This month, a supplement to the minimum living allowance (AGI) will be added to the net earnings in order to compensate for the loss of income due to the income tax increase of 15% to 20% in September.
What is An AGI Supplement?
The AGI supplement was introduced for the first time in 2016, when the minimum wage increase caused a change in the corresponding tax bracket (2nd tax bracket). Due to higher tax, minimum wage earners could not receive the net minimum wage they are supposed to. Therefore, the government introduced an AGI supplement to compensate for the amount of income tax withheld so that the net minimum wage is not affected by the higher tax.
This practice has been enacted with the Law No. 7103, as of March 2018, with the paragraph added to Article 32 of the Income Tax Law No. 193. With this regulation, employees who earn their earnings at the minimum wage every year cannot receive a wage below the net minimum wage (including AGI) of the month they are in. Wage loss caused by the change in income tax bracket is compensated by adding the AGI supplement.
In Which Months Will AGI Supplement Be Made?
The change in the income tax bracket of workers working at the minimum wage coincides with the month of September this year. Therefore, the AGI supplement will be applied to the wages for September-October-November-December. If the 2nd tax bracket has been passed before September due to additional payments, no additional AGI can be applied for the periods before September.
Minimum Wage 2020 = 2,943 Gross
2,943 x 14% = 412.02 SGK Worker Premium
2943 x 1% = 29.43 Unemployment Worker Premium
Income Tax Base = 2,501.55
KGVM = 2.501.55 x 9 (months) = 22,513.95
Upper Limit of Income Tax 1st Bracket = 22,000.
Since the cumulative income tax base of the minimum wage earner in the 9th month is 22,513.95 TL, taxation will apply from the 2nd tax bracket (20%).