Tax Comparison
Turkey vs United States
The USA is one of only two countries in the world (along with Eritrea) that taxes citizens on worldwide income regardless of where they live. Understanding how Turkey's lower rates interact with US citizenship-based taxation is essential before any move.
Overview
The United States taxes its citizens and green-card holders on worldwide income, irrespective of residency. Moving to Turkey does not — by itself — exempt Americans from filing a US federal income tax return or paying US tax. The Foreign Earned Income Exclusion (FEIE, 2025 limit: $126 500 — verify at irs.gov) and the Foreign Tax Credit (FTC) are the primary mechanisms Americans use to reduce double taxation, but neither eliminates US filing obligations.
Turkey taxes residents on worldwide income using progressive bands from 15 % to 40 %. For most Americans in Turkey, Turkey's effective rate is lower than the US federal rate at comparable income levels. However, the key complexity is not the rate comparison — it is managing US citizenship-based taxation alongside Turkish residency-based taxation.
Additional US-specific obligations that apply regardless of Turkey residency include FBAR filing (FinCEN 114) for foreign bank accounts over $10 000 in aggregate, and FATCA Form 8938 reporting for specified foreign financial assets. Turkish banks are FATCA-reporting institutions. The US-Turkey DTT provides some relief but does not override citizenship-based taxation.
Tax highlights at a glance
Turkey
- Income tax bands
- 15 % → 20 % → 27 % → 35 % → 40 % (progressive, 2025 TRY brackets)
- Standard VAT
- 20 %
- Social security (employee)
- ~14 % of gross salary
- Foreign income exemption (proposed)
- Art. 23/14 — verify current status at gib.gov.tr
- Wealth tax
- None
- Inheritance / gift tax
- 1 %–30 % scale
United States
- Federal income tax rates
- 10 % – 37 % (7 progressive brackets, 2025 — verify at irs.gov)
- FICA (employee)
- 7.65 % (Social Security 6.2 % + Medicare 1.45 %)
- State income tax
- 0 %–13.3 % depending on state
- Standard VAT equivalent
- No federal VAT; state sales taxes vary (~0 %–10 %)
- FBAR reporting
- Required for foreign accounts exceeding $10 000 aggregate
- FATCA (Form 8938)
- Required for foreign financial assets above thresholds
- Exit tax
- Applies to certain long-term residents / high-net-worth individuals who renounce
Key differences
| Topic | Turkey | United States |
|---|---|---|
| Tax basis | Residency-based — non-residents only taxed on Turkish-source income | Citizenship-based — US citizens taxed on worldwide income everywhere |
| Top marginal income tax rate | 40 % (above ~1.9M TRY) | 37 % federal (+ state income tax) |
| FICA / social security | ~14 % employee social security | 7.65 % FICA employee share; self-employed pay full 15.3 % up to SS ceiling |
| Foreign reporting requirements | None equivalent to FBAR/FATCA | FBAR + FATCA for all Americans worldwide, regardless of residency |
| Double-tax treaty | Yes — Turkey-US DTT in force (does not eliminate citizenship-based taxation) | Yes — US-Turkey DTT in force |
Double-tax treaty
Turkey and United States have a double-tax treaty in force.
Turkey and the United States have a double-tax treaty in force. The treaty reduces withholding rates on dividends, interest, and royalties flowing between the two countries, and provides credit and exemption mechanisms to mitigate double taxation. Crucially, the treaty does not override the US's citizenship-based taxation — Americans remain subject to US tax law even when residing in Turkey. Verify treaty details at gib.gov.tr or irs.gov.
Source: https://www.gib.gov.tr
Who should consider this comparison?
- American freelancers or remote workers who want to understand how FEIE and FTC interact with Turkish income tax.
- US citizens already living in Turkey who need to understand their ongoing US filing obligations (FBAR, Form 8938, annual federal return).
- American retirees drawing Social Security or pension income who want to confirm treaty treatment of those payments in Turkey.
- US entrepreneurs considering a Turkish company structure and wanting to understand controlled-foreign-corporation (CFC) and GILTI implications.
- Americans weighing renunciation of US citizenship who need to understand the exit-tax rules before making that decision.
FAQ
Frequently asked questions
- Do I still have to file a US tax return if I move to Turkey?
- Yes. The United States taxes its citizens on worldwide income regardless of where they live. Moving to Turkey does not end your obligation to file a US federal income tax return each year. You may use the Foreign Earned Income Exclusion (FEIE) and/or the Foreign Tax Credit (FTC) to reduce or eliminate the additional US tax owed, but the filing obligation remains. Failure to file can result in penalties.
- Does the US-Turkey double-tax treaty help Americans living in Turkey?
- The DTT helps in specific ways — primarily by setting withholding tax rates on passive income (dividends, interest, royalties) between the two countries and by providing a framework for credit and exemption of double-taxed income. However, it does not override US citizenship-based taxation. Americans in Turkey still owe US tax on worldwide income, though Turkish taxes paid are generally creditable against US liability for the same income via Form 1116.
- What is FBAR and do I need to file it if I have a Turkish bank account?
- FBAR (FinCEN 114) is a US Treasury report required from any US person who has a financial interest in — or signature authority over — one or more foreign financial accounts with an aggregate value exceeding $10 000 at any point during the calendar year. Turkish bank accounts count. FBAR is filed separately from your tax return (online via BSA E-Filing System) with a deadline aligned to the regular tax filing season. Penalties for willful non-filing can be severe.
- Can I use the Foreign Earned Income Exclusion (FEIE) in Turkey?
- Yes, if you qualify. The FEIE (Form 2555) allows you to exclude a portion of foreign-earned income from US taxable income — the 2025 limit is $126 500 (verify at irs.gov). You must either pass the Physical Presence Test (330 full days outside the US in a 12-month period) or the Bona Fide Residence Test (genuine residency in Turkey for a full tax year). Passive income (dividends, interest, rental income) is not covered by FEIE — only earned income from working.
- How does Turkey's proposed Art. 23/14 foreign income exemption interact with my US tax obligations?
- If the Art. 23/14 exemption is enacted, it would mean Turkey does not tax your foreign-source income, potentially giving you a zero Turkish tax bill on foreign earnings. This reduces (or eliminates) the Turkish tax you could credit against US tax via the Foreign Tax Credit. In practice, this means the FTC strategy becomes less useful — the FEIE may be more relevant. You would still owe US tax on income above the FEIE limit, and Turkish-source income would be subject to whatever Turkish rules apply.
- What are the Turkish tax filing obligations for Americans in Turkey?
- If you are a Turkish tax resident, you must file a Turkish annual income tax return (yıllık gelir vergisi beyannamesi) covering your worldwide income, subject to DTT exemptions and credits. Turkish tax residents with only employment income taxed at source may have simplified obligations. American expats in Turkey are commonly advised to engage both a US-qualified CPA with international experience and a Turkish mali müşavir (certified public accountant) to handle both sets of obligations.