Employee Tax Review Processes As companies grow globally, their tax strategies must be flexible and sustainable.
Our company helps them to understand the tax inspections, evaluate the risks and harmonize them in the Tax Inspection Process Management and future business models within the scope of the Tax Inspection that may occur during the International Assignment Process.
Employee Tax Review Processes
Income tax concerns almost everyone living in our country, and it occupies an important place in business life for companies and individuals, both as workers and employers.
In accordance with Article 1 of the Income Tax Law, the income of real persons is subject to income tax. Earnings and revenues subject to income tax are defined in seven different groups listed below; Different taxation principles have been determined for each income group.
- Commercial Earnings,
- Agricultural Earnings,
- Self-Employment Earnings,
- Real Estate Capital Revenues,
- Security Capital Revenues,
- Other earnings and
In which cases the income tax return should be submitted, has been set out separately according to each income type and taxpayer. Taxes collected through withholding constitute the weight of the income tax, and the most important part of the income subject to withholding is wage income.
Taxation of Wage Income
In accordance with Article 61 of the Income Tax Law; It is defined as the benefits that can be represented by money, provided with money and in-kinds given to employees in return for service, subject to the employer and connected to a specific workplace. In Article 94 of the same Law, employers are obliged to withhold tax as a deduction from the income taxes of the beneficiaries on the wages paid to the service personnel and the payments considered as wages.
In the Turkish tax system, it is envisaged that wage incomes are mainly taxed by withholding tax. Commercial companies are obliged to pay the income tax calculated by deducting the income tax from the wages paid to the service people on behalf of the service people. While all kinds of benefits represented by the money provided by the employer are added to the gross amount, very few payments such as private pension/health insurance can be deducted in the determination of the income tax base. Since the calculated income tax is paid to the tax office, a list on the basis of names is not requested, so the tax office does not have the information about which employee receives and how much.
In the event that taxed wage income is obtained from a single employer through withholding, it is not possible to file an annual income tax return for this income. On the other hand, those who regularly engage in commercial and professional activities, who exceed the limits of exceptions and declarations in the Law; Those who earn income such as rent, dividend and wage income from more than one employer must also declare their income by filing an annual income tax return. Since most of the employees receive wage income from a single employer and income tax withholding is made by the employers on these incomes, the cases where a declaration is made for wage income are very limited. For example; Pursuant to Article 95 of the Income Tax Law, it is not possible to withhold tax on the wages of service professionals who receive their wages directly from an employer in a foreign country, and these incomes must be declared with an annual income tax return.
Assignment of Foreign Employees in Turkey and Taxation of Their Earnings
It is frequently encountered that employees assigned from abroad to work in Turkey enter the Turkish sovereignty area in terms of taxation, especially in personnel assignments of multinational companies operating in our country. multinational companies; It can perform the regional leadership task of the regions in which it is organized, such as the Middle East, the Balkans, Central Asia, and the Arabian Peninsula, with a company residing in Turkey and foreign employees assigned to that company.
Persons assigned from abroad to work in Turkey with a service contract may also declare their worldwide income and/or the parts of their wages paid directly from abroad. While evaluating the situation of employees assigned from abroad to work in Turkey against income tax, it is necessary to take into account the provisions of the Double Taxation Agreements to which the Republic of Turkey is a party, as well as the provisions in our local legislation. In cases where the provisions of the Double Taxation Agreements are taken into account, the obligation to declare the wage income directly received from abroad frequently arises in Turkey.
In principle, the personnel assigned to work in Turkey from abroad can work in Turkey; It is possible thanks to the work permit obtained as a result of the application made to the Ministry of Labor and Social Security.employment of persons who do not have a work permit; It is an illegal practice that causes employees and employers to face some penal sanctions. For this reason, foreign nationals must obtain a residence and work permit before starting to work in Turkey.
The provisions of the Turkish Income Tax Law are also valid for the taxation of the wage income of foreign personnel working in Turkey. For example, if the salary payments of a person who has started his duty by being appointed from abroad in a company of a multinational group of companies in Turkey are made by the company in Turkey and the person does not have any other income, the company in Turkey will pay the taxes by withholding income tax on the entire wage of this employee, It will not be possible to file an annual income tax return.
On the other hand, income tax withholding will not be possible if the wage payment of the foreign employee is made in the country of residence or in the country of citizenship before his/her assignment in Turkey. In such a case, taking into account both our local legislation and the provisions of the Double Taxation Agreement, wage payments made by a resident company abroad may be subject to income tax in Turkey and this may need to be declared with an annual income tax return.
There is not yet a central tracking system in our country regarding the tracking of tax returns of foreign employees. However, the fact that the Social Security Institution has started to use more central control mechanisms in the follow-up of social security premium receivables shows that similar practices may be implemented in the future in the field of income tax.