The tax exemption rate applied to earnings derived from services such as architecture, engineering, software, design, data analysis, and certain education/health services provided from Turkey to customers abroad has recently been increased from 50% to 80%. The implementation of this significant tax advantage has been tied to stricter conditions and burden of proof by the Ministry of Finance. For exemption amounts exceeding certain limits, a simple declaration is no longer sufficient; the submission of a Sworn Certified Public Accountant (YMM) Certification Report has become mandatory.
The Essence of the New Regulation: Transition from Declaration to Certification
This exemption, provided under Article 89 (repeated) of the Income Tax Law (GVK) and Article 10 of the Corporate Tax Law (KVK), is a critical incentive for activities classified as “service exports.” However, with the increase in the exemption rate, the tax administration has strengthened the audit mechanism to prevent abuse of this right.
Now, if the exemption amount utilized in the relevant year exceeds the annual limits determined by the Ministry, the fulfillment of the required conditions must be documented officially via a “Certification Report” by a Sworn Certified Public Accountant (YMM). This report is an annex to the tax return and is of vital importance.
Who and What Services Are Covered?
This requirement covers both individual taxpayers operating as sole proprietorships (freelancers, consultants) subject to income tax, and corporate taxpayers with statuses such as anonymous or limited liability companies. The main “remote” services covered are:
Software, coding, and IT services.
Architectural and engineering projects.
Graphic, web, and industrial design services.
Data processing and data analysis services.
Medical reporting or educational services provided with relevant ministry permission.
What Does the YMM Report Guarantee? (4 Critical Conditions)
The YMM Report to be issued is not merely a mathematical calculation. In their report, the Sworn CPA certifies that the following four fundamental conditions have actually and legally occurred:
Performance of Service in Turkey: The service was actually provided from within the borders of Turkey.
Utilization Abroad: The outputs of the service (software, projects, etc.) were benefited from exclusively abroad.
Foreign Client: The invoice was issued in the name of a firm or individual resident abroad.
Requirement to Bring Foreign Currency: The entire revenue derived from the service must be brought into bank accounts in Turkey as foreign currency by the end of the tax return submission period for the relevant year (This is the most critical and most frequently errored article).
What Happens If the Report Is Not Submitted? (Risk Analysis)
Failure to submit the YMM Certification Report within the required timeframe in cases where it is mandatory results in severe financial consequences:
Denial of Exemption: The 80% tax exemption utilized is cancelled by the tax office.
Penalty Assessment: The unpaid (exempted) tax is demanded retrospectively together with a “tax loss penalty” and accruing “delayed interest.”
Audit Risk: Failure to submit the report can directly place the taxpayer into the tax audit risk pool.
📌 Application and Additional Info: The Ministry of Finance determines specific monetary thresholds annually for the YMM report requirement. If your exemption amount falls below these thresholds, an SMMM (Certified Public Accountant) report may be sufficient, or no report may be required. However, it is essential to consult with your financial advisor to determine your status regarding the current thresholds.
Frequently Asked Questions
Can my own Certified Public Accountant (SMMM) issue this report?
No. If your exemption amount exceeds the annual limits determined by the Ministry, this report can only be issued by professionals holding the title of “Sworn Certified Public Accountant” (YMM) who have full certification authority. SMMMs cannot issue this special certification report.
I brought the foreign currency to Turkey but did not convert it to TL; is the exemption violated?
According to current regulations for service exports, the primary condition is that the foreign currency must be brought into bank accounts in Turkey (documented with a Foreign Exchange Purchase Document – DAB or bank receipt). The requirement to sell a certain percentage to the Central Bank (İBKB requirement), as in goods exports, is currently not applied for service exports. However, the entry of the money into the country is mandatory.
Which period tax returns does this apply to?
The YMM report requirement is valid for taxation periods following the effective date of the relevant communiqués. This issue is of critical importance, especially in annual tax returns to be submitted for earnings in 2023 and subsequent years.
Professional Support
The foreign service exemption provides high financial advantages but involves complex legislation and strict formal requirements. You can receive support from the expertise of Vergi Merkezi | Mali Müşavirlik for managing the YMM reporting process and determining whether the conditions are met.
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⚠️ Legal Disclaimer: This content has been prepared according to the legislation in force at the time of publication. Tax laws, communiqués, and monetary thresholds can change frequently.
📚 Sources and References
Primary Sources
T.C. Laws (Legislation Information System) Title: 193 Income Tax Law (Repeated Article 89) Title: 5520 Corporate Tax Law (Article 10/ğ)
Revenue Administration (GİB) Document: General Communiqués Regarding Related YMM Certification Reports and Thresholds
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