether someone working under an employment contract can use this route should be confirmed with the SGK provincial directorate for the specific case.
- 4/b: This applies only to self-employed people registered as taxpayers; it does not apply to salaried employees.
For the options foreign companies have for employing staff in Türkiye: Employment for foreign companies
Documents to keep
- Signed employment contract and any annexes,
- The employer's foreign register entry and address,
- Letter from the employer stating that it has no income-generating activity or workplace in Türkiye,
- Payslips or pay statements issued abroad,
- Bank receipts showing that each payment came from abroad in foreign currency,
- Letter confirming that the wage is not recharged to a company in Türkiye,
- Any SGK posting certificate and tax ruling.
Frequently asked questions
I am a foreign national living in Türkiye. Can I benefit?
Yes. According to the communiqué, it does not matter whether the employee is a full or a limited taxpayer; what counts is the employer and the payment.
My salary arrives in foreign currency in my account in Türkiye and I then convert it. Is that a problem?
The condition is that the employer makes the payment in foreign currency. Converting an amount received in foreign currency into Turkish lira afterwards does not change the nature of the payment; the employer sending Turkish lira, however, breaks the condition.
I work freelance. Can I benefit from the exemption?
No. The exemption covers only wages. Invoiced income is self-employment income; the service export income deduction should be considered.
I am the manager in Türkiye of a foreign company. What changes?
A manager's pay under an employment contract is also a wage and the same conditions apply. However, a manager signing contracts or finding clients on behalf of the company in Türkiye may lead to the conclusion that the employer has a workplace or activity in Türkiye. In that case it is advisable to request a tax ruling in advance.
Do I need to file an annual return?
A wage within the exemption is not declared. If one of the conditions is broken, a wage received from abroad without withholding is declared in the annual return.
My employer's country also withholds tax. What should I do?
If you do the work in Türkiye, treaties as a rule give the taxing right to Türkiye. For a refund of the tax withheld in the other country, that country's rules and a certificate of residence obtained in Türkiye are relevant.
Is stamp duty payable?
GİB has stated that stamp duty is not sought either for a wage payment that meets the exemption conditions.
What should I do if I am not sure?
A tax ruling (özelge) can be requested from the Revenue Administration. A ruling gives a binding interpretation only for the applicant and the facts in the application.
Legal basis: Income Tax Law (193) art. 23/14; Income Tax General Communiqué (Serial No: 147) and (Serial No: 293); Stamp Duty Law (488); Social Insurance and General Health Insurance Law (5510) arts. 4 and 50.