Young Entrepreneur Income Exemption
ITA repeated Art. 20
Individuals under 29 registering as a taxpayer for the first time; from start of activity, 3-year period, up to 230,000 TRY annual income tax exemption.
Sole Proprietorship Formation
Single-person trader structure — 1-day setup, no capital required, but unlimited personal liability.
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Key facts
- Setup time
- 1 business day
- Min. capital
- No capital required
- Est. cost
- ~2,500 TRY
- Liability
- Unlimited (personal)
- Tax base
- Personal Income Tax
- Bookkeeping
- Operational ledger or balance sheet
Overview
Sole proprietorship is the fastest way to begin commercial activity in Turkey as an individual trader. After obtaining a tax number and tax certificate, you can start operating the same day. Low accounting cost, easy closure, minimum bureaucracy. However, there is no separation between personal and company assets; your liability is unlimited. As revenue approaches the TRY 1M band, conversion to Ltd./A.Ş. should be evaluated.
Most common first structure for freelancers, consultants, software developers, professional service providers. Individuals under age 29 registering as a taxpayer for the first time benefit from the Young Entrepreneur Exemption under Income Tax Act repeated Art. 20 — up to TRY 230,000 annual income tax exemption for the first 3 years.
NOT suitable for ventures planning a funding round — there are no share certificates, no ESOP, no exit structure. If a funding plan is on the table, A.Ş. should be the direct choice.
Suitable for
- Freelance developer, consultant, designer
- Side-income earners (especially under 29 — exemption applies)
- Self-employed professionals (excl. lawyers)
- Marketplace sellers (Trendyol, Amazon, Etsy)
- Content creators, trainers, coaches
NOT suitable for
- Ventures planning funding rounds
- Multi-partner businesses (Ltd./A.Ş. required)
- High-revenue (1M TRY+) targeted companies
- Those needing employee share options (ESOP)
Advantages
- Fastest setup (1 business day)
- No capital required
- Low accounting cost (~1,000-2,000 TRY/month)
- Easy closure (1 business day)
- Young Entrepreneur Exemption (ITA repeated Art. 20) — up to 230,000 TRY annual tax-free for those under 29
- Simple bookkeeping (operational ledger)
- No dividend tax (after income tax, remaining is personal)
Watch out
- Unlimited personal liability — personal assets exposed to company debt
- No partnership structure — must convert to Ltd./A.Ş. to scale
- Not suitable for funding rounds (no share certificates)
- ESOP / employee share options cannot be set up
- Weak corporate image — some clients and banks require Ltd./A.Ş.
- When revenue exceeds 1M TRY, marginal income tax rates climb to 35%
Process
- 01
Tax number
Obtain tax number from the relevant tax office (same day).
- 02
Tax certificate
Activity code + address + contact info processed for certificate (same day).
- 03
Ledger certification
Journal/operational ledger notarisation.
- 04
E-infrastructure
E-signature, e-invoice, e-archive activation (if needed).
- 05
Social security
Bağ-Kur (4/b) self-employed insurance registration.
Deliverables
- Tax number + tax certificate (PDF)
- Certified ledgers
- E-signature + e-invoice activation (on request)
- Bağ-Kur insurance registration
- 30-day post-launch operational checklist
Required documents
- ID copy (Turkish national)
- Residence document (from e-Devlet portal)
- Signature declaration
- Address information (rental contract or title deed)
- Activity code selection (NACE)
Cost
~2,500 TRY (state fees + notary; CPA monthly fee separate)
Timeline
1 business day (with all documents in hand)
Tax benefits and exemptions
Simplified Tax Regime
ITA Art. 47-48
For small tradespeople below a revenue threshold; simplified taxation (sector-specific applicability).
Legal references
- Income Tax Act
- ITA repeated Art. 20 — Young Entrepreneur Exemption
- Tax Procedure Law
- Social Security Law No. 5510 — Bağ-Kur (4/b)
Frequently asked
Sole proprietorship or Limited — which?
Three variables: (1) number of partners (sole = 1 person, Ltd. = 1+), (2) liability preference (sole unlimited, Ltd. limited), (3) revenue projection (over 1M TRY, Ltd./A.Ş. is tax-advantageous). Side income or freelance → sole; SME growth plan → Ltd.
How do I claim the Young Entrepreneur Exemption?
Must be under 29 + first-time taxpayer. Within 10 days of starting activity, declare "first-time taxpayer" to the tax office. If conditions met at start, exemption continues for 3 years even if you age out.
How do I convert from sole proprietorship to Limited?
No direct conversion. A new Limited Company is established, and the sole proprietorship is transferred/sold to the Ltd. Process takes 2-4 weeks; tax impact of transfer value must be evaluated.
What does unlimited liability mean in practice?
When the company has debt, creditors can reach not just company assets but your personal assets (home, car, bank account). Therefore, sole proprietorship is illogical for high-risk businesses (manufacturing, import).