Short answer: A US company can often contract with a genuinely independent software developer based in Türkiye without first incorporating a Turkish subsidiary. That does not mean every engagement is free of employment, payroll, social-security or permanent establishment risk.
Four common hiring models
Independent Turkish contractor
A Turkish sole proprietor or company may provide development services and issue invoices under a commercial contract. The US customer should verify that the actual relationship supports independent contracting, rather than treating an employment relationship as a services agreement.
Direct employment
Employing a Türkiye-based individual can trigger Turkish employment, payroll, social security and registration questions. The correct treatment depends on the facts and any applicable bilateral arrangements.
Employer of record (EOR)
An EOR can administer local employment but is not a blanket exemption from corporate-tax or PE exposure for the overseas business. Assess the worker’s activities and authority separately.
Turkish subsidiary
A subsidiary may be appropriate for a larger engineering team with local management, recurring expenditure and operational responsibilities. It creates its own corporate, payroll, VAT and reporting obligations.
When does hiring a developer create permanent establishment risk?
The analysis starts with the applicable US–Türkiye income tax treaty and Turkish law. Key questions include whether the foreign company has a fixed place of business at its disposal in Türkiye, whether a person habitually exercises relevant contracting authority, and what functions the individual actually performs. A home office is not automatically the foreign company’s place of business, and a contractor label is not an automatic safe harbor.
Five practical questions before signing
- Does the developer write code only, or also negotiate customer contracts and direct commercial operations?
- Who determines working hours, methods and priorities?
- Does the individual have authority to bind the US company?
- Is a Turkish office or workspace required or provided by the company?
- Who owns the work product and how are intellectual-property rights transferred?
Payments, invoices and taxes
Contracting directly with a Turkish supplier is different from operating through a Turkish entity that buys services from developers in other countries. For the latter, withholding tax, reverse-charge VAT, treaty relief and documentation require separate analysis. Do not assume that an export-related deduction on the Turkish supplier’s income resolves these inbound payment questions.
Which structure is best?
For a limited and genuinely independent engagement, direct contracting may be administratively simpler. For an integrated team under day-to-day direction, employment or a local entity may be more appropriate. The tax result depends on substance, not merely the cheapest contract format.
Get a Turkish hiring tax assessment
Systems CPA reviews contractor classification, Turkish permanent establishment exposure and implementation options for overseas technology companies. Request a CPA-led Turkey Hiring Tax Risk Assessment.
This article is general information, not individualized tax or legal advice. Verify current law and applicable treaty provisions before implementation.
Does your Turkey-based team serve customers in Turkey?
Support, customer success or renewals delivered to Turkish customers raise Turkish VAT on contractor invoices and a sharper PE question. Read Should a Turkish contractor charge VAT?, Customer success managers in Turkey: PE risk, or request the Turkey Tax Risk Review for foreign companies serving Turkish customers →
Turn Turkey compliance into certainty
SYSTEMS CPA supports foreign-owned companies with company formation, accounting, tax compliance and payroll in Turkey — one accountable local partner. Reviewed by Evren Özmen, SMMM (Certified Public Accountant), TÜRMOB Reg. No. 35675.
