Having no money in a business bank account does not mean that the business has no taxable income. Business income is determined by recording sales and expenses in the period to which they legally belong. In the annual return, the result of the balance sheet or operating account, expenses not accepted for deduction, exemptions and prior-year losses are assessed together. This article concerns the business income of individuals; the corporate tax of capital companies is a separate subject.
Legal nature of the practice and how it differs from other obligations
Taxation of business income is not based only on the difference between money coming into and going out of a bank account. The period in which income and expenses legally arise, inventories, receivables, payables and expenses not accepted under the law can change the result.
Nature of the activity and the taxation method
Commercial organization, continuity and the aim of earning income matter in assessing an activity. Selling over the internet does not mean that the activity is outside the tax. Conversely, it is not right to treat every small activity the same way: the tradesperson exemption (esnaf muaflığı), the income exemption under the simplified regime (basit usul kazanç istisnası) and the special exemptions for internet activity each have their own conditions.
Merchants taxed under the regular regime (gerçek usul) determine income on the basis of a balance sheet (bilanço) or an operating account (işletme hesabı). Whether a person must keep books of a given class and whether the income is taxable are separate questions. Changes of regime and the electronic ledger obligation must be tracked separately from the annual income calculation. [1; Income Tax Law Articles 37–41]
Why does accrual differ from cash collection?
For business income, it matters that the nature and amount of an income or expense are finally established. The fact that a sale price has not yet been collected does not in every case postpone recording the revenue. By contrast, an advance received from a customer whose entitlement has not yet arisen must be assessed separately for its nature. A year-end account cannot be built merely by adding up bank inflows and outflows.
For example, if goods have been delivered and the price is fixed but the customer has postponed payment to the following year, the effect of the receivable on that year's income is assessed. If difficulty in collecting the receivable arises later, the rules on doubtful or worthless receivables apply under separate conditions. Not every uncollected receivable is automatically an expense that can be deducted.
Expenses deductible from business income and expenses not accepted by law
An expense must be connected with obtaining or maintaining the business, must be documented and must comply with legal limits. An owner's personal spending does not become a business expense because it was paid from the business account. A business trip that is combined with a private holiday on the same invoice also requires separation.
For passenger cars, rent, purchase taxes, depreciation and operating expenses are subject to different limits. For 2026, the guide shows a monthly rent expense limit of 46,000 TL; this amount is not the total limit for all expenses relating to a vehicle. For vehicles used in line with their purposes by persons whose activity is vehicle rental or vehicle operation, a separate assessment of scope applies. The importance of the purchase year in relation to the depreciation limit should also be kept in mind.
Tax penalties and other payments not accepted under the law may be added to the tax base even if they are accounting expenses. For this reason, a reconciliation schedule between accounting profit and taxable income is prepared. [1; Income Tax Law Articles 40–41; Tax Procedure Law (Vergi Usul Kanunu) valuation provisions]
Losses, other income and the annual return
A business operator who makes a loss under the regular regime is not thereby released from the annual return obligation. Whether other income is included in this return is examined under its own rules. For example, filing an annual return because of business income does not require reporting certain final-withholding income from movable capital (menkul sermaye iradı) in the return.
For prior-year losses, the five-year period, the correct declaration of losses in the years in which they arose and their sequential use are important. The same loss cannot be used twice, both in the accounting result and as a deduction in the return. Treating an economic loss on the sale of a personal immovable property as a business loss is also incorrect.
Provisional tax does not replace the annual tax
Payment of provisional tax (geçici vergi) during the year does not remove the need to file the annual return. Once the annual tax has been calculated, the offset conditions are examined. The offset and collection outcomes of unpaid provisional tax and of the amount paid are not the same. Entries made in the interim periods should be compared with the year-end closing adjustments.
| Year-end item | Check |
|---|---|
| Gross receipts | Distinguishing delivery, accrual, returns and advances |
| Inventory | Count, cost and period-end valuation |
| Expenses | Connection with the business, documents and legal limits |
| Receivables | Collection, litigation or enforcement, and provision conditions |
| Return | Losses, exemptions, deductions and offset of tax paid |
Is a withdrawal of personal money from the business account a separate expense?
No. A business owner's personal withdrawal is not accepted as a business cost. Money put into the business and money taken out of it must be properly separated in the income calculation.
Do all tax obligations end when the business is closed?
The notice of cessation of business, the status of remaining assets, the returns for the final period, and the obligation to keep books and documents are each completed separately. Closing the tax registration does not remove the review and document obligations for earlier transactions. For details, see the article on consequences of failing to produce books and documents.
Who bears business income in a company partnership?
The income of a sole proprietorship is not the same income element as a dividend received from a capital company. When income is assessed as business income, the income of a general partner of a general partnership (kollektif şirket) and of a limited partner of an ordinary limited partnership (adi komandit şirket) is considered, while a dividend distributed to a shareholder of a capital company may be subject to the provisions on income from movable capital (menkul sermaye iradı). A fee received for services provided to a company, or an independent professional fee (bağımsız mesleki ödeme), is also examined according to its own nature. Being a partner in a company does not turn all of a person's receipts into business income.
The conditions of the simplified-regime exemption (basit usul istisnası), the young entrepreneur exemption (genç girişimci istisnası) and the special regimes for internet activities are explained in separate articles. These benefits should not be treated as applying twice to the same gross receipts. In particular, staying under the simplified regime must be reassessed against the 2026 rules for metropolitan areas (büyükşehir) and for activities; low turnover alone is not enough.
Why is the year-end calculation different for construction spread over several years?
Construction and repair work undertaken on a contractual basis for another party and spread over more than one calendar year, within the scope of Article 42 of the Income Tax Law (GVK 42), is subject to a special determination of income. The long duration of a project alone is not sufficient; the construction or repair nature of the work, the contractual relationship and the condition of more than one calendar year are assessed together. A building project carried out on one's own account and then sold does not automatically fall under this regime.
Profit or loss is assessed for the year in which the work is completed. The completion date may be determined differently for works subject to a provisional acceptance procedure (geçici kabul) and for other works. Shared general expenses and depreciation must be allocated between projects and other activities in accordance with the law. Tax withheld from progress payments (hakediş) is tracked in the return and offset file for the year in which the project is completed. Early collection and the legal completion of the work are not the same event.
Matching exempt income with expenses
Exemptions relating to free zones (serbest bölge), technology development zones (teknoloji geliştirme bölgesi), education and care enterprises, ship registers (gemi sicili) or industrial property income may require separate permits, activity, time limits and a separation of income. Operating in one of these sectors does not automatically make all of a business's income exempt. The transfer of expenses attributable to an exempt activity to taxable income from another source must also be checked separately.
The annual working file should keep gross receipts, costs, the allocation of shared expenses, exempt income, prior-year losses and the return deductions on separate lines. This makes visible both which transaction gave rise to the income and at what stage the deduction was applied. A single total deduction line makes it harder to audit items that carry different legal conditions.
Decision and file to prepare before acting
In the year-end review, track sales and collection records separately. Separate personal spending from business expenses; match prior-year losses and provisional tax payments with the relevant periods. If the business is closing, complete the final return and the document obligations separately.