Sectoral Taxes and Funds

1- Direct Taxes

Indirect Taxes

Banking and Insurance Transactions Tax(BSMV)
Fire Insurance Tax
Value Added Tax(VAT)
Stamp Duty

Funds

Traffic Services Development Fund
Guarantee Fund

Income Tax

The provisions of the Income Tax Law related to insurance mainly apply to tax withholding and the taxation of insurance intermediaries and policyholders.

Insurance companies are required to withhold income tax on the following transactions as per Article 94 of the Law:

Payments made to their employees
Payments made to independent professionals
Payments made for the lease of goods and rights as per Article 70 of the Income Tax Law
Profit distributions made as per Article 94/6 of the Law
Fees paid to insurance adjusters

Article 75, paragraph 2 of the law was amended to include item 15, which states that payments made by pension and insurance companies will be considered as capital income:

Payments made to those who leave without paying premiums, dues, or contributions for ten years (withholding tax applied as per Article 94)
Payments made to those who have paid contributions for ten years but leave without acquiring retirement rights from the individual pension system, as well as payments to other pension schemes and policyholders who leave due to reasons like death, disability, or liquidation (withholding tax applied as per Article 94)
Payments made to those who acquire retirement rights from the individual pension system or leave due to reasons like death, disability, or liquidation (5% withholding tax applied as per Article 94)

Article 89 of the law specifies the deductions that can be made from the declared income in the income tax return. Accordingly, the following can be deducted:

For individual pension system premiums, 5% of the declared income (not exceeding the annual minimum wage), provided the premiums are paid for the taxpayer, their spouse, and minor children, for personal insurance premiums such as life, death, accident, health, disability, maternity, birth, and education. The premiums and contributions must be paid in the year the income is earned, and the gross salary of wage earners must be calculated without these deductions.
If spouses and children file separate returns, premiums, and contributions paid for them will be deducted from their respective income.

Income Taxpayer

An income taxpayer is an individual who earns income. Taxes are generally assessed based on the taxpayer's declaration. All earnings and income must be declared in tax returns.

The income tax rate is progressive, as per the tax schedule in Article 103 of the Income Tax Law, and is calculated based on increasing rates of 15%, 20%, 27%, 35%, and 40%.

Corporate Tax

Article 1 of the Corporate Tax Law No. 5520 outlines the taxpayers subject to corporate tax. Accordingly, capital companies, cooperatives, economic public institutions, economic enterprises of associations or foundations, and joint ventures are subject to corporate tax. In this regard, insurance companies, whether established as joint-stock companies or cooperatives, are subject to corporate tax, and the profits they earn during a fiscal period are subject to corporate tax. Due to their legal status, insurance companies must comply with the provisions of the Corporate Tax Law and all related legal regulations.

The key difference between insurance companies and other corporations regarding corporate tax lies in the deductible expenses related to determining profits or losses from their operations. The deductible insurance technical provisions are listed in Article 8 of the Corporate Tax Law under "Deductible Expenses." These include provisions for outstanding damages and claims, unearned premium reserves, earthquake damage reserves, and life mathematical reserves.

Article 8 of the law defines the deductible outstanding damage and claim provisions as follows:

“Outstanding damage and claim provisions refer to accrued and calculated damage and claim amounts, or if this calculation has not been made, the estimated amounts of damage, claims, and all related expenses, as well as damage and claim amounts that have occurred but have not been reported, and the expenses related to them, minus the reinsurance share and the remaining amount related to the provision for outstanding damage reserves attributable to the retention share.”

Accordingly, any damages and claim amounts that have occurred but have not been reported, without any limitation on the notification period, will be fully deducted from the corporate tax base.