Describing a payment as a royalty fee is not enough to qualify for the income tax exemption. Article 18 of the Income Tax Law (Gelir Vergisi Kanunu, GVK) covers specific works, specific right holders and specific ways of earning income. In addition, the annual earnings ceiling, withholding tax (stopaj), value added tax (VAT) and the documentation system are each checked separately. For 2026 earnings the relevant ceiling is 5,300,000 Turkish lira (TL); for 2025 earnings it is 4,300,000 TL. Exceeding the ceiling does not merely subject the excess portion to tax; the exemption may be lost for all of the in-scope earnings of the entire year. [1]
Legal nature of the practice and how it differs from other obligations
The royalty income exemption does not arise merely because the contract says “royalty.” The work and the right holder must fall within the statutory scope. The income tax exemption on the one hand, and the withholding tax and value added tax obligations on the other, are governed separately.
The work requirement and the person requirement apply together
Authors, translators, painters, sculptors, calligraphers, composers, computer programmers, inventors and their statutory heirs are assessed within the relevant scope. Income such as that from the publication, sale, assignment of rights in, or lease of poems, articles, books, scientific research, software, photographs, films, screenplays and similar works listed in the article is examined.
Not every design, consulting or technical service is automatically earnings from a work. The nature of the work under the Law on Intellectual and Artistic Works and the scope of Article 18 of the GVK are examined together. Where a work is subject to mandatory recording and registration, that step must be completed; a mandatory registration requirement is not invented for every work that is subject only to optional registration. On the other hand, obtaining a registration certificate does not bring every work within the tax exemption.
Salaried work and a person who acquires the right later
Compensation for work performed as an employee is wages, which differ from independent income from a work. A software developer’s salary and the same developer’s assignment of the rights in suitable software created independently of the job may not be the same type of income. The actual working relationship and the relationship of right ownership are examined, rather than the title of the contract.
Where a person other than the author or the statutory heir assigns a copyright that they purchased, this may be assessed as a capital gain (değer artışı); where they lease it, it may be assessed as income from immovable capital (gayrimenkul sermaye iradı). The capacity of the right holder is therefore critically important. The characterization of transactions within a commercial organization as commercial income is also reserved separately.
Does the ceiling apply to gross receipts or to earnings?
The annual ceiling is assessed on the earnings determined by deducting eligible expenses from the amounts received from in-scope activities. In-scope earnings from more than one work or payer are tracked together. A separate 5,300,000 TL exemption does not arise for each contract.
In 2026, if there are 6,000,000 TL in gross receipts and 1,000,000 TL in documented eligible expenses, then, assuming the other conditions are met, earnings of 5,000,000 TL remain below the ceiling. If the expenses are only 400,000 TL, earnings of 5,600,000 TL exceed the ceiling; not only the 300,000 TL excess but the entire relevant earnings are included in the annual tax return. Each year is assessed separately; exceeding the ceiling in one year does not automatically block the following year.
An income tax exemption for royalty income does not by itself remove withholding tax
Payers listed in Article 94 of the GVK withhold income tax at 17% on in-scope royalty payments. This should not be confused with the 20% rate applied to other self-employment activities. The fact that the exemption cannot be used because the annual ceiling will be exceeded does not by itself change this withholding regime during the year.
The withholding on earnings left outside the return under the exemption is final tax; filing a tax return for other income does not by itself require this income to be consolidated in the return. If the ceiling is exceeded and a return is filed, the relevant withholdings are credited against the calculated tax; the route for refund of any excess withholding is assessed with its own documents and time limits. It should not be assumed that the annual return filing for this particular activity automatically creates provisional tax or wage/rent withholding responsibility; the guide’s special provision is read together with the other activities.
The income tax exemption is not a value added tax exemption
Whether the activity is occasional or continuous matters for VAT. A continuous activity involving works may be subject to VAT. For activities whose transactions consist solely of matters within the scope of Article 18 of the GVK and are all made to the recipients listed in Article 94 of the GVK, a special arrangement may be considered, in which, on prior notification, the VAT is declared by the recipient as the liable party.
The sale of the same works to consumers as well, or the existence of another activity, may change the conditions of this special method. A person who must declare VAT personally cannot neglect the VAT obligation by arguing that the recipient withholds income tax. The gross transaction amount, which includes the income tax withholding, and the VAT are calculated separately; VAT is not added to the income tax withholding base.
Books and records, documents and non-resident taxpayers
Whether the activity is occasional, the status of the recipients and the existence of another professional activity affect the bookkeeping and documentation duties. The requirement for the Defter Beyan system and for the electronic self-employment receipt (e-SMM) is determined on the basis of the specific activity. For a work obtained from a person who is not obliged to issue a receipt, the recipient sets up the expense voucher (gider pusulası) arrangement; the payment and the work contract are retained.
A non-resident individual taxpayer may also benefit from the work income exemption if the conditions are met. The exemption from annual return filing for self-employment earnings fully taxed in Türkiye by withholding is assessed separately under Article 86 of the GVK; the consequence of exceeding the ceiling for a resident taxpayer does not carry over unchanged. The relevant double taxation treaty and the classification of the income are also examined.
The file should contain the work sample and its nature, right ownership, registration where required, the assignment/lease contract, the gross receipts and expense calculation, the status of the payer and the withholding documents together. Basing the exemption claim solely on the word “royalty” does not satisfy these four separate checks.
The decision to be made before the transaction and the file to be prepared
Document the nature of the work, the owner of the right and the contract from which the income arises. Track the annual earnings ceiling across all relevant income; bear in mind that if the ceiling is exceeded, not only the excess amount but the entire applicable regime must be reassessed.