Other payroll parameters along with the minimum wage are announced. The most important of these, which directly affects the wages, is the tax rates. The income tax tariff with tax brackets is re-determined every year.
Changes in Tax Tariff
There was a significant change in the income tax tariff last year. With Law No. 7194 published on December 7, 2019, a new tax rate was added to the income tax tariff. Since January, the earnings of those whose cumulative income tax base exceeds 600,000 TL were taxed at 40%.
In 2021, taxation will continue over 5 brackets. The new income tax tariff for wage earners is determined as follows:
|1st Tax Bracket 15%||0 -24.000|
|2nd Tax Bracket 20%||24.000 -53.000|
|3rd Tax Bracket 27%||53.000 – 190.000|
|4th Tax Bracket 35%||190.000 – 650.000|
|5th Tax Bracket 40%||650.000 +|
When Does the Minimum Wage Switch to 20% Tax Bracket?
After determining the minimum wage as 3.577,50 TRY gross, the net wage of the minimum wage after taxes and SSI premiums was calculated as 2.557,59 TRY. However, when we calculate the new income tax tariff, we see that the minimum wage earners have switched to the 20% tax bracket in August.
We can determine the income tax base of the minimum wage as follows:
|Minimum Wage (Gross)||3.577,50|
|SGK Base (PEK Base)||3.577,50|
|SGK Employee Premium (14%)||500,85|
|Unemplyment Employee Premium (1%)||35,78|
|Income Tax Base||3.040,88|
To find out when the employee will change the tax bracket, we need to sum the income tax bases for the year. After 7 months, we see that it has moved to the next level by exceeding the first tax bracket of 24.000 TRY.
3.040,88 TRY (income tax base of the minimum wage) x 8 months = 24.327,04 TRY
With Changing Tax Bracket, Will the AGI Addition to the Minimum Wage Continue?
Taxation of the minimum wage from the next upper bracket, ie 20%, reduces the net wage. In order to prevent this decrease, the addition of AGI, once temporarily put into practice, was made permanent with the regulation introduced in the past years. The implementation will continue this year.
The continuity of the regulation was realized with the Omnibus Law No. 7103, which was published in the Official Gazette dated March 27, 2018 and entered into force.
The minimum wage earner, whose wage will be reduced as of 8 months, will be paid additional AGI to the net amount of 2.825,90. Thus, the employee’s wage will not fall below the amount of 2.825,90 TRY throughout the year.