Turkey: 20-year tax exemption for newcomers - both an opportunity and a pitfall

The announcement of 24 April 2026

On 24 April 2026, Turkish President Recep Tayyip Erdoğan announced his intention to „Türkiye Century Strong Centre for Investment Program“ announced a far-reaching tax package at the Dolmabahçe Labour Palace in Istanbul. The package of measures is to be submitted to parliament for a vote shortly - an exact date was not given. It is therefore still a legislative project; however, the political will has been clearly articulated.

The most important measure for international newcomers: Anyone who settles in Turkey and has not been a Turkish tax resident in the past three years is to be exempt from Turkish income tax on foreign income and capital gains for 20 years. Only income earned domestically is to be subject to Turkish taxation.

Planned key points of the Turkish tax package (status: announcement 24/04/2026, not yet in force):

• 20-year tax exemption on foreign income and capital gains for newcomers without Turkish tax residency in the previous 3 years
• Inheritance and gift tax flat rate 1 % (previously staggered up to 30 %)
• Corporate tax rate for manufacturing exporters: reduction to 9 % (previously 25 %); other exporters: 14 %
• Full tax exemption for companies in the Istanbul Finance Centre (IFM)
• Varlık Barışı: New asset amnesty programme for the repatriation of capital held abroad at reduced tax rates

Press reviews - today's Stuttgarter Zeitung also reports

„The Gulf states have lost their appeal due to the Iran war. Istanbul is now filling this gap.“ - Stuttgarter Zeitung, 29 April 2026

The Stuttgarter Zeitung reports in detail on the package today. Finance Minister Şimşek is aiming for a financial centre on a par with Singapore and Hong Kong. The announcement coincides with reports of possible early elections in November 2027 - against a backdrop of around 31 % inflation and high youth unemployment.

Classification in international comparison

The project is remarkably aggressive in its dimensions. The duration of 20 years clearly exceeds all European comparative regimes.

Excursus: Northern Cyprus (TRNC) vs. Turkey

Until now, the Turkish Republic of Northern Cyprus (TRNC) has often been an attractive alternative for many expatriates who favoured a non-EU country as their new tax domicile. Now that the announced Turkish tax reforms have come into force, Turkey is likely to be the more interesting option from a tax perspective in future. This is mainly due to the fact that there is no double taxation agreement (DTA) with Germany: The TRNZ is only recognised internationally by Turkey. There is no DTA with Germany - neither the DTA between Germany and Cyprus nor a separate agreement. The taxation of German source income (§§ 49 EStG and 2 AStG, see below), which is also relevant after the departure, therefore applies without restriction and without any limitation under treaty law.

What does this mean for German travellers - and why should they be careful?

The following German tax risks apply both to an emigration to Turkey and - in an aggravated form, as no DTA applies - to an emigration to Northern Cyprus.

1. exit taxation

Anyone who holds a stake of at least 1 % in a corporation in Germany and has been subject to unlimited tax liability for at least seven of the last twelve years triggers a notional capital gains tax (Section 6 AStG) on all hidden reserves in the shareholding upon departure. As neither Turkey nor Northern Cyprus are EU/EEA states, no relief provisions apply; the tax is payable immediately or in seven annual instalments - usually against security. In addition, sole traders and partnerships may also be subject to so-called unbundling taxation, which leads to comparable tax consequences.

2. limited tax liability on German source income in accordance with § 49 EStG

The departure does not end the German tax liability on domestic income. Rental income from German real estate, dividends from German companies, profits from the sale of domestic real estate and remuneration for activities carried out in Germany remain taxable in Germany in accordance with Section 49 of the German Income Tax Act (EStG) - regardless of whether the destination state grants a tax exemption.

When moving to Turkey, the DTA between Germany and Turkey partially restricts the German right to tax withholding income. When moving to Northern Cyprus, on the other hand, there is no DTA at all, meaning that the German right of taxation in accordance with Section 49 EStG without restriction and without limitation under treaty law applies.

3. extended limited tax liability in accordance with § 2 AStG when moving to low-tax countries

§ Section 2 of the AStG applies if the person moving away, who is a German national, (i) has been subject to unlimited tax liability in Germany for at least five years in the ten years prior to moving away, (ii) has moved to an Low-tax country and (iii) retains significant economic interests in Germany. Both Turkey (planned 0 % taxation of foreign income) and Northern Cyprus (informal full exemption) fulfil the low tax threshold of Section 2 AStG. As a result, all income that is not foreign income will remain taxable for up to Ten years after moving away are subject to German taxation and can often maintain quasi-full taxation in Germany.

Important note: The Turkish tax package is not yet law. The tax impact for Germans depends on the final structure, the DTA categorisation and the taxation waiver vs. sovereignty. An individual tax analysis is essential before any planning considerations are made.

4. actual abandonment of domicile and habitual residence

In Germany, moving away requires the abandonment of residence (no power of disposal over domestic dwellings) and so-called habitual residence (stay < 6 months in Germany).

Conclusion and recommendation for action

The Turkish tax plans from April 2026 are a serious signal. For internationally positioned entrepreneurs and investors, this means that Turkey is entering the circle of attractive countries for tax purposes and will certainly be frequently included in the corresponding selection process in future.

For German expatriates, the following applies in any case: The German limited tax liability pursuant to Section 49 EStG and the extended limited tax liability pursuant to Section 2 AStG apply in full. This means that German tax declaration obligations are still required even after the departure. A targeted structuring of the assets before and after the departure can be helpful. An individual analysis of both sides of tax law - German and the destination country - is essential.

The TAXGATE International Tax Team will be pleased to advise you on relocation, exit taxation (§ 6 AStG), extended limited tax liability (§ 2 AStG), limited tax liability on source income (§ 49 EStG) as well as on tax structures in Cyprus (North and South) and Turkey. Our Partner Ilkan Dadusut, tax consultant, can also advise you in his native Turkish.

Legal notice: This article is for general information purposes only and reflects the legal status at the time of publication. It does not constitute tax or legal advice and does not replace individual counselling. Despite careful research, TAXGATE assumes no liability for the completeness, accuracy or timeliness of the information. Tax conditions may change at short notice. The legal situation applicable at the time of individual planning is always decisive.