What is minimum living allowance?
Part of the wage that constitutes the amount of minimum subsistence level is not subject to income tax for real persons in Turkey legislation.
Minimum Living Allowance (MLA/AGİ) is calculated on the basis of annual minimum wage regardless of the total earning, and in accordance with the marital status and the number of the children of the employee.
What rates are applied?
The following rates of annual gross minimum salary are not subject to income tax;
50% for the employee
10% for the non-employed spouse
7,5% for each of the first two dependent children and 10% for third dependent child and 5% for the following dependent children.
Who can benefit from MLA?
According to Income Tax Law No. 193, minimum living allowance is applied on the taxation of wages with the "actual method of taxation. In other words full liability tax-payer real persons whose taxes withheld from their wages can benefit from MLA.
Can foreign national employees benefit from minimum living allowance?
Minimum Living Allowance (MLA/AGİ) applies to foreigners working against wage in Turkish companies. A foreign employee who is “settled" in Turkey, is deemed as a "full liability tax-payer" and will benefit from the MLA.
In Turkey's practice wages of employees are taxed in actual earning basis. In this respect the foreign employees who have legal domicile and are staying for more than 6 months continuously within one calendar year at Turkey are considered full liability tax-payer and will be benefiting from MLA.
What is the meaning of children in the application of MLA?
Children, in the application of MLA means, those who did not completed 25 years of age while being educated or those who did not completed 18 years of age staying with tax payer or looked after by the tax payer. (including alimony receivers, adoptive sons, and grandchildren lost their mother and father living with tax payer).
Deduction will be applied; only to either wife or husband for children.
What is the meaning of non-working spouse in the application of MLA?
10% of the employee’s minimum wage is not subject to income tax for the non-employed spouse.
Non-employed spouse means the one who are not earning any wage. In case the spouse is working against wage he/she is considered as working spouse and employee cannot benefit from MLA for him/her.
If the spouse is earning self-employment income (like lawyers or doctors do) then he/she will be considered as non-employed spouse.
Who benefits from MLA in alimony cases?
- MLA for the children should be applied to divorced spouse who is paying alimony, even the other spouse is employed and receiving real wage,
- In case the alimony paying father is not benefiting from MLA for the children, mother will benefit from MLA for the children under her custody and dependent to mother from the point of social security.