Turkish Labor Law
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As Ramadan (18th June 2015 – 16 th July 2015), the month of fasting for Muslims is approaching, we would like to touch briefly on the subject of allowances and benefits, whether cash or in kind, provided for fasting employees during this special month.
Though not all of the employees are fasting, many companies close their dining halls in their premises and prefer to provide meal cash allowance, or basic food items (such as milk, yogurt, oil, flour, sugar, macaroni, cheese, tomato sauce) for fasting employees, and meal vouchers, checks or tickets for non-fasting to have lunch out of the premises. However these allowances, cash or in kind are deemed as a part of the wage, we had better to examine them with respect to income tax and social security premium liability.
First to keep in mind, as per the Turkish Constitution and Article 5 of Labor Law there can be no discrimination amongst people or employees based on religion and sect etc. So the below regulations will apply in a way not causing any inequality between fasting and non-fasting employees.
Are Allowances Included in The Earnings Subjected to Tax or Social Security Premium?
Meals provided by employers in the premises of a company are exempt from income tax and employers may write of the related amounts as a business expense with no withholdings, also the Value Added Tax (VAT) write-off is possible. And these meals will not be included in monthly earnings subjected to premium.
But in view of the fact that, in calculation of the base of severance pay (the last 30 days’ wage), the money paid and the other regular contractual and statutory benefits in kind provided by employer should be taken into account, meals provided in premises will be included in the base of severance pay.
Meal Cash Allowance
Where an employer chooses to pay in cash for the meal instead of providing it in premises or through a restaurant or caterer, this payment is considered as part of the wage and is subject to income tax withholding 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 (2,55 TL for the second half of the year 2015). Exceeding part is subject to premium contributions.
Benefits in Kind
In case of supplying foodstuff for employees, amount of these food items are not taken into account in calculation of earning subjected to premium, for they are regarded as benefits in kind according to Social Insurance and General Health Law, Article 80.
But total net invoice amount of supplied foodstuff is subjected to income tax, as per Income Tax Law, Article 63.
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.
Summary
Firstly it should be noted that, these are general provisions about meal allowances, and not specifically designed for Ramadan. Our purpose in this article is to point out the alternative ways of providing meal allowances, as Ramadan with fasting employees will/may inevitably force you to change your meal allowance policy.
Here are the methods of providing meal allowance, and their tax and premium liabilities:
- Meals provided in the premises: exempt from income tax, and not subject to social security premium contribution. However in the calculation of severance pay base these meals will be included.
- Money paid to employees for their meal: subject to income tax. Only daily 2,55 TL ( 6% of daily gross minimum wage for 2015) of this payment is not subjected to premium contributions.
- Supplying foodstuff: subject to income tax; not subject to premium contributions.
Providing meal voucher/checks for virtually worked days: up to 13.00 TL daily (for 2015) is exempted from income tax; not subject to premium contributions.
