Young Entrepreneur Income Exemption
ITA repeated Art. 20
If age, first-registration and commencement conditions are met, an indexed annual exemption may apply for three tax periods.
Sole Proprietorship Formation
A single-person business with no minimum capital and personal liability for business debts.
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Key facts
- Setup time
- Depends on tax registration and inspection
- Min. capital
- No capital required
- Est. cost
- Quote based on activity and documents
- Liability
- Unlimited (personal)
- Tax base
- Personal Income Tax
- Bookkeeping
- Operational ledger or balance sheet
Overview
A sole proprietorship is an individual conducting business or professional activity in their own name. No minimum capital is required and setup may be simpler than a capital company, but there is no separate legal personality and the owner is personally liable for business debts. Timing depends on tax registration, address inspection and the activity.
It may suit freelancers, consultants, software developers and certain professional services. If a first-time income-taxpayer is under 29 and meets the conditions in ITA repeated Art. 20, the young entrepreneur income exemption may apply up to the indexed annual limit for three tax periods.
It is not suitable for a multi-owner or equity-funded structure. Revenue alone is not an automatic conversion threshold; liability, profitability, ownership, funding and distribution plans should be assessed together.
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)
- Activities with high debt or personal exposure
- Those needing employee share options (ESOP)
Advantages
- Simpler setup than a capital company
- No capital required
- Potentially lower operating cost at low transaction volume
- Simpler closure than a capital company
- Young entrepreneur income exemption if all conditions are met
- 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.
- The effect of the progressive income-tax tariff grows with profit
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
Project quote based on activity and document scope; notary, e-signature and third-party costs are itemised separately.
Timeline
Depends on tax registration, address inspection and activity-specific permits; no fixed completion day is promised.
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?
Compare ownership, personal liability, profitability, public-debt exposure, funding and distribution plans. Revenue alone does not automatically determine the entity type.
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).