Foreign Companies Serving Turkish Customers: VAT, Permanent Establishment & Contractor Risk
For US, UK and EU companies that sell to customers in Turkey and support them through a contractor, remote employee or EOR worker based in Istanbul — technical support, customer success, onboarding or contract renewals — without a Turkish company.
The short version
Serving Turkish customers through one person in Turkey does not automatically create Turkish corporate tax — but it often creates Turkish VAT. Support delivered to customers in Turkey usually fails the “benefit abroad” test of the VAT export exemption (KDV Law Art. 11/1-a and 12/2), so the contractor’s invoice should normally carry 20% Turkish VAT. Corporate tax exposure depends on two different tests — a fixed place of business and a dependent agent — and on what the person actually does, not on the job title.
Key facts at a glance
| Question | Position (October 2026) | Legal basis |
|---|---|---|
| Standard Turkish VAT rate on services | 20% | VAT Law No. 3065 Art. 28 and Presidential Decision |
| When a Turkish service is a VAT-exempt export | Customer abroad and benefit used abroad — the service must relate to the customer’s business abroad and have no connection with its activities in Turkey | VAT Law Art. 11/1-a, 12/2; VAT General Communiqué II.A.2.1 |
| Contractor supports your customers located in Turkey | Benefit is normally in Turkey → 20% VAT, not exempt | Same; consistent GİB ruling practice |
| You sell SaaS to Turkish companies | Turkish business customer self-assesses VAT (reverse charge, VAT return No. 2) | VAT Law Art. 9/1 |
| You sell electronic services to Turkish consumers | Foreign provider must register for special (simplified) VAT and file monthly | VAT Law Art. 9 (electronic services to non-taxpayers) |
| Domestic definition of taxable presence | Place of business (işyeri) or permanent representative (daimi temsilci) — broader than most treaties | Tax Procedure Law No. 213 Art. 156–157; Corporate Tax Law No. 5520 Art. 3 |
| US–Turkey treaty PE tests | Fixed place of business; dependent agent who habitually exercises authority to conclude contracts; no separate services-PE clause; construction > 6 months | US–Turkey Income Tax Treaty Art. 5 |
| Home office as a fixed place PE | Under 50% of working time over 12 months is generally not a place of business; customer interaction can supply the “commercial reason” | OECD Model Commentary, 2025 Update (19 Nov 2025) |
| Corporate tax if a PE exists | 25% on profit attributable to the Turkish PE | Corporate Tax Law Art. 3, 32 |
| Turkish customers paying for software | Customers frequently withhold tax treating the fee as a royalty; treaty rate may reduce it | Corporate Tax Law Art. 30; treaty Art. 12 |
- Who this review is for
- The four questions CFOs and counsel ask
- VAT: exempt service export vs 20% domestic service
- Permanent establishment: fixed place vs dependent agent
- Contractor vs employee in Turkey
- Contractor vs EOR vs branch vs subsidiary
- Turkey vs EU and UK VAT rules
- Anonymised case analyses
- What happens if…
- What the Turkey Tax Risk Review delivers
- What drives the scope and cost
- FAQ
Who this review is for
The typical client is a US-incorporated SaaS or software company with a growing customer base in Turkey. Rather than opening a Turkish company, it engages one person in Istanbul — as an independent contractor, through an employer of record, or as a remote employee on the US payroll — to handle technical support, customer success, onboarding and, over time, contract renewals and upsells.
The same pattern appears with UK and EU technology businesses, marketplaces and B2B service firms. The arrangement usually starts as an operational convenience. It becomes a tax question when the CFO, external auditor, legal counsel or an acquirer’s due-diligence team asks whether anyone has looked at Turkey.
- CFOs and finance directors who need to know whether a Turkish liability belongs on the balance sheet.
- In-house counsel reviewing the contractor agreement, EOR contract or commercial authority matrix.
- Founders preparing for a funding round or sale where Turkish exposure will be asked about.
- Companies deciding whether this is the moment to move from a contractor to an EOR or a Turkish subsidiary.
The four questions CFOs and counsel ask
Does a contractor supporting our Turkish customers create Turkish tax for us?
Should the contractor’s invoice to us include Turkish VAT?
If our Turkey-based person manages renewals, does that create a permanent establishment?
Can we keep running this operation without a Turkish company?
VAT: exempt service export vs 20% domestic service
Turkey does not use the EU-style “B2B services are taxed where the customer is established” rule. Under VAT Law Art. 11/1-a and Art. 12/2, a service performed in Turkey is a VAT-exempt export only if both conditions hold: the service is rendered to a customer abroad, and the benefit of the service is used abroad. The VAT General Communiqué (section II.A.2.1) adds the decisive sentence: the service must relate to the foreign customer’s business, transactions and activities abroad and have no connection with its activities in Turkey. It also lists services rendered to foreign firms in connection with goods or services those firms supply into Turkey — consultancy, intermediation, customer-finding, market research, supervision — as outside the exemption.
That is why the same contractor, invoicing the same US company in USD, can be exempt for one part of the work and taxable for another.
| What the Turkey-based contractor does | Where the benefit is used | Typical VAT treatment |
|---|---|---|
| Builds product features used by all customers worldwide | Abroad (the US company’s global product) | Export — exempt |
| Global tier-2 support from Turkey for non-Turkish customers | Abroad | Export — exempt |
| Technical support, onboarding or success for customers in Turkey | Turkey (the US company’s Turkish sales) | 20% VAT |
| Finding customers, demos, market research for the Turkish market | Turkey | 20% VAT |
| Mixed: Turkish and international customers | Split | Split invoices or document the allocation |
Where your company sells into Turkey, VAT also applies on your side: Turkish business customers self-assess VAT on your SaaS fees under the reverse-charge rule (VAT Law Art. 9/1), and electronic services sold to Turkish consumers require a special VAT registration. See VAT registration in Turkey for non-resident companies and the Digital Services Tax guide.
Permanent establishment: fixed place vs dependent agent
Corporate tax exposure is decided twice — first under Turkish domestic law, then under the treaty, which can only narrow the domestic result. Turkish law taxes a non-resident company on business profits earned through a place of business (Tax Procedure Law Art. 156) or a permanent representative (Art. 157) in Turkey (Corporate Tax Law Art. 3). A permanent representative is broadly a person who works continuously in Turkey on behalf of and for the account of a business — no signing authority is needed. The treaty test is narrower.
| Test | Turkish domestic law | US–Turkey treaty (Art. 5) | What we look at |
|---|---|---|---|
| Fixed place PE | Any place used for or allocated to the business (Art. 156) | Fixed place through which the business is wholly or partly carried on | Whose decision the home office is, share of working time, customer meetings at home or in client premises, co-working desks paid by you |
| Agent PE | Person continuously acting on behalf of the business (Art. 157) | Dependent agent who habitually exercises authority to conclude contracts | Who sets prices, who agrees discounts, whether HQ changes what Turkey negotiates, e-sign routing |
| Services PE | Not a separate category | No separate services-PE clause | Some other Turkish treaties do contain one (often 183 days in a 12-month period) — check yours |
| Preparatory or auxiliary exception | Not codified | Activities of a preparatory or auxiliary character are excluded | Customer support for your core product is rarely “auxiliary” |
The OECD’s 2025 Commentary update on home offices is directly relevant: where someone works from home less than 50% of their time over a 12-month period, the home is generally not a place of business of the employer; above that, the question is whether there is a commercial reason for the presence in that country — and interacting with local customers is the example the OECD gives. A customer success manager in Istanbul serving Turkish accounts full time is exactly that case. The Commentary is persuasive guidance; a Turkish tax inspector starts from Articles 156 and 157.
| Role of the Turkey-based person | PE risk | Main reason |
|---|---|---|
| Engineer building the global product | Low | No Turkish customers, no commercial authority |
| Technical support for Turkish customers | Low–medium | Customer-facing; fixed-place question if full-time from home |
| Customer success with expansion targets | Medium | Commercial reason for presence; drifts into selling |
| Negotiates renewals, discounts or pricing | High | Habitual conclusion of contracts in substance |
| Signs, accepts orders or issues quotes HQ does not review | Very high | Dependent agent under both domestic law and treaty |
For the developer-only version of this question see Does hiring a developer in Turkey create a PE?, and for residency and management risk see Permanent establishment & corporate tax residency risk in Turkey.
Contractor vs employee in Turkey
The third exposure is employment status. Turkish Labour Law No. 4857 Art. 8 defines an employment contract by dependency: work performed under the employer’s direction in return for pay. A full-time, exclusive “contractor” with set hours, a company email signature, a manager and a performance review looks like an employee to a labour court and to the Social Security Institution (SGK, Law No. 5510), whatever the contract says. A foreign company with no Turkish workplace cannot register as an employer with SGK, so the realistic routes are an EOR, a Turkish entity, or a genuinely independent contractor with their own business, several clients and control over how the work is done.
Reclassification risk travels with the PE question: the more the person is integrated into your organisation, the more their home and their actions are attributed to you. Practical guidance on paying Turkish contractors is in How to pay contractors in Turkey, and on remote employees in Remote employee in Turkey: tax, payroll, SGK & PE risk.
Contractor vs EOR vs branch vs subsidiary
| Independent contractor | Employer of record | Branch | Subsidiary (Ltd./A.Ş.) | |
|---|---|---|---|---|
| Employment status risk | Highest if exclusive and full-time | Solved — EOR is the legal employer | Solved — branch employs | Solved — subsidiary employs |
| PE risk | Depends on role and authority | Not solved — EOR does not remove PE risk | PE exists by design, taxed on attributable profit | Contained in a Turkish taxpayer; agent-PE risk managed by service agreement |
| VAT on the local cost | Contractor invoices VAT if benefit in Turkey; not recoverable by you | EOR invoices with VAT; usually not recoverable by you | Branch is a VAT taxpayer and can deduct | Subsidiary is a VAT taxpayer and can deduct |
| Can contract with Turkish customers | No (contracts stay with foreign company) | No | Yes | Yes |
| Typical fit | Genuine freelancer, limited hours | 1–5 people, support and success roles | Project or sales presence | Team of 5+, local selling, long-term |
A liaison office is not an option for this pattern: it is barred from commercial activity and cannot serve or invoice customers. The trade-offs are covered in Branch vs subsidiary vs liaison office and Employer of record vs own entity in Turkey.
Turkey vs EU and UK VAT rules: why the same contract is taxed differently
| Jurisdiction of the contractor | B2B service invoiced to a US company | Does the location of the US company’s end-customers matter? |
|---|---|---|
| Turkey | Exempt only if customer abroad and benefit used abroad (VAT Law Art. 11/1-a, 12/2) | Yes — support for Turkish customers is taxable |
| EU member states (e.g. Poland, Portugal, Romania) | General B2B rule: taxed where the customer is established (VAT Directive 2006/112/EC Art. 44) — outside local VAT | Generally no |
| United Kingdom | General B2B rule: supplied where the customer belongs (VATA 1994 s.7A) — outside UK VAT | Generally no |
| United States | No federal VAT | — |
Finance teams used to EU or UK contractors assume “invoice to a foreign company = no local VAT”. In Turkey that assumption fails precisely where the contractor serves the Turkish market. The PE analysis is similar across countries; the VAT analysis is not.
Anonymised case analyses
Facts. Delaware SaaS company, around 40 Turkish B2B customers, one Istanbul-based customer success manager engaged as an independent contractor for three years. She ran quarterly reviews, agreed renewal discounts of up to 15% on calls, and sent renewal order forms that the US VP Sales signed without changes. Her invoices to the US company were VAT-free as a “service export”.
The obvious answer. “She is a contractor and does not sign anything, so there is no PE and no VAT.”
Why it failed. On VAT, her work served the US company’s Turkish customers — the benefit was in Turkey, so 20% VAT was due on three years of invoices. On PE, she was negotiating every material term of the renewals; headquarters’ signature was a formality, which is the fact pattern for a dependent agent. She also worked exclusively and full-time for one client.
Structure adopted. Pricing authority moved to a US deal desk with a written approval matrix; renewals routed through e-signature from the US with her role limited to account health and adoption; her role moved to an EOR; VAT on future invoices charged at 20% and the historical position corrected with the contractor under a negotiated cost share; a Turkish subsidiary planned for the second hire.
Facts. UK B2B software company; Turkish contractor spent about 70% of his time on global product engineering and 30% on support for Turkish customers.
The obvious answer. “UK client, so the invoice is outside Turkish VAT — like our Polish contractors.”
Why it failed. Turkey applies the benefit test, not the EU place-of-supply rule. The Turkish-customer support portion was taxable.
Structure adopted. Two statements of work and two invoice lines — engineering as an exempt export, Turkish support with 20% VAT — supported by ticket data showing the split. PE risk was low: no commercial authority and less than half his time was customer-facing.
Facts. German machinery software provider; four Turkey-based staff through an EOR handling sales support, implementation and renewals for Turkish distributors.
The obvious answer. “The EOR is the employer, so we have no Turkish exposure.”
Why it failed. An EOR solves employment law, not PE. A team negotiating with Turkish distributors on the German company’s behalf is a dependent-agent fact pattern, and the non-recoverable VAT on the EOR invoices had become material.
Structure adopted. A Turkish limited company employing the team under a cost-plus service agreement with the German parent, transfer-pricing documentation, and VAT deduction inside the Turkish entity — see transfer pricing in Turkey.
What happens if…
What happens if the tax office decides the contractor’s invoices should have included VAT?
The contractor is assessed the VAT, a tax loss penalty under Tax Procedure Law Art. 344 and late-payment interest. Contractually, most service agreements make the client bear VAT, so the contractor will seek the VAT from you. You cannot deduct it without a Turkish VAT number, so it becomes a cost.
What happens if a PE is found for past years?
The profit attributable to the Turkish PE is assessed to 25% corporate tax with a tax loss penalty and late-payment interest, and the company must register, keep Turkish books and file returns. The attributable profit is usually modest for a support function — but the penalties and the compliance obligations are not.
What happens if the contractor is reclassified as an employee?
Employee social security contributions, severance and notice entitlements under Labour Law 4857 can be claimed, typically in a labour court case brought by the worker at the end of the relationship. The reclassification also strengthens a PE argument because the person becomes your employee in Turkey.
What happens if we do nothing until we open a Turkish company?
Opening the subsidiary does not cure the past. Due diligence on a funding round or acquisition will ask about prior Turkish activity, and an acquirer will price the historical VAT and PE exposure as a specific indemnity. It is cheaper to quantify and correct the position before the question is asked.
What the Turkey Tax Risk Review delivers
- Fact finding: corporate structure, treaty country, customer base in Turkey, roles, contracts, authority matrix, CRM and e-sign routing.
- VAT position: written view on whether each workstream is an exempt export or a 20% domestic service, and the correct invoice wording.
- PE map by role: fixed-place and dependent-agent analysis under Turkish law and your treaty, including the OECD 2025 home-office tests.
- Employment status: contractor vs employee indicators and the EOR or entity threshold.
- Historical exposure: where the past position is wrong, an estimate of VAT, corporate tax, penalties and interest, and the correction route (including voluntary disclosure).
- Roadmap: contract and role-description redlines, approval-matrix changes and, where the facts justify it, a plan to move to a branch or subsidiary.
The deliverable is a CPA-signed written tax opinion your auditor, counsel or acquirer can rely on, plus a one-page action list for the operational team.
What drives the scope and cost
Fees are confirmed privately after the scoping call. What changes the scope:
- Number of people and roles in Turkey, and whether any of them are customer-facing or commercial.
- Treaty country of the foreign company (US, UK, Germany and others differ on PE wording).
- Number of contracts and statements of work to review.
- Whether historical exposure needs to be quantified across several years.
- Whether an advance ruling (özelge) application to the tax administration is advisable.
- Whether the review feeds a transaction timetable (funding, acquisition, audit sign-off).
Frequently asked questions
Does a foreign company need a Turkish entity to have customers in Turkey?
No. A foreign company can sell to Turkish customers from abroad without a Turkish entity. Turkish business customers self-assess VAT on imported services, and consumer sales of electronic services require a special VAT registration. An entity becomes necessary when people in Turkey sell, negotiate or form a team.
Can a Turkish contractor invoice a US company without VAT?
Yes, but only if the service is a genuine export: the customer is abroad and the benefit is used abroad. Work on a global product usually qualifies. Support, onboarding or customer success for the US company’s customers in Turkey usually does not, so 20% Turkish VAT applies.
Does a home office in Turkey create a permanent establishment?
Not automatically. Under the OECD 2025 Commentary, working from home less than 50% of the time over 12 months is generally not a place of business; above that, a commercial reason such as serving local customers points toward a PE. Turkish domestic law (Tax Procedure Law Art. 156) is applied first.
Does a customer success manager in Turkey create a PE for a US company?
It depends on authority. Account health and adoption work alone is lower risk. If the manager negotiates renewals, agrees discounts or prepares contracts headquarters signs unchanged, that can amount to habitually concluding contracts — a dependent-agent PE under the US–Turkey treaty.
Does an employer of record remove permanent establishment risk in Turkey?
No. An EOR becomes the legal employer and solves employment and payroll compliance, but the worker still acts for your business. If the worker negotiates contracts for you or works from a place at your disposal, PE risk remains with your company.
Is there a services PE under the US–Turkey tax treaty?
No. The US–Turkey treaty has no separate services-PE clause; its tests are a fixed place of business, a dependent agent with habitually exercised authority to conclude contracts, and construction projects lasting more than six months. Some other Turkish treaties do include a services PE, often 183 days in a 12-month period.
What is the corporate tax rate if a PE exists in Turkey?
The general Turkish corporate tax rate is 25%, applied to the profit attributable to the permanent establishment, together with registration, bookkeeping and filing obligations. Penalties and late-payment interest apply to past periods that were not declared.
How long does a Turkey Tax Risk Review take?
Most reviews run in stages: a scoping call, document and activity review, and a written CPA opinion with a roadmap. The timing depends on the number of roles, contracts and historical years; urgent transaction timetables can be prioritised.
Does your Turkish contractor arrangement create VAT or corporate tax exposure?
We help foreign companies assess Turkish VAT treatment, permanent establishment exposure and contractor arrangements through a CPA-led written tax opinion and a practical compliance roadmap — Tax Certainty before the tax office asks.
To scope the review, send us five facts: country of incorporation · number of customers in Turkey · what the Turkey-based people do day to day · the current contract model · whether anyone in Turkey negotiates price or renewals.
Request a Turkey Tax Risk Review →WhatsApp a CPA+90 216 352 29 61
Related reading
- Should a Turkish contractor charge VAT to a US company? When the export exemption applies
- Customer success managers in Turkey: tax and PE risk for US companies
- Turkey Remote Workforce & Permanent Establishment Risk Review
- Remote employee in Turkey: tax, payroll, SGK & PE risk
- Permanent establishment & corporate tax residency risk in Turkey
- Can a US company hire developers in Turkey without a legal entity?
Primary sources
- VAT Law No. 3065 — Art. 1, 9, 11/1-a, 12/2, 28
- GİB — VAT General Implementation Communiqué, section II.A.2 (service export) and published rulings (özelge)
- Tax Procedure Law No. 213 — Art. 156, 157, 344
- Corporate Tax Law No. 5520 — Art. 3, 30, 32
- Income Tax Law No. 193 — Art. 89/13
- Labour Law No. 4857 — Art. 8 · Social Security Law No. 5510
- Official Gazette (Resmî Gazete) — treaty texts and Presidential Decisions
- OECD Model Tax Convention 2025 Update (19 Nov 2025) — home-office PE guidance, summary
This page is general information on Turkish law as of October 2026 and is not a tax opinion on your facts. Treaty wording, rulings and rates change; a written opinion is issued only after a review of your contracts and activities.
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