The 2026 100% Earnings Deduction for Game and App Developers: Sole Proprietorship or Limited Company on the Steam, App Store and Google Play Front?

Regulatory note. This article is based on: Article 89/1-13 of the Income Tax Code No. 193 and the mobile application developer withholding exemption sub-paragraph; Articles 10/1-(ğ), 32/(7) and 32/C of the Corporate Tax Code No. 5520; Presidential Decision No. 11257 (Official Gazette 30/4/2026-33239); Articles 7, 8 and 9 of Law No. 7582 (Official Gazette 04.06.2026-33270); sections 10.5, 32.1.2.9.1 and 32.5.6 of Corporate Tax General Communiqué No. 1 as revised by Communiqué No. 23; General Communiqué No. 49 on the Law on Independent Accountancy, Certified Public Accountancy and Sworn-in Certified Public Accountancy (Official Gazette 30/12/2025-33123); the Istanbul Revenue Office ruling E-62030549-125[32/2024]-143061 (30.01.2026); and decisions E:2022/3559 K:2025/4071 (21/10/2025) and E:2023/5968 K:2024/129 (29.01.2024) of the 3rd Chamber of the Council of State. Legislation changes; confirm the current text and the specifics of your own file before acting.

Presidential Decision No. 11257 raised the earnings deduction rate on service exports from 80% to 100%. For a game or app developer that does not mean “everything is solved now, the company’s profit goes to zero”.

The equation turned on three separate fronts at once in 2026: the rate rose to 100%; the domestic minimum corporate tax in CTC Art. 32/C does not let the Art. 10/1-(ğ) deduction be subtracted from the base; and ruling No. 143061 refuses the deduction categorically on mixed sales. Put those three together and, for a taxpayer selling an application on Steam or the App Store, the question “sole proprietorship or limited company” gets a different answer on the tax front than it did in 2025.

1. Why it is being asked now: the rate rose to 100% and the equation got harder

Presidential Decision No. 11257 (Official Gazette 30/4/2026-33239) set the deduction rate to be applied under CTC Art. 10/1-(ğ) and ITC Art. 89/1-(13) at 100%. Under Article 3 of the Decision the change applies to the income and earnings of taxation periods beginning on or after 1/1/2026; it is in force as of the date of publication (30/4/2026).

Two months before that Decision, however, ruling No. 143061 of 30.01.2026 (Istanbul Revenue Office, Revenue Laws Income and Corporate Taxes Group Directorate) gave a categorical refusal to an artificial-intelligence and mobile-game company earning in-app purchase and subscription income on Google Play and the App Store: because the applications were directed at the domestic market as well as abroad, “since they do not meet the condition of relating to software services performed exclusively for customers abroad”, the Art. 10/1-(ğ) deduction cannot be applied.

So the rate went from 80% to 100%, but for many developers the deduction does not work at all; it stays on paper.

The next layer is Law No. 7582. Article 9 of the law published in the Official Gazette of 04.06.2026 added the transit trade (CTC 10/1-i) and qualified service centre (CTC 10/1-j) earnings deductions to the list of deductible items for the domestic minimum corporate tax in CTC Art. 32/C. But 10/1-(ğ) was not added to that list — the service export deduction is still among those that cannot be subtracted from the minimum corporate tax base.

Article 9 lists the sub-paragraphs in CTC Art. 32/C(2)(b) as “(g), (h), (i) and (j)”; (ğ) does not appear. For a limited company that means that, despite the 100% deduction, 10% of the pre-deduction earnings is in fact paid as minimum tax.

In a sole proprietorship, by contrast, the deduction under ITC Art. 89/1-(13) is not blocked by a minimum floor like CTC Art. 32/C — because a sole proprietorship is an income tax payer, and Art. 32/C is a corporate tax institution.

The result: when the rate rose to 100%, a sole proprietorship can reduce its base all the way to zero with the deduction, while a limited company cannot go below the 10% minimum tax except during the first 3 accounting periods (CTC Art. 32/C paragraph 5 — newly commencing companies are not subject to the provision for those three periods).

Before 2026 the dominant tax argument in the sole-proprietorship-versus-limited comparison was the gap between the top brackets of the income tax tariff and the general corporate tax rate, and in those conditions a limited company was usually better. In 2026, Art. 32/C hitting only companies outside their first three accounting periods reversed that balance.

2. The short answer: the deduction works, but on three conditions — and the structure choice favours the sole proprietorship in 2026

A game or app developer has three axes to decide together on the 100% service export earnings deduction in 2026.

First: can the exclusive-benefit-abroad test be met technically (region lock, sales panel, VAT invoice arrangement)? If not, the administrative stance of ruling No. 143061 is risky; the route of dispute is open, but the time and cost of litigation are real.

Second: is the revenue level below or above the repeated Art. 20/B threshold? Below it, a sole proprietorship plus the withholding-based exemption in repeated Art. 20/B is the lightest regime for a mobile application; above it, a sole proprietorship plus the 100% deduction under ITC Art. 89/1-(13) can be better than a limited company, because there is no minimum tax floor on that route.

Third: does the amount of the deduction exceed the annual YMM full certification threshold — TRY 500,000 applied to each exemption and deduction on the return (that is, to the CTC 10/1-ğ / ITC 89/1-13 earnings deduction itself; the definitive 2025 figure, with no “single customer” or “total” distinction, computed at approximately TRY 560,000 for 2026)? If it is exceeded, a full YMM certification report is compulsory, and if it is not submitted within two months of the filing period the deduction is refused.

The short frame: if exclusivity can be achieved technically, the structure choice divides by revenue level; if it cannot, one route is to apportion and file with a reservation for the part directed abroad, a second is to apply a region lock, and a third is to give up on the advice of your adviser. Even where it is achieved with a region lock, that is not yet a formula confirmed by the Revenue Administration; the administration looks at each case on its own facts.

3. The architecture of the deduction: CTC 10/1-(ğ) ↔ ITC 89/1-13, one doctrine through two channels

Article 10/1-(ğ) of the Corporate Tax Code No. 5520 provides that a certain proportion (100% from 2026) of the earnings derived by service businesses operating in the fields of architecture, engineering, design, software, medical reporting, bookkeeping, call centres, product testing, certification, data storage, data processing, data analysis and vocational training areas determined by the Ministry of Finance after taking the views of the relevant ministries — services supplied in Turkey to persons not resident in Turkey and to those whose place of business, registered office and place of management are abroad, and the benefit of which is enjoyed exclusively abroad — is deductible in determining corporate earnings.

The same sub-paragraph contains the rule that “in order to benefit from this deduction the invoice or similar document must be issued in the name of the customer abroad”, and the rule requiring “the whole of it to be transferred to Turkey by the date on which the corporate tax return for the accounting period in which it is derived is due”.

For an income tax payer (a sole proprietorship) the counterpart is ITC Art. 89/1-(13). The wording is identical to CTC 10/1-(ğ); the list of services, the definition of customer status, the exclusivity test, the invoice arrangement and the timely transfer condition are the same. Article 1/(2) of Decision No. 11257 set the deduction rate at 100% for ITC 89/13 as well. The two channels establish one doctrine; the difference opens only on the minimum tax front (Art. 32/C hits the limited company, not the sole proprietor).

Software is clearly within scope, and game and application development fall in the “software” category. The Ankara Tax Office ruling E-38418978-125[10-24/3]-378244 of 2024 confirms that graphic and animation design services (which can include game assets) are deductible within Art. 10/1-(ğ) where they fall within the main field of activity. So the matter is settled on the statutory-definition side; the main dispute is the administrative stance on mixed sales.

4. The five conditions

The earnings deduction requires the five conditions to be met together. If one condition is missing the deduction is refused in its entirety; there is no regime of partial satisfaction.

The third condition is the heart of the subject; we open it separately in section 5.

The first and second conditions are usually not a problem in game and app practice. The trap in the fourth condition is the bulk invoice question — a bulk invoice issued without Revenue Administration approval makes the basis of the deduction questionable. The trap in the fifth is the discipline of timing: Google and Apple payments must reach Turkey in full by the April filing deadline; balances left in intermediate layers such as PayPal, Stripe or Wise count as “not arrived”.

5. The platform side: Steam, App Store, Google Play — what ruling No. 143061 says

The module here is a decision matrix: platform × customer profile × decision. Each cell shows whether the relevant rule “applies / does not apply / depends” in that scenario.

The critical sentences of ruling No. 143061 read as follows.

For CTC Art. 10/1-(ğ): “…since they relate to earnings in the nature of in-app purchase income and since, moreover, the applications in question are directed at the domestic market as well as abroad and therefore do not meet the condition of relating to software services performed exclusively for customers abroad, it is not possible for the earnings derived within these activities to be deducted in determining corporate earnings under sub-paragraph (ğ) of the first paragraph of Article 10 of the Corporate Tax Code.”

For CTC Art. 32/(7) it uses a different formula: “Where the artificial intelligence and mobile games developed by your company are made exclusively for the use of customers abroad, they will be assessed within the scope of service exports and the corporate tax rate will be applied to those earnings with a 5-point reduction.”

So the ruling applies two different tests: for 10/1-(ğ), mixed use is entirely closed; for CTC 32/(7), the ruling says literally that “the rate is applied with a 5-point reduction” for the part that is exclusively foreign.

But there is an express CONFLICT here with Corporate Tax General Communiqué No. 1: the computation example in section 32.1.2.9.1 shows that the software service export earnings within CTC 10/1-(ğ) are first SUBTRACTED from the export earnings base and that the 5-point reduction applies only to the REMAINING GOODS export earnings base — so service export earnings fall outside the 5-point reduction. Because a game or app developer typically exports no goods, applying the computation example in the Communiqué leaves no residual base for the 5 points to engage on.

The literal wording of the ruling and the computation example in the Communiqué do not read the same way at this point; an expectation of 5 points is an application risk. And Art. 32/(7) requires exclusivity too.

For mixed sales, section 10.5 of Corporate Tax General Communiqué No. 1 opens an apportionment methodology: revenue, cost and expenses are tracked separately, and common general expenses are apportioned by the revenue ratio.

That says the deduction can be applied to the foreign part on the ground of the Communiqué. But ruling No. 143061 made no reference to that section of the Communiqué and applied a categorical refusal. This contradiction between the Communiqué and the ruling is a real source of risk for the taxpayer: a taxpayer who apportions and files may meet the administrative stance of the ruling on audit.

6. The 3rd Chamber case law is about VAT: can it be carried across to the earnings deduction?

In two recent decisions the 3rd Chamber of the Council of State settled the doctrine that “accessibility from Turkey does not destroy exclusivity”.

E:2023/5968 K:2024/129 (29.01.2024): translation and subtitling services for a foreign broadcaster. The decision reads: “since the fact that the service received by the foreign firm, which is in the position of directly benefiting from the service, is also accessible by users in Turkey does not constitute an obstacle to satisfying the condition of benefiting from the service abroad…” Outcome: the VAT assessment with penalty and the special irregularity penalty were annulled; the appellate decision is final.

E:2022/3559 K:2025/4071 (21/10/2025, unanimous): a developer offering a smartphone application over Google Play. The decision reads: “having regard to the fact that the applicant offered the applications it developed for smartphones through the Google Playstore application belonging to a foreign-resident company and that the service was benefited from abroad, the fact that the service received by the foreign firm, which is in the position of directly benefiting from the service, is also accessible by users in Turkey does not constitute an obstacle to satisfying the condition of benefiting from the service abroad…” Outcome: the VAT assessment with penalty was annulled and the Regional Administrative Court decision reversed.

Both decisions are in the taxpayer’s favour, unanimous and final. But there are two critical limits. First, the decisions concern the service export exemption in VAT Art. 11/1-a; they are NOT precedent for the earnings deduction in CTC 10/1-(ğ). Second, no decision approving or rejecting the doctrine at the level of the Plenary Session of Tax Chambers or the Chamber for the Unification of Case Law could be verified. The signal that the case law is settling is strong, but it is not locked at the higher judicial level.

The conceptual analogy argument runs like this: the legislature used the same concept of “exclusive benefit abroad” in both institutions. VAT Art. 12/2 (“the service being benefited from abroad”) and CTC 10/1-(ğ) (“services the benefit of which is enjoyed exclusively abroad”) are the counterparts of the same concept in two different rules.

The Council of State’s interpretation on the VAT side can be advanced on the earnings deduction side as an argument from consistency. But this is a HYPOTHESIS — the court may not accept it, and the ruling may be treated as binding. It should not be presented as settled case law.

The Istanbul 2nd Tax Court decision E:2023/1083 K:2024/1029 (29.05.2024) is likewise in the taxpayer’s favour at local court level, but the appeal route is open and it is not final. It should not be presented as settled case law either.

7. The sole proprietorship ↔ limited company equation reversed in 2026: the quiet effect of CTC Art. 32/C

The “domestic minimum corporate tax” in CTC Art. 32/C was introduced in mid-2024 (added by Law No. 7524 Art. 36 of 28/7/2024; Official Gazette 2/8/2024). In essence it provides: “the corporate tax computed having regard to the provisions of Articles 32 and 32/A cannot be less than 10% of the corporate earnings before deductions and exemptions.” So the tax remaining after the deductions and exemptions on the return cannot fall below 10% of the pre-deduction earnings.

Paragraph 2 sets up a limited list — the deductions on that list can be subtracted from the minimum tax base. Law No. 7582 Art. 9 (Official Gazette 04.06.2026-33270) updated the list: the sub-paragraphs in CTC 32/C(2)(b) are now listed as “(g), (h), (i) and (j)”. 10/1-(ğ) is NOT on that list — so the service export earnings deduction does not prevent the tax from being held at 10% of the pre-deduction earnings.

A concrete computation module:

Example — TRY 1,000,000 of foreign service export earnings, all within scope, exclusivity satisfied:

Limited company (CTC 10/1-(ğ)):

• Corporate earnings before the deduction: TRY 1,000,000
• CTC 10/1-(ğ) deduction at 100%: TRY 1,000,000
• Base after the deduction: TRY 0
• Corporate tax computed at the general rate: TRY 0
• CTC 32/C minimum check: 10% of the pre-deduction earnings = a minimum tax base of TRY 100,000
• The Art. 32/C(3) credit: the “tax not collected” credit for the 5-point reduced rate in CTC 32/(7); but under the computation example in section 32.1.2.9.1 of Corporate Tax General Communiqué No. 1 the service export earnings are first subtracted from the export earnings base and the 5 points apply only to the remaining goods-export earnings — with no goods-export residue for a game or app developer, the amount separately credited by 32/(7) is 0
• Corporate tax payable: TRY 100,000 (the minimum tax)

Sole proprietorship (ITC 89/1-13):

• Annual commercial earnings: TRY 1,000,000
• ITC 89/1-13 deduction at 100%: TRY 1,000,000
• Remaining income tax base: TRY 0
• Application of the income tax tariff: TRY 0
• The CTC 32/C counterpart: NONE (an income tax payer; Art. 32/C sits in the Corporate Tax Code)
• Income tax payable: TRY 0

The difference is clear: the same TRY 1,000,000 of foreign earnings leaves TRY 100,000 of minimum tax in a limited company and zero in a sole proprietorship. For small and mid-sized game studios that difference is not to be dismissed.

Of course the decision is not made on the tax front alone — liability (the shareholders’ limited liability in a limited company versus the sole proprietor’s unlimited liability), the partnership plan (a joint stock or limited structure is essential to take in an investor), the expectations of foreign investors and the financing routes all enter into it. But on the tax front the 2026 wind blows towards the sole proprietorship.

Warning: the example is built on the assumption that exclusivity is satisfied. If the deduction is refused entirely on mixed sales under the logic of No. 143061, a limited company faces the minimum tax plus general corporate tax while a sole proprietor faces the top bracket of the income tax tariff — in those conditions a limited company can often be the better structure. So the decision also depends on whether exclusivity can be achieved technically.

8. The YMM certification requirement: Communiqué No. 49 and the discipline of time

General Communiqué No. 49 on the Law on Independent Accountancy, Certified Public Accountancy and Sworn-in Certified Public Accountancy (Official Gazette 30/12/2025-33123) makes a full YMM certification report compulsory where a given threshold is exceeded on deductions taken on service export earnings. The Communiqué applies for the 2025 accounting period and following periods.

The structure of the threshold is widely misunderstood: the Communiqué does NOT set a limit based on a “single customer” or on “total turnover”; it applies a limit of TRY 500,000 to EACH exemption and deduction on the return (that is, to the CTC 10/1-ğ earnings deduction itself). In practice that means this for a game or app developer: if the annual service export earnings deduction on its own exceeds TRY 500,000, a full YMM certification report is compulsory; having several customers or several products does not produce separate threshold computations. The 2025 figure is definitively TRY 500,000. For 2026 the computed figure is approximately: half the 2025 revaluation rate applied, 500K × 1.12745 = TRY 563,750, and with the part below TRY 10,000 disregarded, TRY 560,000.

⚠️ The Revenue Administration has no separate announcement for the 2026 threshold; until one is published, the computed approximation of TRY 560,000 is used as a prudent figure. If the Ministry determines a different figure, that figure prevails.

The timing is critical: the report must be submitted within two months of the filing period. If it is not submitted in time, the extension under repeated Art. 227 of the Tax Procedure Code opens first; if it is not submitted within that period either, the right to the deduction is lost. Hence the practical importance of signing with a YMM during the year, having the financial statements ready by April, and the YMM completing the work early.

9. The scope of repeated Art. 20/B for Steam and PC games: a grey area

Repeated Article 20/B of the ITC provides a regime of final taxation by withholding for those producing content over social networks and for developers of applications for mobile devices. Income Tax General Communiqués No. 318 and No. 325 govern the application. The primary text of the sub-paragraph was not drawn from a primary source in this run and was confirmed through secondary advisory sources: for 2026 the exemption limit is the fourth income bracket of the income tax tariff; unless that amount is exceeded, the withholding made through the bank is the final tax.

⚠️ Not verified at source: the primary text of ITC repeated Art. 20/B and Communiqués No. 318 and No. 325 were not drawn from a primary source in this run; the account above rests on a secondary advisory source. Confirming the current text of the communiqué and the threshold before acting is essential.

The critical limit: Art. 20/B uses the expression “mobile devices”. A developer selling a PC game over Steam falls OUTSIDE the literal scope of that sub-paragraph. This is a grey area — the route to a 100% earnings deduction as a sole proprietor through ITC 89/1-13 is open (if exclusivity is satisfied), but the convenience of the withholding-based exemption in repeated Art. 20/B is closed for Steam and PC. No ruling of the Revenue Administration on the scope of repeated Art. 20/B for PC games could be identified in this run; there is no settled interpretation.

A mobile developer — particularly a one-person indie studio — loses the repeated Art. 20/B advantage if revenue is above the 2026 fourth bracket and moves to the sole proprietor route under ITC 89/1-13. On that route the exclusivity test comes back into play; the logic of No. 143061 applies there too.

10. Risks

Region lock (the highest risk): if the application is live in the global store and accessible from Turkey, the administration refuses the deduction entirely under the logic of No. 143061. Excluding Turkey technically with a region lock strengthens the exclusivity claim; but no administrative view or judicial decision has treated that as sufficient on its own. A region lock plus the invoice arrangement plus bank monitoring plus KYC are needed together. And there is a commercial cost — genuinely cutting off Turkish users means losing revenue.

Full and timely transfer of the earnings (all or nothing): ITC 89/1-13 and CTC 10/1-(ğ) require the FULL transfer by the filing deadline. A partial transfer puts the WHOLE deduction at risk. Google and Apple deductions, residual balances at PayPal and Stripe, and year-end exchange timing can all break the condition.

Article 3/(1) of the Central Bank Export Circular provides for 180 days from the actual export date and the sale of at least 80% to a bank — the Art. 89 discipline adds on top of that a further layer of “all of it by the filing deadline”.

The deadline for submitting the YMM certification: once the definitive 2025 threshold is exceeded (TRY 500,000 for each exemption or deduction on the return — with no “single customer” or “total turnover” distinction), full YMM certification is compulsory; if the report is not submitted within 2 months of the filing period, the deduction is refused. Not signing with a YMM during the year, a delayed financial close, and last-minute work by the YMM all enlarge that risk.

Sub-processor and indirect access: reaching the end user through Google or Apple is treated by the administration as an element weakening exclusivity. That is another face of the mixed-sales argument: if the platform itself is open to Turkish users, how will the developer construct the “exclusively foreign” claim?

The invoice arrangement: an invoice in the name of the foreign customer is required. An e-invoice issued to Google or Apple (with the service export code — to be confirmed against the current Revenue Administration guide). A bulk “miscellaneous customers” invoice depends on Revenue Administration approval under repeated Art. 257 of the Tax Procedure Code; ruling No. 143061 left open the route of applying to the Revenue Administration on bulk invoicing.

VAT service export is a separate test: CTC 10/1-(ğ) and VAT Art. 11/1-a are subject to different tests; one may be satisfied while the other is not. Ruling No. 143061 draws exactly that distinction. The mechanics of the earnings deduction do not by themselves guarantee the VAT exemption.

11. Gökay’s note

Gökay Gül’s note. A pattern I have often seen in 2026 in files from game and app developers: the taxpayer reads Decision No. 11257 (“the rate went up to 100%”) as great news, then freezes on seeing ruling No. 143061, and then asks “so should I set up as a sole proprietor or a limited company?” Those three steps look independent but they hang on a single question: is it technically possible for the application to satisfy the exclusive-benefit-abroad test? If it can, the structure choice divides by revenue level; if it cannot, what remains is a choice between the administrative stance (No. 143061) and the case law (the 3rd Chamber) — and that choice means litigation.

The healthiest route I see in practice is this: when a new studio is being set up, decide on the region lock first, then move to the structure choice. If a region lock is commercially sustainable, exclusivity can be claimed on technical ground; in that case, if revenue is below TRY 5.3 million a sole proprietorship plus repeated Art. 20/B is the lightest regime, and above it a sole proprietorship again (ITC 89/1-13) is better than a limited company in 2026.

If a region lock is not commercially possible — particularly where Turkish users are a significant share of the target market — the taxpayer is deciding between “apportionment plus a reservation on filing plus litigation risk” and “give it up”; the second is not friendly, but it is real.

Another pattern: because taxpayers fixate on the “Google Play + App Store” wording of No. 143061, they think selling over Steam or PC “escapes”. It does not. The logic of No. 143061 attaches to the concept (exclusivity), not to the platform; the same result arises on mixed sales on Steam. That Steam allows a domestic/foreign split in its panel makes the apportionment easier, but does not by itself solve the exclusivity argument.

12. Action guide

• For a newly formed studio: the region lock decision first; then the structure choice by revenue projection (below the repeated Art. 20/B threshold = sole proprietorship plus the withholding-based exemption; above it = sole proprietorship plus ITC 89/1-13; institutionalisation or an investor needed = a limited company, accepting the CTC 32/C floor).
• An existing limited company with mixed sales: apportionment discipline, a YMM engagement before April, and the 2-month submission calendar. Assess the option of filing with a reservation with your adviser.
• A Steam or PC developer: the ITC 89/1-13 route is open; repeated Art. 20/B is out of scope. The exclusivity test still applies.
• A mobile application with low revenue: sole proprietorship plus repeated Art. 20/B; the bank withholding is final. Unless you go above the 2026 fourth income bracket you are not obliged to file a return (beyond the minimum obligations).
• Document discipline: evidence of the region lock (panel screenshots, KYC, IP filtering), the foreign revenue apportionment (Steam, Google and Apple panel reports), the YMM engagement, the service export e-invoice arrangement, and the bank transfer receipts — all ready in the April filing file.

This article is for general information; it does not replace a conclusion or report specific to any taxpayer’s own file. Before acting, confirm the current text of the legislation and the pattern of your own facts with your accountant or lawyer.