Withholding Tax Deductions and Provisional Tax Refunds
Withholding Deductions and Provisional Tax Refund, Withholding, a word that is frequently heard in conversations about accounting and tax payments, can be defined as tax deducted at source in the simplest sense. In other words, withholding is a type of tax. However, although it is a term you frequently come across in daily life, it is quite natural that you do not have detailed information about withholding. However, it is a fact that withholding tax is a concept that is closely related to many people who receive professional services or generate income. If you want to have more detailed information about withholding tax; Let’s take a closer look at withholding rates, calculation method and payment terms.
What is Withholding Deduction Refund?
As it is known, with the Law No. 7338, which entered into force on October 26, 2021, the income tax withholding deducted at the rate of 4% from plant support payments and 2% from animal support payments within the scope of agricultural supports paid to producers has been abolished. Thus, the income tax amounts collected through withholding before the date in agricultural support payments will be returned together with interest, if an application is made to the tax offices.
In order to be able to pay the withholding tax retrospectively for 5 years, the producers must apply to the tax offices together with the interest. Citizens must apply to the tax authorities until May.
What is Withholding Tax?
The tax system applied in Turkey obliges the winners to declare their earned income and pay tax in the amount calculated by considering the said declaration. However, in some cases, income is deducted before the tax return is filed. Withholding tax is the type of tax collected by deducting the tax amount related to income and corporate tax 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 pay an employee for professional service as an employer, you must 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 payment for professional service.
Articles 15 and 30 of the Corporate Tax Law and Article 94 of the Income Tax Law; Payment types subject to withholding are listed. Again 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 more securely. As withholding tax is withheld before paying, it ensures faster payment of tax revenues and reduces the risk of loss or leakage.
What is Rental Withholding?
Payment types such as rent payments, dividends, employee wages and self-employment payments are 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 Get Withholding Deduction Refund?
In order to benefit from this right, persons registered in the Farmer Registration System (ÇKS) must apply for a refund with a petition to the tax offices. The petition must also include the bank account number from which the refund can be made.
What are the Conditions for Receiving Withholding Refunds?
To benefit from this right;
- You must be registered in the Farmer Registration System (ÇKS).
- The farmer should apply to the authorized tax offices within the statute of limitations.
- The tax office to which the application can be made can be freely determined by the taxpayer.
- In addition, taxpayers can submit their petitions to the relevant tax office by hand or by mail, or electronically via the Interactive Tax Office (ivd.gib.gov.tr).
- The condition of not filing a lawsuit and abandoning the lawsuits is sought.
- According to the previous decisions regarding the abandoned lawsuits and the legal remedy has not been exhausted, no action will be taken regardless of whether the parties are notified or not, and the lawsuits filed by the administration will not continue.
- This provision will not be applied regarding the extradition requests of those who have a final judicial decision.
How to Calculate Withholding?
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), 40% tax rate is applied for incomes over 650,000 TL (highest five).
When is the withholding paid?
Withholding payments are made in accordance with the calendar issued by the Revenue Administration and are updated at the beginning of each year. Taxpayers who make payments under an employment contract can make their payments monthly or quarterly. Withholding payments must be made by submitting a concise declaration until the 26th day of the month following the monthly payments, and until the 26th day of the month following the third month for quarterly payments. The withholding tax payment of the taxes declared on the annual income tax return is paid in two equal installments in March and July of each year.
Rent withholding payments are announced in March of each year. Payments are made in two equal installments in March and annually in July. If you want to make your tax payments safely, quickly and easily, you can get more detailed information by contacting us.
Provisional taxes paid quarterly can be deducted from the tax calculated on the annual return. If there is a remaining amount, it can be deducted from the taxpayer’s other tax liabilities. According to the communiqué, this transaction must be done ex officio by the tax office. If there is any remaining provisional tax amount, it is returned to the taxpayer if requested in writing until the end of that year.
Provisional tax is an application introduced to minimize the time inconsistency between the acquisition of the income and the taxation of the said income. The said application is regulated in our tax legislation in the repetitive Article 120 of the Income Tax Law and in Article 32 of the Corporate Tax Law No. 55202. In the repetitive article 120 of the Income Tax Income Tax Law, according to the provisions of the Income Tax Law regarding the determination of commercial or professional income (with discounts and exceptions, Tax Procedure Law No. They are obliged to pay provisional tax at the rate applied to the first income segment of the tariff in Article 103 of the Income Tax Law, on their quarterly earnings of the relevant accounting period determined (taking into account the provisions of the Law).
Therefore, the owners of commercial income subject to income tax in the real method and the self-employed pay a temporary tax of 15% on their earnings to be determined quarterly, to be deducted from the income tax of the current taxation period.