All payments, which are treated as wage under Income tax law, are subject to the income tax. As per article 61 of Turkish income tax law (law no. 193) in addition to wage, all other associated income such as allowances, bonuses, anniversary gifts, gratuities, commissions, premiums, compensations and other wage and salary related remunerations including benefits in kind at market value are also subject to the income tax.
Taxable income is determined after the deduction of some allowed expenditures from the gross amount. These deductions explained under article 63 and 89(1) of Law no: 193 on Income Tax as;
(1) Legal deduction made according to various laws or regulations,
(2) Premiums and contributions made to the social security institution.
(3) 50 % of life insurance premiums made by employees on their own behalf or on behalf of their spouse and/or children to private insurance and retirement companies which are resident in Turkey and whose headquarters, registered head offices or business centers are in Turkey, Insurance premiums made by the employees on their own behalf or on behalf of their spouse and/or children for death, accident, disease, disability, unemployment, maternity, birth and education polices provided that total amount premiums deducted shall not exceed %15 of monthly income and yearly amount of minimum wage.
(4) Payments made for labor union membership.
Additionally, following benefits are (fully or partially) exempted from income tax;
- Benefits, provided by the employer in the form of the free meal within the business place or its annexes are excluded from the scope taxable income. In the case of not providing free meal within business place or its annexes , obtaining meal service from the outside providers such as by using meal tickets, income tax exemption will be applicable only up to daily settled limit by law (In accordance with Income Tax General Communiqué with Serial no: 310, – 25 TL – excluding VAT in 2021) . In the latter case, the employer required to pay the price for the meals directly to the meal service provider, or intermediary. Any payment made directly to the employees under the name of the meal or food allowance is subject to income tax. (Article 23 (8) of Income tax law)
- Benefits, paid to employees due to birth and marriage, are exempt from income tax. This exemption is limited up to two months’ salary of the employee. In the excess of this limit, the remaining amount is subject to income tax. (Article 25(5) of income tax law)
- Payments made to the employees in the name of ‘child benefits’ are exempt from income tax. This exemption is applicable for maximum two children and limited to the settled amount received by the government employees. (Article 25(4) of income tax law)
Employee benefits and their exemption amounts 2021;
I. FOLLOWING AMOUNTS ARE NOT SUBJECT TO SOCIAL SECURITY PREMIUM.
CHILD ALLOWANCE (Applicable max. for two children) —WILL BE UPDATED
FAMILY ALLOWANCE — WILL BE UPDATED
DAILY FOOD ALLOWANCE — 7.16 TL
II. FOLLOWING AMOUNTS ARE EXEMPTED FROM INCOME TAX
CHILD ALLOWANCE – WILL BE UPDATED
For 0 to 6 Years old 69,23 TL, above 34,61 TL
DAILY FOOD ALLOWANCE — 25 TL excluding VAT.
*The list provided above is not exhaustive. There might be other expenses, benefits or payments that are exempt from income tax and social security premium. Please consult with your accountant for more information.