Turkish Labor Law
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One of the common issues on the area of labor life is the accounting treatment of benefits in kind and other allowances that should be treated differently from the wages.
Benefits in kind can simply be defined as payments in kind and subsidization by employer provided for employees’ personal or social needs. Also the money paid to employees, depending on its purpose, may be deemed as a kind benefit and may have some exemptions as regard to tax and premium contribution.
TAX AND SOCIAL SECURITY PREMIUM EXEMPTION
In this article we want to examine the most common benefits in kind and allowances in Turkey’s practice separately with respect to income tax and social security premium liability.
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Pursuant to Social Security And General Health Insurance Law No. 5510, Article 80; benefits in kind and funeral, birth and marriage benefits, duty travel allowances, mobile duty compensation, severance pay, dismissal pay or collective payment in the form of severance pay, estimated cost, pay in lieu of notice or cash compensation, and food, child and family increments of which amount will be determined the Institution in years, private health insurance premiums and personal retirement contribution fees, not exceeding 30% of the monthly total minimum wage, paid by the employers to private health insurances and personal retirement system for insurance holders shall not be included in the earnings subject to premium.
Article 61 of Income Tax Law No. 193 “Wage is a benefit provided by cash or in kind in return of services performed by employees registered and subject to an employer.” So we may easily deduce from this description that payments under the different names such as indemnity allowance, premium, bonus and so on, whether in cash or in kind are deemed as part of the wages and should be taxed. And also Article 25 of above law specifies the tax exemptions.
Table of Exemption
|
Benefit in Kind/Allowance
|
Premium Subjection |
Tax Subjection |
|
Death Marriage Birth Benefits |
Not subject to. |
Exempt from income tax up to two months’ salary of the employee, exceeding part is subject to tax. |
|
Child Allowance
|
Not subject to. |
Exempt from income tax. This exemption is applicable for maximum two children and limited to the settled amount received by the government employees. |
|
Private Health Insurance/ Private Pension Scheme
|
Employers’ contribution Private Health Insurances and Private Pension Scheme shall be deducted from earnings subjected to premium up to 30% of monthly gross minimum wage. |
The premiums paid to Private Health Insurance institutions and Private Pension Scheme are deductable from the income tax liability, up to 15% of monthly wage with a cap of annual gross minimum wage (TL 14.850,00 for the second half of 2015. |
|
Meal Allowance Meals provided in the premises …………
Cash paid to employees for their meal
Meal Tickets/Vouchers ……………………
|
Not subject to. ……………………
6% of daily gross minimum wage (2.55 for 2015) exempt
Not subject to. ……………….
|
Not subject to……………………….
Subject to tax.
Exempted from income tax up to 13.00 TL daily (for 2015). |
|
Service Vehicle for Employees |
Not subject to.
|
Not subjected to. |
|
Uniform and Costumes Provided for Employee to Wear In the Workplace
|
Not Subject to. |
Not subject to. |
|
Benefit in Kind/Allowance
|
|
Death Marriage Birth Benefits |
|
Child Allowance
|
|
Private Health Insurance/ Private Pension Scheme
|
|
Meal Allowance Meals provided in the premises …………
Cash paid to employees for their meal
Meal Tickets/Vouchers ……………………
|
|
Service Vehicle for Employees |
|
Uniform and Costumes Provided for Employee to Wear In the Workplace
|
