Employers can give workers additional monetary benefits besides the actual wage. These benefits can be payments such as sales premiums, bonuses paid to motivate the employee, as well as side benefits that cover the food and travel expenses during the employment. How will the travel expenses, which have been legally exempted with new regulations recently, be taxed?
Employers do not have to cover their workers’ travel and food expenses according to the Turkish Labor Law, unless the reimbursement of these expenses is included in the individual or collective agreement. If there is an agreement between the employee and the employer or the union and the employer regarding the payment of food and travel expenses, the employer must comply with it.
At the same time, if there are such benefits provided to certain workers in the workplace, even if these benefits are not included in the contracts, all workers have to have the same rights. In this regard, employers have an obligation to treat all workers equally.
Legislation on Travel Money Exemption
The first legislation on travel expenses was published in the Official Gazette on December 7, 2019 as Article 11 of the Digital Service Tax numbered 7194, and the Law on Amending Certain Laws and Decree Law No. 375. With the relevant article, in-parenthesis provision has been added to the Clause 10 of Paragraph 1 of Article 23 of the Income Tax Law No. 193. Along with this in-parenthesis provision, a detailed exception was defined for the transportation services provided by the employers to ensure commuting of the workers. The effective date of this legal arrangement has been set as January 1, 2020. Click here to access the law in Turkish.
On May 27, the Income Tax General Communiqué with serial number 311 was published. In the Chapter 3 of the Communiqué, the details of the exceptions to the travel expense reimbursements are explained. Click here to access the notification in Turkish.
How Is Cash Payment Taxed?
Cash paid on the payroll is subject to income tax. Regulations on income tax do not change the application on this issue. The employer pays the employee a wage, pays it in cash on the payroll, with no tax exemption.
When transport expense is paid in cash, the worker can use the money for other purposes as there is no restriction on using it for transport only. Therefore, as with cash meal fees, all of the travel money paid in cash to the employee is subject to income tax.
Is Income Tax Calculated on Bus Service?
One of the side benefits that employers provide for workers’ travel expenses is the bus service that picks up and drops off employees from home to work and vice versa.
Providing bus service to workers is not mandatory. The obligation on this issue is valid only for women working in night shifts. The employer is obliged to ensure the arrival and departure of female workers at night shifts in accordance with the relevant regulation.
Regarding the taxation of the bus service, the employer’s provision of a public transportation vehicle for commuting is excluded from income tax. While providing bus service, expenses incurred are accounted for on the accounting side and are not reflected on the pay slip.
Apart from the bus service, the provision of a private vehicle to the worker to commute to work will not be subject to income tax.
How is a Transportation Card / Ticket Provided as Transport Benefit Taxed?
Another method preferred by employers in reimbursing transport expenses including the road fees paid to the transportation cards of the workers. In this case, the fare is paid to the worker as a credit to the road card, not as cash or the employer buys road tickets for the employee so that they can use it in transportation vehicles. In this application, the worker can only use the transportation card or ticket when traveling to and from work.
The provision of the transportation card, ticket or payment means used by the employer was exempted from income tax up to a certain amount in accordance with the new regulation. When the employer provides this benefit, up to 12 lira of the paid road fee on a working day basis (for 2020) will not be subject to income tax. For the aid exceeding 12 liras per day, income tax will be calculated over the excess.
How will the Transportation Fee Exemption be Applied?
The income tax exemption of 12 lira, applicable in case of the use of the transportation card, ticket or means of transportation, provided by the employer, will only be valid within the framework of certain rules:
- The exception will apply to situations where the employer does not provide transportation (such as a bus service) to the collective workplace. If the employer provides bus service for the transportation of the workers and also provides transportation card or ticket assistance, all of this assistance will be subject to income tax.
- Income tax exemption may be applied to benefits such as public transport card / ticket provided by the employer to the employee who cannot benefit from this benefit while providing bus service to other employees.
- Benefits paid to the employee’s account in cash are not exempt from income tax.
- For the exemption to be applied, the road card or ticket provided to the employer must be valid in the transportation vehicles used by the worker on his way to and from work.
- Amounts paid only for business days will be exempted. Payments made for non-working days are excluded from the scope of the exception.
- Aid is to be documented with an invoice or a receipt.
- In the event that the location where the bus service will be used by the employer is remote to the places where the worker resides, if the employee uses public transportation to reach the bus service, the transportation card or ticket to be provided by the employer for this road expense will also be evaluated within the scope of the exception.
- Exception will not be applied for days when the worker cannot come to work for various reasons such as medical leave and holiday. The transportation expenses subject to the exemption made in advance for the days when the employee is unable to come to work can either be corrected by the employer in the relevant month or deducted from the transportation expense paid in the next month.
Is Social Security Premium Deducted From Transport Expenses?
There is no exception to Law No. 5510 on transport expenses paid by employers to employees. Just like the income tax, there is a premium calculation on the SSI side over the cash paid.
Non-cash benefits in the form of transportation card, transportation vehicle ticket or the provision of payment tools is accepted as aid for SSI and no SSI premium deduction is made. The same rule applies for food cards such as Sodexo. These non-cash benefits are not included in earnings subject to premiums in accordance with Article 80 of Law No. 5510. Therefore, SSI shares are not calculated based on it.