Navigating employment taxes in Turkey involves understanding the distinct obligations placed upon both employers and employees. The system is primarily based on contributions to social security and withholding of income tax from employee salaries, ensuring compliance with national regulations. Employers play a crucial role in calculating, withholding, and remitting these amounts to the relevant authorities on behalf of their workforce.
The Turkish tax year aligns with the calendar year, running from January 1st to December 31st. Employers are responsible for monthly payroll calculations, including the determination of gross salary, application of social security contributions, calculation of income tax and stamp tax, and ultimately, the payment of net salary to the employee. Understanding the specific rates, thresholds, and reporting requirements is essential for compliant operations in Turkey.
Employer Social Security and Payroll Tax Obligations
Employers in Turkey are required to make significant contributions to the social security system on behalf of their employees. These contributions cover various branches of social insurance, including long-term insurance (pensions), short-term insurance (sickness, maternity, work accident, and occupational disease), and general health insurance. The contribution base is typically the employee's gross salary, subject to minimum and maximum limits which are updated periodically.
The standard employer social security contribution rate is 20.5% of the employee's gross salary. This rate can be reduced by 5 percentage points (to 15.5%) if the employer meets certain conditions related to timely payment of contributions and reporting. Additionally, employers contribute to the Unemployment Insurance Fund at a rate of 2% of the gross salary.
| Contribution Type | Standard Employer Rate | Discounted Employer Rate (if applicable) |
|---|---|---|
| Social Security Contributions | 20.5% | 15.5% |
| Unemployment Insurance | 2.0% | 2.0% |
| Total | 22.5% | 17.5% |
Note: These rates are applied to the employee's gross salary, subject to annually determined minimum and maximum contribution bases.
Employers are also responsible for calculating and withholding Stamp Tax from the employee's gross salary at a rate of 0.00759% (or 7.59 per thousand). This withheld amount is then paid to the tax office by the employer.
Income Tax Withholding Requirements
Employers are legally required to withhold income tax from the monthly salaries paid to their employees under the Pay As You Earn (PAYE) system. The amount of income tax withheld depends on the employee's cumulative taxable income earned during the calendar year and the applicable progressive income tax rates.
The taxable income is calculated by deducting the employee's share of social security contributions and unemployment insurance contributions from the gross salary. The resulting amount is subject to income tax based on the following progressive tax brackets (rates and thresholds are subject to annual adjustment):
| Cumulative Taxable Income (TRY) | Tax Rate |
|---|---|
| Up to [Threshold 1] | 15% |
| [Threshold 1] to [Threshold 2] | 20% |
| [Threshold 2] to [Threshold 3] | 27% |
| [Threshold 3] to [Threshold 4] | 35% |
| Above [Threshold 4] | 40% |
Note: Specific threshold values for 2025 will be officially announced and are subject to change annually.
Employers must track each employee's cumulative taxable income throughout the year to apply the correct tax rate bracket each month.
Employee Tax Deductions and Allowances
Employees in Turkey are subject to deductions for social security contributions, unemployment insurance contributions, and income tax, which are withheld by the employer.
The employee's share of social security contributions is 14% of their gross salary, and their share of unemployment insurance is 1% of their gross salary. These amounts are deducted from the gross salary before calculating the taxable income for income tax purposes.
| Contribution Type | Employee Rate |
|---|---|
| Social Security Contributions | 14.0% |
| Unemployment Insurance | 1.0% |
| Total | 15.0% |
Note: These rates are applied to the employee's gross salary, subject to annually determined minimum and maximum contribution bases.
While the primary deductions are social security and unemployment insurance, certain other deductions or allowances may apply, such as specific disability allowances or contributions to private pension schemes, which can affect the taxable income calculation. The personal allowance system was largely replaced by the minimum living allowance (AGI), which was integrated into the minimum wage calculation, effectively increasing the net minimum wage rather than providing a separate tax allowance deduction.
Tax Compliance and Reporting Deadlines
Employers in Turkey have strict monthly reporting and payment obligations.
- Monthly Social Security Declarations: Employers must submit a monthly declaration (Aylık Prim ve Hizmet Belgesi) detailing employee earnings and social security contributions. This declaration is typically due by the 23rd of the following month.
- Monthly Social Security Payments: The calculated social security contributions (both employer and employee shares) must be paid by the end of the following month.
- Monthly Withholding Tax Declarations: Employers must file a monthly withholding tax return (Muhtasar Beyanname) reporting the income tax and stamp tax withheld from employee salaries. This declaration is typically due by the 23rd of the following month.
- Monthly Withholding Tax Payments: The withheld income tax and stamp tax must be paid by the 26th of the following month.
For employers with a small number of employees (typically 10 or fewer), the withholding tax declaration and payment may be done quarterly instead of monthly.
Annual reporting requirements include submitting an annual summary of income tax withholdings for each employee.
Special Tax Considerations for Foreign Workers and Companies
Foreign individuals working in Turkey are generally subject to the same income tax and social security regulations as Turkish citizens if they are considered tax residents. Tax residency is typically determined by physical presence in Turkey for more than six months in a calendar year. Non-residents are taxed only on their income sourced in Turkey.
Double Taxation Treaties (DTTs) that Turkey has with numerous countries can impact the tax obligations of foreign workers and foreign companies. These treaties may provide relief from double taxation and specify which country has the right to tax certain types of income. Foreign employees from countries with a DTT may be exempt from Turkish social security contributions for a certain period if they continue contributing to their home country's social security system, provided there is a specific social security agreement in place.
Foreign companies employing individuals in Turkey may need to establish a legal presence or utilize an Employer of Record (EOR) service to handle local payroll, tax withholding, and social security contributions compliantly, especially if they do not have a registered entity in Turkey. The tax obligations for a foreign company depend heavily on whether they are deemed to have a permanent establishment (PE) in Turkey. If a PE exists, the company is subject to corporate income tax on the profits attributable to the PE, in addition to employer obligations. Utilizing an EOR can help foreign companies manage these complexities without establishing a local entity.
