Turkey Introduces 20-Year Tax Break for Foreign Income

Turkey’s Parliament has approved a significant tax package designed to attract wealthy individuals and offshore investors. Starting in 2026, eligible new residents can benefit from a 20-year tax holiday on foreign-source income and a reduced inheritance tax rate of 1%. This initiative aims to position Turkey as a competitive destination for international wealth by offering long-term financial incentives.

The new tax structure specifically targets individuals who have not been Turkish tax residents for the past three years. This means the benefits are primarily for those looking to establish or re-establish tax residency in Turkey with income generated outside the country. Income earned from Turkish sources will continue to be subject to standard Turkish taxation rules.

This move places Turkey among countries actively using tax policy to draw in globally mobile capital. The package is structured to appeal to individuals with diverse offshore earnings or investments who wish to relocate while minimizing their tax obligations on non-Turkish income. The combination of a lengthy tax break and a low inheritance tax rate creates a compelling offer for long-term financial and estate planning.

Key Features of the Turkish Tax Package

The approved tax package includes two main components: a substantial tax holiday on foreign income and a favorable inheritance tax rate. These features are designed to provide a stable and attractive financial environment for qualifying new residents.

20-Year Tax Holiday on Foreign-Source Income

Eligible individuals will receive a 20-year exemption from Turkish taxes on income and capital gains earned from foreign sources. This means that earnings from investments, businesses, or other activities conducted outside of Turkey will not be subject to Turkish income tax for two decades. However, any income generated within Turkey will still be taxed according to local regulations.

This distinction between foreign and domestic income is central to the proposal. It makes the incentive particularly beneficial for individuals whose financial lives are primarily based outside of Turkey, such as those with international investment portfolios or offshore business interests. The long duration of the tax holiday offers a significant period of tax certainty for financial planning.

1% Inheritance and Gift Tax Rate

In addition to the income tax benefits, the package also introduces a low inheritance and gift tax rate of 1% for qualifying individuals. This provision addresses estate planning and wealth transfer, which are important considerations for individuals relocating with substantial assets. A reduced rate on inheritances and gifts can make Turkey a more attractive location for families looking to manage their estates across generations.

This dual approach, focusing on both annual income and long-term wealth transfer, aims to provide a comprehensive incentive for relocation. It acknowledges that financial decisions for internationally mobile individuals often involve a mix of income generation, investment growth, and legacy planning.

Eligibility and Target Audience

The tax incentives are not universally available to all residents. Eligibility is specifically tied to an individual’s recent tax residency history. The package is designed for individuals who have not been tax residents in Turkey for the past three years.

This three-year lookback period means the incentive is aimed at attracting new residents or those returning to Turkey after an extended period abroad. It rewards a change in tax residence and targets newcomers rather than providing a blanket tax holiday for everyone already living in Turkey. The focus on individuals with foreign-source income and capital gains suggests that the primary beneficiaries will be globally mobile households and investors whose wealth is derived from international activities.

Implications for International Investors

The Turkish tax package is poised to influence decisions for international investors and globally mobile individuals. By offering a 20-year tax break on foreign income and a 1% inheritance tax, Turkey is making a strong bid to attract wealth. This could lead to increased foreign investment and a larger population of high-net-worth individuals residing in the country.

However, it is important for potential applicants to understand that this Turkish exemption does not necessarily mean a global tax exemption. Individuals who are citizens of countries that tax their citizens on worldwide income, such as the United States, will still be subject to their home country’s tax laws. Therefore, a move to Turkey would not eliminate their tax obligations in their country of origin, even if Turkey exempts their foreign-source income. Careful tax planning with advisors familiar with both Turkish and home-country tax laws will be essential.