Withholding Deductions Consultancy
Withholding Deduction Consultancy… Withholding (stoppage), a word that is frequently heard in conversations about accounting and tax payments, can be defined as the tax collected at the source in its simplest sense. In other words, withholding is a sort of tax. Yet, even though it is a term we often come across in our daily life, it is quite natural not to have detailed information about it. However, it is a fact that withholding tax is a concept that is closely related to many people who provide and/or professional services or generate income. If you would like to have more sophisticated information about withholding tax; let us take a closer look at withholding rates, calculation methods and key payment terms.
What is Withholding Tax?
The tax system applied in Turkey obliges the tax earners to declare their earned income and pay tax in the amount calculated by taking the submitted, written declaration into account. Nonetheless, in some cases, income is deducted before the tax return is filed. Withholding tax is a type of tax collected by deducting the tax amount calculated in accordance with a real person’s or a corporation’s income before transferring it to the income owner and depositing it to the tax office on behalf of the business owner.
For example, when you, as an employer, pay an employee for a professional service, you are obliged to deduct a certain amount of withholding tax from the amount you pay and deposit the relevant amount with the tax office. Therefore, your employee is not required to declare and pay the amount of tax on his/her fee for the professional service provided.
Articles 15 and 30 of the Corporate Tax Law and Article 94 of the Income Tax Law; Payment types subject to withholding are listed. Also in the same articles, the withholding tax rates that full and limited taxpayers are obliged to pay are also specified.
The purpose of withholding tax is to reduce tax costs and to ensure that tax collection can be done in a more secure way. As withholding tax is withheld before paying, it ensures faster payment of tax revenues and reduces the risk of loss or leakage.
What is the Purpose of Withholding?
Withholding tax is a type of tax collected by deducting the tax amount of corporate and income tax-related earnings before transferring them to the income owner and depositing them to the tax office on behalf of the business owner. While the withholding cannot be expressed in a fixed amount, it varies depending on the payment type. Besides, withholding is calculated as a percentage of total earnings.
The purpose of withholding is to ensure that tax collection can be done more securely and to reduce tax costs. Since withholding tax is deducted before it passes to the income owner, it helps to pay tax income faster and to reduce the risk of leakage.
Most incomes from securities, particularly stock and bond gains, are taxed through withholding. Investors do not need to submit a separate declaration since the deduction is made by the intermediary parties or bank where the transactions are made.
What Does Withholding Deduction Mean?
Withholding tax is a type of tax collected by deducting the tax amount for corporate and income tax-related earnings before the income is transferred to the owner and depositing it to the tax office on behalf of the owner of the business. While the withholding cannot be expressed in a fixed amount, it varies according to the payment type.
What is Rental Withholding?
Payment types such as rent payments, dividends, employee wages and self-employment payments are all subject to withholding tax. Rent withholding is only valid in the case of commercial real estate leases. The person paying the rent is obliged to pay the rental withholding before handing over the rental income to the owner.
How to Calculate Withholding Tax?
Withholding tax calculation is based on tax bracket rates and gross wages updated annually. The deduction rate applied in the rental withholding is 20%. Therefore, the withholding tax deduction to be made can be found by calculating 20% or one-fifth of the gross rental amount.
Wage withholding is collected on the remaining amount after SGK deduction is made from the relevant gross wage amount. According to the 2021 income tax schedule; While 15% tax rate is applied for incomes up to 24.000 TL (lowest five), a 40% tax rate is applied for incomes over 650,000 TL (highest five). You can visit the Tax Guide tab to review the tax guides for previous years.
When should Withholding Tax be paid?
Withholding payments are made in line with the calendar issued by the Revenue Administration and updated at the beginning of each year. Taxpayers who pay within the scope of a business agreement can make their payments monthly or quarterly. Withholding tax payments must be made by submitting a concise declaration until the 26th day of the month following the payment for monthly payments, and until the 26th day of the month following the third month for quarterly payments. Withholding tax on taxes declared through annual income tax return is paid in two equal instalments in March and July of each year.
Investment information, comments and recommendations contained herein are not within the scope of investment consultancy. Investment consultancy services are offered individually by authorized institutions, taking into account the risk and return preferences of individuals. The comments and recommendations contained herein are of a general nature. These recommendations may not be suitable for your financial situation and risk and return preferences. Therefore, making an investment decision based solely on the information contained herein may not yield results that meet your expectations.