Legal News

Withholding Tax And Monthly Premium Service Document Application Postponed To 1 October 2018

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We informed you that “Withholding Tax and Monthly Premium Service Document” application will start as of 1st of July 2018; however the start date is determined as 1st October 2018 by the Finance Ministry’s General Communique issued in Official Journal number 30435, dated 29 May 2018.

As is known, it is stipulated by the Law No. 6728 that “withholding tax returns and SSI e-declarations will 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.

Regulation On Data Controller Registry Issued

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The Regulation on Data Controller Registry has been published in Official Journal numbered 30286, dated 30 January 2017.

As is known, according to Law on The Protection of Personal Data, No. 6698 all natural and legal persons, collecting, processing and transferring personal data are deemed as “Data Controller” and shall be registered in “Data Controller Registry” (VERBİS) before starting personal data processing with some exceptions determined by Personal Data Protection Board (The Board).

NOTICE PAY AND JOB SEEKING LEAVE

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As per article 17 of Turkish Labor Law 4857, both employee and employer can terminate an open-ended employment contract, provided that required notice period is given to other party. In case fixed-term employment contract is concluded only for a defined period of time (with a specified end date) there will not be a notice of termination/notice pay obligation.

The minimum notice periods depend on the length of service as shown below;

* Less than 6 months 2 weeks

* 6 month to 1.5 years 4 weeks

* 1.5 years to 3 years 6 weeks

* More than 3 years 8 weeks.

Notice periods can be substituted by payment in lieu. The employer may terminate the employment contract by paying in advance the wages corresponding to the term of notice. Employee as well may pay the notice payment for terminating the contract (by resignation).

In the presence of just cause for termination parties doesn’t have to observe notice periods.

JOB SEEKING LEAVE

Employee, whose contract is terminated, should be allowed at least two hours job seeking leave within working hours during the notice period. Employee may use these hours as total provided that he/she informs the employer before the termination date.

Job seeking permission is arranged in article 27 of Labor Law;

“During the term of notice the employer must grant the employee the permission to seek new employment within working hours without any deduction from his wage. The time devoted to this purpose should not be less than two hours daily and if the employee so requests such hours may be added together and taken at one time. But if the employee wishes to take these hours at one time, he must do so on the days immediately preceding the day on which his employment ceases and must inform the employer in advance.

If the employer does not grant the permission to seek new employment or allows less time than that stipulated in this Article, he must pay the employee the wages corresponding to the time to which he was entitled.

If the employer makes the employee work during the time to be allowed for seeking new employment, he must compensate the employee twice the amount of wages he is entitled to even for no work during the time which should be allowed for seeking new employment.”

Another important point is that taking the job seeking leave in total doesn’t change the actual the leaving date in SSI..

For example end of notice pay is 31 May 2018 and employee used 3 days leave as total. So he can cease to work on 28 May, but the actual leaving date will be 31 May 2018 from the point of SSI.

 

MEAL ALLOWANCE AND OTHER BENEFIT IN KINDS DURING RAMADAN

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This year’s holy fasting month of Ramadan has started on May 16; and like previous years we are having questions about meal allowances and other benefits provided in Ramadan.

While fasting employees are fasting and not having lunch, some employees are not fasting and continue to have their lunch during the month.

First of all there are no special arrangements for fasting and non-fasting employees in Turkey’s legislation. And it should be bear in mind that as per the Turkish Constitution and Labor Law there can be no discrimination amongst people or employees based on religion and sect. i.e. no discrimination between fasting and non-fasting employees.

SUPPLYING FOODSTUF / RAMADAN PACKAGES

* Meals provided by employers in the premises of a company or through a restaurant or a caterer are exempt from income tax and not subject to social security premium contribution. However as fasting employees don’t have lunch, some companies stop giving meal in their premises and chose to provide their fasting personnel with what can be called "Ramadan Packets" which consist of basic food items.

* In this case, providing Ramadan Packets are regarded as benefits in kind according to Social Insurance and General Health Law, Article 80 and should not be taken into account in calculation of earnings subjected to SSI premium. But total net invoice amount of supplied foodstuff is subjected to income tax, as per Income Tax Law, Article 63.

PAYING CASH FOR MEALS

* If an employer chooses to pay in cash for the meal, this payment is considered as part of the wage and is subject to income tax as per Income Tax Law, Article 61.

* Mail cash allowance is reducible only from daily earning subjected to premium up to an amount not exceeding 6% of daily gross minimum wage valid in relevant month (4,06 TRY for 2018). Exceeding part is subject to premium contributions.

MEAL VOUCHER/CHECKS

* Instead of providing meal allowance in cash or supplying foodstuff, employer may choose to provide employees with meal vouchers or checks enabling them have their lunch outside of workplace. And again these vouchers or checks regarded as benefits in kind are not subject to premium contribution.

* With regard to tax liability there is an exemption, for the virtually worked day in the year 2015, daily amount of meal voucher/check up to 13.00 TL is exempted from tax. (Not including the amounts paid for meal voucher/check not related to virtually worked day.)

* This exemption is applicable only for the meal vouchers/checks used on meals and belonged to virtually worked days. Where they are spend on products other than meals and foods, the amounts paid for them must be considered as part of the wage and must be subject to income tax.

WORK PERMISSION FOR GUEST STUDENTS

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President Erdoğan, speaking in an ınternational student gathering last week, announced that all guest students will be granted work permit, and they can renew the residence permits in their permit own universities.

Also they can get their general health insurance without waiting three months.

Erdoğan point out that there are 115.000 visiting student in the country in the scope of Turkey Scholarship Program, and Turkey aims to increase that figure up to 350.000, and also wants to continue the relationship with these students after graduation.

The promises for the guest students are briefly as follows.

* Both the students and graduates can obtain work permit,

* Guest students have to wait to renew their residence permits; however they will be able to renew these permits in the universities they are studying in.

* They can be registered in general health insurance without waiting three months

WORK PERMIT FOR FOREIGN STUDENTS - IN GENERAL

Work permit for foreign students are arranged in article 19 of International Workforce Law No. 6735.

* Foreign students enrolled in formal education programs at universities or higher education of Turkey may work provided that they obtain work permit.

* Those receiving education at the level of two-year degree or undergraduate study may apply for a work permit after completing their first year and work part time in accordance with Labor Law No. 4857 of 22 May 2003. This restriction is not applicable to postgraduate students enrolled in formal education programs.

* Work permits granted to foreign students will not cancel their valid student residence permit and the rights it provides

INTERNS FROM FOREIGN UNIVERSITIES

* Foreigners applied to receive or already receiving vocational training with an employer are in the scope of work permit legislations.

* Students arriving within the scope of the European Union Education and Youth Programs are exempt from work permit.

* Foreigners who are specified as exempt from work permit in other laws and international bilateral and multilateral agreements and conventions to which Turkey is party may work or be employed without obtaining work permit.

* The foreign students who wish to receive vocational training have to bring their internship file from their school, and not exceed the determined training period.

 

Tax and SSI Premium Debts to be Restructured

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Many of the public receivables, accrued before 31 March 2018, related to taxes and social security premiums, and subsidiary receivables associated with them will be restructured.

After Turkish PM Yıldırım has announced his government's economic package that contains social reforms and restructuring of some public receivables including SSI premiums and tax debts on Monday this week, the “Draft Law on Restructuring Some Receivables,” has been accepted in Plan and Budget commission and expected to get through Parliament well before the elections that will held on June 24, 2018.

SCOPE OF THE LAW

The law will be applicable to following receivables provided that they accrued before 31 March 2018;

* All types of taxes and tax penalties,

* Administrative monetary fines

* Insurance premium, group insurance premium, pension deduction and institution's contribution, unemployment insurance premium, social security support premiums and subsidiary receivables associated with principles receivables (penalties, default interests and late,)

* Customs duties,

* Estate tax,

* The motor vehicle tax and their tax penalties, default interests and late fees.

RESTRUCTURED PREMIUM DEBTS

Only the "Domestic PPI" applied amount of principle receivable will be collected, and delay penalty and default interests will be waived.

In the collection of receivables; Monthly Change Ratio of Domestic Producer Price Index (Domestic PPI / Yİ-ÜFE) will be applied to principal amount of;

"Insurance premium, pension deduction, unemployment insurance premium, social security support premium, irredeemable voluntary insurance premium and group insurance premium, general health insurance premium, and SSI related stamp tax, special transaction tax, and contribution to education" receivables accrued before 31 March 2018

However, the delay penalty and default interests (subsidiary receivables) applied to these principle amounts will not be collected, provided that PPI applied amount of principle receivable is paid.

In short, the amount to be collected = principle amount of receivable*PPI.

The same will be applied to social security support premium receivables, accrued on or before 31 March 2018, related to retired persons who continue to work independently.

Debts may be paid bimonthly in 6-9-12-18 equal installments. First installment and advanced payments should be paid until 31 August 2018.

ADMINISTRATIVE FINES

Half of the principle amount of receivables related to unpaid administrative fines imposed for the acts conducted before 31 March 2018 will be deleted. In other words, "Domestic PPI" will be applied only to half of the principal amount of administrative fine.

TAX DEBTS

Similar principles, such as Domestic PPI will be applied to tax receivables. We will inform you in details when the application circulars are issued.

Combined SSI and Tax Declaration Starts on July

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We would like to remind you that, starting from 1st of July 2018, withholding tax returns and SSI e-declarations will 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.

Pilot application of Withholding Tax and Monthly Premium Service Document has already started as of 1st of January in some of the regions. Now this combined declaration will take start all over Turkey as of 1st of July.

WHAT IS WITH HOLDING TAX RETURN?

As far as the employees of a workplace concerned, withholding tax is income tax withheld from employees' salaries and paid directly to the tax office by the employer.

In Turkey, filing of withholding tax returns is a job only for the Certified Accountants as per their special law. For this reason payroll companies generally calculate the withholding taxes related to employees but don't make tax filing.

WHAT IS SSI E-DECLARATION?

Employee and employer share of SSI contributions are notified online to authorities by "Monthly Premium and Service Document by the 23rd of following the month document belongs to, and premiums should be paid at the end of following month.

Also there are different time limits for notification of new starters and leavers.

PROBLEMS THAT CAN BE FACED

In current application the social security premium declarations and tax returns are dealt with by different departments of a company. It is important to put these units in a good cooperation.

There is also problem of wage confidentiality principle.

Datassist experts are working to find solutions for such problems that can be faced in the application.

We will further inform you in the coming days.

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