Tax Comparison
Turkey vs Pakistan
Pakistan and Turkey have a double-tax treaty in force. For Pakistani professionals and entrepreneurs relocating to Turkey, understanding the interaction of both tax systems — and Turkey's potential foreign income exemption — is essential planning.
Overview
Pakistan levies personal income tax on a progressive slab system with rates ranging from 0 % to 35 % (verify current slabs at fbr.gov.pk — the FBR revises brackets annually). Pakistan also operates an extensive withholding tax (WHT) system on numerous transaction types. Pakistani residents are taxed on worldwide income; non-residents are taxed on Pakistan-source income only.
Turkey's income tax reaches 40 % at its top band. At comparable income levels, Pakistan's top rate (35 %) and Turkey's top rate (40 %) are broadly similar for high earners, though the slab structures differ. For most income levels, the comparison yields similar effective rates — but Turkey's higher rates on middle income brackets and Pakistan's lower brackets at lower income levels create differences at specific income points.
The Turkey-Pakistan double-tax treaty provides a framework to prevent double taxation on cross-border income. Pakistani professionals working remotely in Turkey or Turkish employers with Pakistani staff should understand the treaty's employment income provisions — which typically assign taxing rights to where the work is performed.
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
- Corporate tax
- 25 % (verify at gib.gov.tr)
- Foreign income exemption (proposed)
- Art. 23/14 — verify at gib.gov.tr
- Inheritance / gift tax
- 1 %–30 %
Pakistan
- Personal income tax slabs
- 0 % – 35 % progressive (verify current slabs at fbr.gov.pk — revised annually)
- Withholding tax (WHT)
- Extensive — applies to salaries, dividends, interest, contracts, imports (verify rates at fbr.gov.pk)
- Standard GST / VAT
- 18 % federal GST (verify at fbr.gov.pk — provincial rates differ)
- Corporate tax
- 29 % (verify at fbr.gov.pk)
- Social security / EOBI
- Employee: 1 % of minimum wage; Employer: 5 % of minimum wage — verify current rates
Key differences
| Topic | Turkey | Pakistan |
|---|---|---|
| Top income tax rate | 40 % (above ~1.9M TRY) | 35 % (verify current top slab at fbr.gov.pk) |
| VAT / GST rate | 20 % | 18 % federal GST (verify — additional provincial sales taxes may apply) |
| Withholding tax system | Withholding on employment income, dividends, interest — standard rates | Extensive WHT regime across many transaction categories — consult FBR guidance |
| Foreign income exemption | Proposed Art. 23/14 for qualifying new residents | Pakistan taxes residents on worldwide income; non-residents on Pakistan-source only |
| Double-tax treaty | Yes — Turkey-Pakistan DTT in force | Yes — Pakistan-Turkey DTT in force |
Double-tax treaty
Turkey and Pakistan have a double-tax treaty in force.
Turkey and Pakistan have a double-tax treaty in force. The treaty allocates taxing rights on employment income, business profits, dividends, interest, and royalties, and provides credit mechanisms to prevent double taxation. Pakistani professionals working in Turkey and earning Pakistan-source income should verify the employment income and business income articles to determine which country has primary taxing rights. Verify treaty details at gib.gov.tr or the FBR website.
Source: https://www.gib.gov.tr
Who should consider this comparison?
- Pakistani professionals working remotely for Pakistani employers from Turkey who need to understand which country has taxing rights on their salary.
- Pakistani entrepreneurs and business owners considering Turkish company structures and wanting to understand the DTT's business profits provisions.
- Pakistani nationals who own Turkish real estate or investment assets and need to understand their Turkish tax obligations.
- Pakistani professionals applying for Turkish citizenship-by-investment who want to understand the ongoing tax implications of Turkish residency.
- Pakistani diaspora already living in Turkey who have been resident for 183+ days and need to file Turkish tax returns.
FAQ
Frequently asked questions
- Do I have to pay Turkish income tax if I work remotely in Turkey for a Pakistani employer?
- If you are a Turkish tax resident (183+ days in Turkey or domiciled in Turkey), you are subject to Turkish progressive income tax on your worldwide income — including your Pakistani-source salary. Turkey's proposed Art. 23/14 foreign income exemption could exempt that salary if you qualify, but you should verify its current legislative status. The Turkey-Pakistan DTT's employment income article determines which country has primary taxing rights — generally, employment income is taxable where the work is physically performed, which would be Turkey.
- Does the Turkey-Pakistan DTT prevent double taxation on my income?
- The DTT provides mechanisms to prevent double taxation — either through exemption or credit. If Turkey taxes your income as the country of residence / work location, the DTT should allow you to credit that Turkish tax against any Pakistani liability on the same income. The exact mechanism depends on the income type and the specific DTT article. Verify both the Turkish and Pakistani tax positions with advisors in each country.
- Am I still a Pakistani tax resident if I live in Turkey?
- Pakistan determines tax residency primarily based on days present in Pakistan in a tax year (generally 183+ days for residency; fewer than 183 days for non-residency). If you spend fewer than 183 days in Pakistan in the relevant year, you may be classified as a non-resident Pakistani taxpayer — taxed only on Pakistan-source income. However, Pakistan's FBR has revised residency rules and enforcement has changed — verify the current rules at fbr.gov.pk or with a Pakistan-qualified tax advisor.
- What is Turkey's VAT compared to Pakistan's GST?
- Turkey's standard VAT (KDV) is 20 %. Pakistan's federal GST is 18 % — though provincial sales taxes in Pakistan (Punjab, Sindh, etc.) add to the burden on services. For businesses operating across both countries, the different VAT/GST systems require separate registration and compliance. The rates are broadly comparable, but the categories and administration differ significantly.
- How does Turkish income tax compare to Pakistani income tax for a high earner?
- Pakistan's top income tax slab is 35 % (verify at fbr.gov.pk — revised annually). Turkey's top band is 40 %. At the very top income levels, Turkey is higher. However, the slab structures differ: Turkey's 15 % and 20 % bands apply to lower TRY thresholds that translate to relatively modest USD/GBP amounts, while Pakistan's lower bands cover a broader range of rupee income. The effective rate comparison at a specific USD income level depends on the exchange rate and current bracket thresholds in both currencies. Run a side-by-side calculation with current numbers.
- Does Pakistan have a withholding tax on payments to Turkish companies?
- Pakistan's extensive withholding tax (WHT) regime applies to a wide range of payments — including services, dividends, interest, and royalties. WHT rates on payments to non-residents are set in Pakistan's Income Tax Ordinance and may be reduced by the Turkey-Pakistan DTT for qualifying payments. Turkish companies receiving payments from Pakistani entities should check the applicable DTT-reduced rates at the FBR website and ensure their Pakistani payer is applying the correct rate.