Professional Employer Services

ATA KURUMSAL

“A TURKISH PEO SOLUTION”

 

PAYROLL UMBRELLA

EMPLOYEES ARE SAFE UNDER OUR PAYROLL UMBRELLA
“Join our PEO services and gain efficiencies of Scale”

ATA Kurumsal provides payroll umbrella services that assist you manage HR service responsibilities such as payroll, benefits and employees’ compensation. By partnering with Ata Kurumsal, administer payroll for staff located in Turkey efficiently. Minimize your payroll and tax related risks, stay legally compliant.

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DON’T BOTHER WITH FORMALITIES - PERMITS

By partnering with Ata Kurumsal, you do not need to bother for employment formalities including work visa-permits, social security registration…etc

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STAY LEGALLY COMPLIANT

Our payroll umbrella services designed for your temporary posted workers, by partnering with Ata Kurumsal, you will be free from many payroll & tax associated risks.
Additionally our co-employer model, helps you to minimize many common risks deriving from Turkish Labor Law, OHS Law, Social Security Legislation and all other relevant Turkish legislation.

Employees, starting from their joining date begin to benefıt from Turkish Social Security System

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COST EFFECTIVE - SHARING RESPONSIBILITES

Our Co-Employer model especially used by temporary posted workers. Under this model, as an International Company you do not need to be located in Turkey. You can seize the opportunity to expand into Turkey without waiting for months to set up a subsidiary, liaison office or company, ATA Kurumsal PEO services provides you cost effective, reliable and effective solutions for managing remotely your employees in Turkey.

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- TURKISH PAYROLL GUIDE -

More usually it seems as a complex system, however it is not that difficult to understand payroll data and employment taxes in Turkey (Really!).  Fixed parameters of 2017 presented in this page represents basic payroll accounting in Turkey. However please note that there might be other benefits and allowances applicable to the employees. Below calculations excludes daily food, family and children allowances and other exemptions. Also please consider that, following information is for informational purposes only.

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I - DEFINITION OF WAGE AND ITS TAXATION UNDER TURKISH LAW

 


1. DEFINITION OF WAGE UNDER TURKISH LEGISLATION

Definition of wage exists in a variety of relevant Turkish laws and regulations. Article 32 of Turkish labor law defines wage as;

“Wage is, in general terms, the amount of money to be paid in cash by an employer or by a third party to a person in return for work performed by him.”

More detailed definition of wage is given under the article 61 of the law no: 193 on Income Tax Law. Accordingly wage is defined as;

“Wage is a benefit provided by cash in kind and cash, represented by cash, in return of services performed by employees registered and subject to an employer. It does not change the true nature of wage by paying it under the names of indemnity, allowance, cash compensation (Financial Liability Indemnity), allocation, increment, advance, remuneration, attendance fee, premium, bonus, in return of an expense or determined by a particular percent of revenue provided not to have the attribute of a partnership. ”

2. COMPONENTS OF WAGE

In accordance with article 32 of Turkish Labor Law, there are three components of wage; (1) Wage should be paid in return for performed work, (2) wage should be paid by an employer or by a third party, (3) wage should be paid in cash.

For the purpose of law no: 193 on Income Tax, on article 61, components of wage are defined as; (1) being subject to an employer, (2) work in association with a specific place of business (3) being paid in return of services performed

3. TAX TREATMENT TO THE WAGE AND SALARIES

All payments, which are treated as wage under Income tax law, are subject to the income tax. As per article 61 of Turkish income tax law (law no. 193) in addition to wage, all other associated income such as allowances, bonuses, anniversary gifts, gratuities, commissions, premiums, compensations and other wage and salary related remunerations including benefits in kind at market value are also subject to the income tax.

Taxable income is determined after the deduction of some allowed expenditures from the gross amount. These deductions explained under article 63 and 89(1) of Law no: 193 on Income Tax as;

(1) Legal deduction made according to various laws or regulations,

(2) Premiums and contributions made to the social security institution.

(3) 50 % of life insurance premiums made by employees on their own behalf or on behalf of their spouse and/or children to private insurance and retirement companies which are resident in Turkey and whose headquarters, registered head offices or business centers are in Turkey, Insurance premiums made by the employees on their own behalf or on behalf of their spouse and/or children for death, accident, disease, disability, unemployment, maternity, birth and education polices provided that total amount premiums deducted shall not exceed %15 of monthly income and yearly amount of minimum wage.

(4) Payments made for labor union membership.

Additionally following benefits are (fully or partially) exempted from income tax;

  • Benefits, provided by the employer in the form of free meal within business place or its annexes are excluded from the scope taxable income. In the case of not providing free meal within business place or its annexes , obtaining meal service from the outside providers such as by using meal tickets, income tax exemption will be applicable only up to daily settled limit by law (In accordance with Income Tax General Communiqué with Serial no: 287, - 13 TL - in 2015) . In the latter case, employer required to pay the price for the meals directly to the meal service provider, or intermediary. Any payment made directly to the employees under the name of meal or food allowance is subject to income tax. (Article 23 (8) of Income tax law)
  • Benefits, paid to employees due to birth and marriage, are exempt from income tax. This exemption is limited up to two months’ salary of the employee. In the excess of this limit, remaining amount is subject to income tax. (Article 25(5) of income tax law)
  • Payments made to the employees in the name of ‘child benefits’ are exempt from income tax. This exemption is applicable for maximum two children and limited to the settled amount received by the government employees. (Article 25(4) of income tax law)

Employee benefits and their exemption amounts 2015;

I. FOLLOWING AMOUNTS ARE NOT SUBJECT TO SOCIAL SECURITY PREMIUM.

CHILD ALLOWANCE (Applicable max. for two children)

01.01.2017 - 31.12.2017 --- 32,94 TL

FAMILY ALLOWANCE

01.01.2017 - 31.12.2017  --- 164,70 TL

DAILY FOOD ALLOWANCE

01.01.2017 - 31.12.2017 --- 3,29 TL

II. FOLLOWING AMOUNTS ARE EXEMPTED FROM INCOME TAX

CHILD ALLOWANCE  (Applicable max. for two children)

01.01.2017 - 31.12.2017 --- for 0 to 6 Years old 44,41 TL, above 22,20 TL

DAILY FOOD ALLOWANCE

01.01.2017 - 31.12.2017 ---13,70 TL

*The list provided above is not exhaustive. There might be other expenses, benefits or payments that are exempt from income tax and social security premium. Please consult to your accountant for more information.

MINIMUM LIVING ALLOWANCE

Effective from January 1, 2008, a tax-free minimum living allowance is available for wage earners. Income tax payable (taxable income) is calculated after deducting MLA from the income tax.

Calculation is made on the basis of minimum wage regardless of the wage of employee. In calculation of the minimum living allowance, the marital status and the family composition of the employee is taken into account.

Calculation: 50% for the taxpayer, 10% for the spouse provided who is unemployed, 7.5% each for the first two dependent children, and 5% each for the following dependent children.

DISABLEMENT DEDUCTION

The employee who lost working capacity at minimum 80 % is regarded as 1st degree disabled, minimum 60 % is 2nd degree disabled, minimum 40 % is 3rd degree disabled worker. In calculating income tax, the following monthly deductions are applicable to the taxable income of the employees.

  • For the 1st degree disabled 900 TL
  • For the 2nd degree disabled 460 TL
  • For the 3rd degree disabled 210 TL

4.TAX EXEMPTION REGARDING TO THE WAGES PAID BY EMPLOYERS WITH LIMITED TAX LIABLITY[1]

  • In accordance with article 3(2) of Corporate Income Tax law numbered 5520[2], Corporations[3] have a limited tax liability for income deriving from Turkey if neither their registered office nor their business center is within Turkey. Full liability taxpayer corporations are subject to corporation tax on their worldwide income.
  • As per article 23(14) of Income tax law, employees working for limited liability corporations whose registered offices and business centers are not located in Turkey are exempt from income tax if; (this usually applies to the liaison offices)
  1. The wage is paid out from the earnings and revenues generated abroad.
  2. The wage is paid out in the form of foreign currency.
  3. Wage is not evaluated in Turkey.[4]

[1] Income tax law (Law no. 193) distinguishes limited tax liability and full tax liability. As a general rule, resident taxpayers are subject to full tax liability for their worldwide income. (art.3) Nonresident taxpayers are taxable on their income generated in Turkey. For the purpose of Income tax law, resident taxpayer refers to those who have legal residence in Turkey and who stay in Turkey more than six consecutive months within a calendar year. (art.4)

[2] Law No. 5520, Official Gazette of 21.06.2006, No. 26205.

[3] Refers to all subjects of Corporate Income Tax law.

[4] The term evaluated refers to the situations which salary payments are used as expenses against profits taxable in Turkey.

 

II. PAYROLL PARAMETERS FOR 2017

 

I- Gross Salary:

Gross Salary refers to amount of salary which is earned by employees according to Turkish Labor Law.

  • Gross Salary = Net Salary + Total Deductions (Social Security Premium Employee's Share (including Unemployment Insurance) + Income Tax + Stamp Tax)

II- Net Salary:

It is the amount of salary actually received by the employees.

  • Net Salary = Gross Salary – Total Deductions

III- Employer's Cost:

In addition to the gross salary, employer must pay the employer's share of social security and unemployment insurance premiums.

  • Total Cost of Employee to Employer = Gross Salary + Social Security Premium Employer's Allocation (including Unemployment Insurance)

IV-Social Security Premium and Unemployment Insurance:

Total social security premium is 37.5% (including unemployment insurance) of Earning Subject to Premium. 15% of total is deducted from the gross salary as employee's allocation and 22.5% of Earning Subject to Premium is calculated additionally as the employer's allocation. (Effective from 01/09/2013 Short term insurance branches premium rate is determined as 2% of earning subject to premium regardless of the gravity of the danger of the work.)

 

Insurance Branches Employee's Allocation (%) Employer's Allocation (%) Total Allocation (%)
Short Term Insurance Branch Premium - 2 2
Invalidity, Old Age and Death Insurance Premium 9 11 20
General Health Insurance 5 7,5 12,5
Unemployment Insurance 1 2 3
Total 15 22,5 37,5

 

SOCIAL SECURITY BASE AND CEILING

MONTHLY (TL)

BASE (01 Jan 2017 - 31 Dec 2017)

1777,50

CEILING (01 Jan 2017 - 31 Dec 2017) - BASE (x) 6,5

13.331,25

V- Income Tax:

Employee's Wage Income is subject to income tax and employer is responsible to deduct, and pay to tax office on behalf of employee.

  • Income Tax Base (Taxable Income) = Gross Salary - Social Security Premium (Employee's Share)
  • Income Tax = Taxable income * Income Tax Rate (%)

Income Tax (Cumulative) (Wage Income)(2017)

Rates

Up to 13 000 TL

%15

Between 13 000 and 30 000 TL (For the 13 000 TL of the total amount, income tax is 1.950 TL) In excess

%20

Between 30 000 and 110.000 TL* (For the 30 000 TL of the total amount, income tax is 5350 TL) In excess

%27

Over 110.000 TL (For the 110 000 TL of the total amount, income tax is 26 950 TL) In excess

%35

VI- Stamp Tax: (2017)

Stamp tax is based on the gross salary. The rate of tax is 0,00759

  • Stamp Tax = Gross Salary * Stamp Tax Rate

VII- Minimum Living Allowance (MLA)

Effective from January 1, 2008, a tax-free minimum living allowance is available for wage earners. Income tax payable is calculated by deducting MLA from the income tax.

Calculation is made on the basis of minimum wage regardless of the salary of employee. In calculation of the minimum living allowance, the marital status and the family composition of the employee is taken into account.

Calculation: 50% for the taxpayer, 10% for the spouse provided who is unemployed, 7.5% each for the first two dependent children, 10% for the third dependent children and 5% each for the following dependent children.

  • Income Tax Payable = Income Tax - Minimum living Allowance

MINIMUM LIVING ALLOWANCE RATES EFFECTIVE 01 JAN 2017

 

UNEMPLOYED SPOUSE

(01 Jan 2017 - 31 Dec 2017)

STATUS MINIMUM LIVING ALLOWANCE
SINGLE 133,31 TL
MARRIED 160,00 TL
ONE CHILD 180,00 TL
TWO CHILDREN 200,00 TL
THREE CHILDREN 213,00 TL

 

EMPLOYED SPOUSE

(01 Jan 2017 - 31 Dec 2017)

STATUS MINIMUM LIVING ALLOWANCE
SINGLE 133,31 TL
MARRIED 133,31 TL
ONE CHILD 153,05 TL
TWO CHILDREN 173,00 TL
THREE CHILDREN 187,00 TL

 

VIII – Disablement Deduction

The employee who lost working capacity at minimum 80 % is regarded as 1st degree disabled, minimum 60 % is 2nd degree disabled, minimum 40 % is 3rd degree disabled worker. In calculating income tax, the following monthly deductions are applicable to the taxable income of the employees (2017).

  • For the 1st degree 900 TL
  • For the 2nd degree 460 TL
  • For the 3rd degree 210 TL

 

 

III - MINIMUM WAGE CALCULATION

 

MINIMUM WAGE CALCULATION - SINGLE EMPLOYEE WITH NO CHILDIREN*

( PERIOD BETWEEN 01.01.2017 – 31.12.2017)

GROSS SALARY
1.777,50TL
Social Security Premium Employee’s allocation (14%) 248,85 TL
Unemployment insurance Employee’s allocation (1%) 17,78 TL
Income tax base 1.510,87TL
Income tax (15%) 226,63 TL
Minimum living allowance
(Single and no children)
133,31 TL
Income tax payable 93,32 TL
Stamp tax (0,00759) 13,49 TL
Total Deductions (Income tax payable +Stamp Tax + Social Security Premium Employee Allocation +Unemployment Insurance Employee Allocation)

373,44 TL

NET SALARY

1.404,06 TL

 

TOTAL COST OF EMPLOYEE TO EMPLOYER

Gross salary 1.777,50 TL
Social Security Premium Employer’s allocation (15.5%)** 275,51 TL
Unemployment Insurance (2%) 35,55 TL
TOTAL COST 2.088,56 TL

* Calculation is applicable to single employees with no children. Different Minimum Living Allowance amounts should be considered for other calculations.

**"For the private sector employers who employ insurance holders under item (a) of paragraph one of Article 4 of this Law, the amount corresponding to five points of employer share in the premiums of invalidity, old - age and survivors insurances pursuant to item (a) of paragraph one of this Article shall be covered by the Treasury." SOCIAL INSURANCE AND UNIVERSAL HEALTH INSURANCE LAW (law no:5510 - Article 8-ı )

Ata İnstitutonal Consultancy provides the service throughout whole Turkey including İstanbul, Ankara, Antalya, İzmir, Mugla, Bursa and Gaziantep. İf you have any questions, please feel free to contact us.

 


 

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