1.1 Income Tax Base & Calculation :

According to Income tax law article 1 salaries and wages are subject to income tax. Salaries and wages which will be subject to income tax should be;

• Rendered or accounted for in Turkey.
• Fees, allocations, dividends and the like paid to chairman, directors, auditors and liquidation officers.

Income derived from dependent personal services is subject to the income tax.

An employment service will be considered as having been evaluated in Turkey, if the salary amount is paid in Turkey or it is booked as cost or expense by the Turkish entity.

In determining taxable income, expenses allowable under the income tax law are deducted from gross revenue.

Individuals in Turkey who work for nonresident entities whose legal and business headquarters are not located in Turkey and who are paid in foreign currency are not taxed on their salaries if all of the following conditions are met (this exemption is usually applicable for liaison office employees):

Article 23 of Income Tax Law states that the salaries paid in foreign currency to the employees working under foreign-based taxpayers are exempted from income tax. Within the context of Article 94 of Income Tax Law: Salary payment will be made of the earnings which the foreign-based taxpayers generate abroad. The payments will be made by the company abroad by transferring the money on the Liaison Office’s bank account in Turkey.

The nonresident entity pays the salaries out of earnings derived abroad; The salary payments are not charged as expenses against profits taxable in Turkey; and The amount of compensation is brought into Turkey as foreign currency.

Income tax calculation for salary is made from income tax base which formulated as below;

Income Tax Base=Gross Salary- Social Security Employee Premium(14% for normal employees-7,5% for retired employees)- Unemployment Insurance Employee Premium(1% for normal employees- 0% for retired employees)

Income tax rate is between %15-%35. Income tax rate is base on accumulated income tax base. We can find which rate that will be used for income tax calculation but adding each months income tax base until at the end of the calendar year. Accumulated income tax will be 0 at the beginning of the year.

Income tax rates are as below for 2019;

Employers must withhold income tax from salaries and wages paid to employees. All kind of WHT shall be declared monthly on 26th day and paid on 26th day of the following month of payment (whether in cash or in accrual).

1.2 Tax Credits on Salary & Wages :

“The Minimum Living Allowance” can be deducted from the tax on employment income. The minimum living allowance base applicable for each month of employment is; 50% of the monthly gross amount of legal minimum wage that is effective at the beginning of the calendar year (TL 2.558,40 for 2019) for the employee himself, 10% of the monthly gross amount of legal minimum wage mentioned above for a spouse who is unemployed and does not earn income 7,5% of the monthly gross amount of legal minimum wage mentioned above for the first two children and 5% for other children. The tax credit is calculated by multiplying the total minimum allowance amount by 15%. However, the credit cannot exceed the total tax calculated on the employment income and no refund is granted in the event of an excess amount.

Minimum Living Allowance is not applicable for non-resident individuals who derive employment income in Turkey.

1.3 Deductions & Exmeptions :

In determining taxable amount of salaries and wages the following expenditures are allowed to be deducted from gross amount:

• Legal deduction made according to various laws or regulations,
• Payments made for pensions,
• Payments made for various insurances,
• Payments made for labor union membership,