Legal News

How the Gift Cheques and Lottery Tickets are Treated in Payroll?

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Employees are provided with some benefits in many occasions such as New Year, feasts and other special days. Accounting treatment of these benefits may be different from the point of tax and social security contribution in comparison with the normal wage.

GIFT CHEQUES AND SSI PREMIUM CONTRIBUTION

As a rule benefits in kinds (payments in kind by employer provided for employees’ personal or social needs) are not subject social security.

As per 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."

However, it is important how and where to use such gift cheques, vouchers or coupons. If these are used for a certain good or service they are deemed as benefit in kind, but as it is seen in practice, gift cheques are used to buy various type of goods and services in the markets.

As a result, the gift cheques are not exempt from SSI premium and the amount of the cheque should be included in payroll as a wage.

FROM THE POINT OF TAX

Article 61 of Income Tax Law No. 193 defines the wage as “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.

As per above definition the gift cheques are subject to income tax and should be included in payroll as wage.

NATIONAL LOTTERY TICKET

Some companies traditionally provide national lottery ticket for their employees. These lottery tickets are treated as in kind benefit, and

  • Exempt from SSI premium contribution, but
  • Subject to income tax.

Seamen Contracts can be arranged in Foreign Currency

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Employment contracts concluded with seamen can be based on foreign currency.

As we informed before, a ban on usage of foreign currency in some transactions and contracts made between real persons or the legal entities settled in Turkey by the Presidential Decrees (No 32 and 85).

However, some exemptions had been introduced later on by Communiqué (2018-32/51) issued in Official Gazette numbered 30557, dated 6 October 2018, permitting that employment contracts concluded with the persons, who are resident in Turkey but do not have citizen-ship bond with the Republic of Turkey, can be arranged as foreign currency or indexed to foreign currency.

Now by the latest amending Communiqué published in the Official Gazette (16 November 2018, numbered 30597) the seamen has been included in the scope of exemptions, meaning that they can be paid in foreign currency.

The other main points as regard to employment and service contracts are as follow.

  • Turkish settled companies can conclude employment and service contracts with foreign employees (working with work permit) based on foreign currency
  • Foreigners working as consultant (by consultancy or montage contracts up to 3 months) can be paid in foreign currency.
  • Branches of foreign based companies, liaison offices, and foreign companies directly has the partnership with 50% or over shares, as well as the ones in free trade zones may arrange their employment and service contracts as foreign currency.
  • Service contracts related to activities performed abroad by Turkish settled companies are also exempt from obligation of using Turkish Lira.
  • Transactions and contracts made with foreign based real persons or legal entities can be agreed in foreign currencies.
  • Also, foreign currency earning bodies can be exempted under certain conditions.

CONTRACTS NOT IN THE SCOPE OF EXEMPTION WILL BE CONVERTED TO TRY

  • Current contracts agreed on foreign currency (and not in the scope of exemption specified in above said Communiqué) will be converted into Turkish Liras within 30 days from 13 September 2018.
  • Contracts made between Turkish nationals and Turkey settlet companies on foreign currency basis shall be converted to TRY.
  • At first step parties may agree on the contract price between themselves.
  • In case the parties cannot agreed on the TRY price, 2 January 208 effective exchange rate of Turkish Central Bank (USD: 3,77) will be taken as a base in the contracts concluded before that date. For the new contracts, monthly increases in producer price index (PPI/TÜFE) between 2 January and the date of new contracts will be reflected to price.
  • In case of disagreement parties will apply to arbitration.

Only Soft Copy Documents in Work Permit Applications

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As is known the renewed work permit application system has come into service as of 26th February 2018. Applications are being made through e-devlet system by using electronic signature, and there is no need to send application form, petition or any other document to the Ministry.

Directorate General of International Workforce recently added a “İZİN SONRASI İŞLEMLER” (TRANSACTIONS AFTER PERMIT) menu in its website, and announced that following transactions related to work permit owner foreigners will be processed through this menu:

  • START OF EMPLOYMENT NOTIFICATIONS,
  • CANCELLATION OF WORK PERMIT REQUESTS,
  • NEW WORK PERMIT CARD REQUESTS (FOR STOLEN OR LOST ETC.),
  • VARIOUS OTHER REQUESTS RELATED TO WORK PERMIT.

All of these applications will be processed through above said menu by uploading soft copies and hard copy documents and petition will not be accepted.

Please visit our website for detailed information on Registered Electronic Mail Obligation: http://turkishlaborlaw.com/news/legal-news/593-electronic-signature-required-in-new-work-permit-application-system

Foreign Labor Quota in Turkey

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Turkish companies must employ certain number of Turkish citizens for applying work permit or hiring foreigners. In other words, number of employed work permit holders cannot exceed the company's total labor force.

Ratio of foreign employee depends on the sector, qualification of foreigner and the international treaties as it will be seen below.

  • Five Turkish citizen employee for each foreigner,
  • In case the foreigner applying for work permit is a co-partner of the company, above said condition is required for the last six months of one-year work permit,
  • For foreigners to be employed in associations and foundations, representative agencies of foreign countries’ airlines in Turkey, in education sector and home services sector, no quota is necessary,
  • For occupations requiring expertise and proficiency in the entertainment and tourism-animation organization and firms, there will be no need for separate quota application on condition that at least 10 Turkish citizen persons are employed in these firms.
  • In the existence of bounding provisions in bilateral or multilateral agreements to which Turkey is a party/ for the foreigners who will be employed in buying of services or goods from public institution and agencies via contract or tender no quota is needed.
  • In the case the job requires advanced technology, or in case there is no Turkish professional with equal qualification, quota will not be applied. However, General Directorate’s approval is necessary,
  • In Foreign Direct Investment with Special Features, quota will be applied by taking the number of Turkish citizens working in all workplaces of the company countrywide
  • At the workplace for which work permit is requested, number of working refugees under temporary protection cannot exceed %10 of the employed Turkish citizens.

PROFESSIONAL COMPETENCE CERTIFICATE WILL BE OBLIGATORY FOR SOME PROFESSIONS

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Some members of professions cannot be employed on arduous and dangerous work without Professional Competence Certificate after 11th November 2019.

According to Communique (SIRA NO: 2018/1) published in Official Gazette No. 30592, dated 11 November 2018, employees working in the professions included in the annexed list must obtain professional competence certificate within one year, otherwise they cannot be employed these professions.

Some of the common professions included in the list are:

  • construction workers
  • turner
  • forester
  • milling machine operator

ADMINISTRATIVE FİNE

Starting from 11 November 2019, 500,00 TRY administrative fine will be imposed for each employee working without professional competence certificate in arduous and dangerous work.

For the full list please visit:

=http://www.resmigazete.gov.tr/eskiler/2018/11/20181114.htm

HOW TO CALCULATE HOURLY WAGE?

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Wage can be determined as monthly, daily, hourly, as a piece or job rate or on a percentage basis.

Payment of wage must be on monthly basis at the latest. Payment period can be reduced down to one week.

Hourly wage is the amount paid to employee for per hours worked. As the wage usually is remunerated in monthly or weekly basis, calculation of hourly rate may be complex sometimes.   Also it is important to calculate hourly wage for overtime work.

CALCULATION OF HOURLY WAGE

1 – Employee contracted in monthly basis

As a rule hourly wage is calculated as gross amount. In case the wage remunerated in monthly basis, monthly wage should be divided to monthly working hours.

For example: Monthly salary is 3.000 TRY

Month is considered as 30 days in Labor Law.

Daily work hours: 7,5 hours.

Monthly work hours: 225

Hourly wage: 3000/30/7,5 = 13,33 TRY

Or 3000/225 = 13,33 TRY

2 – Employee contracted hourly basis

In the moths with 31 days monthly work hours will be taken as 31*7,5 =232,5

In the months with 28 days monthly work hours will be taken as 31*7,5 =232,5 = 210

CALCUALTION OF OVERTIME WORK

The wage for each hour of overtime work is paid by raising the hourly rate of the regular working wage by fifty percent. In other words, wages for each hour of overtime shall be remunerated at one and a half times the normal hourly rate.

Example: Worked 50 hours within the week. First we find the hourly wage of employee as below.

Monthly working hours: 225

Monthly Salary: 2.029,50 TRY

Hourly wage 2.029,50 /225 = 9,02 TRY

50% increased hourly wage: 9,02*1,5 = 13,53 TRY

Overtime: 50-45=5 hours.

Overtime remuneration: 5*13,53 = 67,65 TRY.

CALCULATION OF WORK AT EXTRA HOURS

In work at extra hours, the wage for each extra hour is paid by raising the hourly rate of the regular working wage by twenty-five percent; in other words each extra hour shall be remunerated at one and a quarter times the normal hourly rate.

Example: Monthly working hours is 40 hours. Employee worked 43 hours within the week. Monthly salary is 3.000,00 TRY. First we find daily working hours.

Daily working hours = Weekly work 40 hours / 6 days = 6,667 hours.

Monthly work hours = 6,667 * 30 days = 200 hours.

Hourly wage = 3.000 / 200 = 15 TRY

Then we find 25% increased wage:

25% increased wage = 15 *1,25 = 18,75 TRY

Work at hours: 43 – 40 = 3 hours

3 hours * 18,75 TL=56,25 TRY.

If the employee who has worked overtime or at extra hours so wishes, rather than receiving overtime pay he may use, as free time, one-hour and thirty minutes for each hour worked overtime and one hour and fifteen minutes for each extra hour worked.

Turkey Stays on Summer Time

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Turkey switched to permanent summer time and did not set back the clocks while many of the countries in the World and Europe have already set back their clocks one hour back on 28 October, 2018.

Country’s summer time (DTS) will be the country’s non-changing standard time fixed on GMT +3.

Please be reminded that an extra 1 hour time difference have occurred with the countries who passed to winter time. In European and other countries in which DST is ended on October 28, it is important for individuals and companies, who are in communication with Turkey, to take this extra an hour time-lag into consideration starting from 28 October

TIME ZONE OF TURKEY

Turkey's time is Eastern European Time (EET).

Standard (and stable) Time zone will be UTC/GMT +3 hours. There will be no winter time adjustment anymore.

Witholding Tax Applications Postponed

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Withholding Tax and Monthly Premium Service Document applications, which had been announced earlier to start on 1st October 2018 are now postponed to 1st July 2019.

As is known, it is stipulated by the Law No. 6728 that withholding tax returns and SSI e-declarations to be combined in a single form under the name of “Withholding Tax and Monthly Premium Service Document” and submitted only to the tax offices until the 23rd of the following month.

Now, with the Ministry of Treasury and Finance Communique published in Official Gazette, dated 27 October 2018, numbered 30578, the application of Withholding Tax and Monthly Premium Service Documents are postponed to 1st July 2019. Until this date, SSI declarations and withholding tax returns will be submitted separately, as before.

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