Deductible Business Expenses in Turkey: A Practical Guide for Foreign Investors and Local Entrepreneurs

What Is a Business Expense?

Business expenses refer to costs incurred by a company to maintain and grow its operations—ranging from office supplies to staff salaries.

To be deductible under Turkish law, these expenses must be directly related to the income-generating activities of the business.

Article 39 of Türkiye’s Income Tax Law No. 193 defines commercial income as the positive difference between revenues and expenses within a fiscal year.

Expenses include not only direct operational costs but also taxes and liabilities related to business functioning.

Why Deducting Business Expenses Matters

By documenting allowable expenses, companies in Türkiye can:

• Reduce their income tax burden,

• Save on VAT payments where applicable,

• Improve financial planning and budgeting,

• Strengthen compliance with tax regulations.

Properly categorized business expenses allow sole proprietorships and corporations alike to benefit from reduced tax obligations.

Common Deductible Business Expenses in Türkiye

1. Meal Expenses

Businesses may deduct the cost of meals provided to employees, whether through in-house catering, external providers, or meal cards. Payments in cash require detailed accounting records and are subject to social security contributions. Meal cards, however, offer full tax advantages when used in accordance with current regulations.

2. Employee Payments

Wages, bonuses, commissions, and other employee compensations are tax-deductible. This includes holiday bonuses and certain in-kind benefits. All payments must be documented and align with labor and tax regulations to qualify for deduction.

3. Travel and Transport Expenses

Transportation costs—including flights, bus tickets, and cargo shipping for business purposes—can be declared as business expenses. Travel must be directly related to operations or business development.

4. Work-Related Clothing

Expenses for uniforms or protective gear issued as permanent company property (e.g., returned upon employee exit) are deductible. This is especially relevant for businesses operating in construction, manufacturing, or logistics sectors.

5. Utility Bills and Communication Costs

Phone, internet, electricity, water, and gas bills are deductible if they are registered in the business’s name. Invoices must be issued in the company’s name and supported by payment records.

6. Rent and Maintenance Fees

Office rent and maintenance fees are common deductible costs, whether for a physical location or a legally registered virtual office. Valid contracts and invoices are required for deduction.

7. Software and Advertising

Subscription-based software (SaaS), marketing tools, and digital advertisements used for business activities are considered deductible operational costs, as long as they are well-documented.

8. Office Supplies and Equipment

Paper, printers, chairs, desks, and other necessary supplies used in day-to-day operations qualify as deductible expenses. Companies should retain receipts or invoices for each item.

9. Professional Services and Consultancy

Legal, accounting, auditing, and management consulting fees are fully deductible if supported by valid service agreements and invoices.

10. Vehicle-Related Costs

Company-owned or leased vehicles used for business activities may have their purchase, fuel, maintenance, and insurance costs deducted, partially or fully. For passenger vehicles, only a portion of the expenses are deductible under Turkish tax law, depending on engine size and leasing structure.

Also Read; Understanding company types in Turkey

Common Mistakes to Avoid When Deducting Expenses

Companies often mistakenly attempt to deduct non-business-related or undocumented expenses. Common disallowed deductions include:

• Personal meals or groceries,

• Vacation travel,

• Expenses related to a private vehicle used by employees,

• Bills not issued in the company’s name,

• Unreceipted purchases.

Only expenses with direct links to business operations and backed by formal documentation are legally deductible.

Special Considerations for Sole Proprietorships

Sole traders in Türkiye can deduct a variety of operational expenses, such as:

• Utility bills related to their business activity,

• Rent and maintenance costs for home offices (with proper documentation),

• Fuel, parking, and car insurance (up to 70% if the vehicle is used for business),

• Health insurance premiums and healthcare costs,

• Legal or financial consulting fees.

The deductions result in a lower taxable income, ultimately reducing personal income tax obligations.