Before doing business in Turkey with Payroll Turkey, you need to know some important information regarding this country.
Taxation in Turkey
New corporate tax law 5520, declared in June 2006, has resulted in Turkey currently offering the most competitive corporate tax rates in the OECD region. Indeed, Turkish tax law today offers clear and objective provisions in accordance with international standards. Thus, the Turkish tax system can be classified under three main points, income taxes, expenditure taxes and wealth taxes. Income taxes are applied for individuals, as well as for companies, including capital companies, cooperatives, economic public enterprises, economic enterprises of associations or foundations, as well as joint ventures. In Turkey, income tax is levied on corporate profits at the rate of 20%. The sales taxes consist of the Value Added Tax (VAT), the Special Tax on Consumption (TSC), the tax on Banking and Insurance Transactions, as well as Stamp Duty. Since 2012, local and foreign investors have had equal access to four different schemes: the general investment incentive scheme, the regional investment incentive scheme, the large scale investment incentive scheme and the incentive regime for strategic investment. Our Payroll Turkey company supports you regarding taxation.
The Turkish social security system and Payroll Turkey
General
1) Structure
If you are supported by a Payroll Turkey company, then it will pay all the Turkish social security taxes for you. The general Turkish social protection scheme protects salaried workers in the private and public sectors, as well as the self-employed against the following risks:
- Sickness
- Maternity
- Accidents at work, occupational diseases
- Invalidity, old-age and death (survivors)
- Unemployment (except for self-employed)
- It does not provide for the payment of family benefits
- The worker must be of Turkish nationality and reside in Turkey or be a permanent resident
2) Organisation
The scheme is managed by SOSYAL GUVENLIK KURUMU BASKANLIGI (SGK) which has local offices, regional medical offices and health establishments ensuring the coordination of health establishments. Payroll Turkey company pays SGK taxes each month.
The SGK is a financially autonomous public body, responsible for collecting contributions, managing risks and providing benefits under the supervision of the Ministry of Labour and Social Security.
Unemployment liability is managed by the Employment Agency (ISKUR).
3) Financing Salaried workers
Contributions as of January 1st, 2018
Universal Health Insurance
Employer share 7.5%
Salary share 5%
Work accident,
occupational diseases
Employer share 2%
Salary share –
Disability, old age,
death (survivors)
Employer share 11%
Salary share 9%
Unemployment
(1% by the State with no limit)
Employer share 2%
Salary share 1%
TOTAL
Employer share 22.5%
Salary share 15%
Contributions are calculated by Payroll Turkey company on the monthly salary between:
a minimum level of 2,029.50 TRY corresponding to the gross monthly minimum wage for 45 hours of weekly work on January 1st, 2018, and a maximum limit of 7.5 times the minimum wage, or 15,221.25 TRY.
Self-employed
Contributions as of January 1st, 2018
Universal Health Insurance 12.5%
Work accident, occupational diseases 2%
Disability, old age, death (survivors) 20%
TOTAL 34.5%
Contributions for the self-employed are calculated on the declared monthly income and are subject to a maximum level of 7.5 times the minimum wage, or 15,221.25 TRY.
Insured volunteers
A volunteer may voluntarily insure themself if they are a Turkish resident over 18 years old, not subject to the social security scheme.
The amount of the contributions calculated by Payroll Turkey company corresponds to 32.5% of the income between:
a minimum level of 2,029.50 TRY,
and a maximum level of 7.5 times the minimum wage, or 15,221.25 TRY.
It covers voluntary insured persons against the risks of sickness and invalidity, old age and death.
Illness
Universal health insurance (AMU) provides access to health services for Turkish residents.
This insurance covers health care and provides daily allowances during periods of temporary incapacity.
Travel costs can also be covered when care cannot be provided on-site.
1) Care
Universal health insurance provides all the necessary health benefits:
to children up to the age of 18,
to students aged 20 to 25, and for the 2 years after the issuance of a graduate diploma. They must not be dependent on or entitled to their parents,
to the insured volunteers,
to pensioners,
to the unemployed,
to social assistance recipients.
Care is provided to the worker and his/her dependents provided that the worker has paid contributions for:
at least 30 days during the 12 months preceding the start of the illness of the salaried worker,
at least 60 days in the 12 months preceding the start of the illness of the self-employed.
The following can be considered as beneficiaries:
the uninsured spouse,
the dependent parent,
the child up to 18 years or 25 years in the event of further studies,
the disabled child without age limit.
The following are financed by the scheme:
Ambulatory and hospital healthcare in the event of illness, accident at work, occupational disease or maternity, oral health services and orthodontic treatments for children under 18, methods of medically assisted procreation.
Preventive healthcare related to the fight against drug addiction, blood and blood products, bone marrow, vaccines and prostheses.
Medication.
Consultations with the general practitioner or specialist are fully covered if the insured or his/her dependents consult doctors approved by the Ministry of Health.
In the event of hospitalisation, the insured may go to the establishment of his/her choice where the treatment as well as the hospital package is fully covered.
Regarding medication:
20% of the amount when prescribed by external consultation remains the responsibility of the actively insured individual, whereas 10% remains payable by pensioners.
In the case of chronic diseases, medication is covered 100%.
For dental prostheses, the amount remaining to be borne by the insured, without the latter being able to exceed 75% of the national minimum gross salary applicable at the time of service of the benefits, is:
10% for pensioners and their dependents.
20% for workers and their dependents.
Care is in principle provided in SGK establishments. However, they can also be in official medical establishments or in case of absolute emergency, in private establishments, in which case, tariffs provided for by the SGK are applied.
2) Daily allowances
The allowance in the event of temporary incapacity is paid from the 3rd day of sick leave and until recovery or the date of invalidity. This is provided that the person concerned has paid the sickness contribution for at least 90 days during the year preceding the suspension of working.
This daily allowance (which can be paid by the Payroll Turkey company) represents:
50% of the average monthly salary/income for the last 3 months, subject to contributions in the event of hospitalisation.
66.7% in the case of outpatient treatment without limitation, and until complete recovery or invalidity of the insured.
Maternity
1) Care
The insured person or the wife of an insured person working under a Payroll Turkey company has the right, without condition of a minimum membership period, for examinations and medical care during pregnancy.
The pregnant woman must undergo a medical examination before the end of the 6th month.
2) Daily allowances
Daily allowances are paid to the insured person proving at least 90 days of contributions during the year preceding the birth.
The temporary incapacity for work allowance is equal to two thirds of the basic salary/monthly income declared, subject to contributions.
It is paid during the 8 weeks preceding and the 8 weeks following the birth, provided that contributions have been paid for at least 90 days.
In the event of multiple births, post-natal leave is extended by 2 weeks.
In the event of the mother’s death during childbirth or after birth, the father of the child is entitled to unused post-natal leave.
In the event of the adoption of a child under the age of 3, one of the parents has a leave of 8 weeks from the day of the child’s arrival.
3) Breastfeeding benefits
The insured person, or the wife of an insured person (who has contributed at least 120 days during the 12 months preceding childbirth) may be entitled (on condition of breastfeeding her child) to a lump sum payment of 133 TRY per child.
In addition, during the 6 months following childbirth, the employee who meets the above conditions is entitled to a leave of one and a half hours per day to breastfeed her child.
4) Parental leave
Part-time work immediately after birth/adoption.
The insured employee who returns to work after maternity leave (child born viable) or adoption leave (child under 3 years) may, if he/she has validated 600 days of contributions during 3 years before delivery/adoption, resume part-time (50% of full time) for:
60 days for the 1st child,
120 days for the 2nd child,
180 days for the third child and subsequent children.
The insured may, under certain conditions, be entitled to additional days:
30 days in case of multiple births,
360 days in case of disability of the child.
The subsidy is paid by unemployment insurance and corresponds to the daily amount of the gross minimum wage.
Part-time work until the child’s schooling
One of the parents, provided that they are both employees, can choose to work part-time (50%) at the end of the periods of leave (maternity leave, part-time parental leave) and after a period of 6 weeks minimum paid activity until the first day of the month following the start of schooling.
Resumption of work for 6 weeks is not necessary if the insured person took a leave without pay immediately after the part-time leave and informed his employer by mail at least 1 month in advance.
The request for part-time work must be addressed to the Ministry of Labour and Social Security by the employer.
Invalidity, old age and death (survivors)
The system implemented by the 2006 and 2008 reforms has been fully in force since 2016, and only concerns new entrants to the labour market. This information is generally known by the Payroll Turkey company.
1) Disability
with conditions
To be able to open a disability pension, you must:
have lost at least two thirds of your working capacity (60% for those who have been the victim of a work related accident or have an occupational disease),
have been insured for at least 10 years,
justify payment of the invalidity-old-age-death (survivors) contribution for at least 1,800 days.
Amount
Different calculation formulas apply depending on the periods of contributions to the invalidity, old-age and survivors pension insurance:
For the period prior to January 1st, 2000, the amount of the invalidity pension was calculated according to the following formula:
index1 × coefficient2 × rate3
The index is the figure to which the average of the wages/income giving rise to the payment of contributions corresponds, and is taken into account in the calculation of the pension.
The coefficient is applicable at the time of payment of the pension, and it is set by the Council of Ministers.
The rate is set at 60%. It can be increased to 70% when the interested party needs the help of a third person.
For the period after January 1st, 2000, the amount of the invalidity pension is calculated according to the following formula:
average annual salary / income 1 × rate (60%) / 12
The average annual salary/income is obtained by taking the total annual wages divided by the total number of days contributed, multiplied by 360 days.
For persons affiliated from October 1st, 2008 onwards, the amount of the invalidity pension is calculated according to the following formula:
(last salary/income of insured person x 40% 1) × number of years of contributions
Beyond 7,200 days (9,000 days for the self-employed), a 2% increase is applied for any additional period of 360 days without exceeding the maximum rate of 90%.
Mixed system: for persons affiliated before January 1st 2000, the amount of the invalidity pension is calculated separately for each of the 2 periods. The results obtained are then added to obtain the final amount of the pension.
An increase of 10% is paid when the interested party needs the help of a third person.
The minimum amount of the invalidity pension cannot be less than 35% of the monthly minimum wage (this is increased 5% if the insured has a spouse or children).
The invalidity pension ceases to be paid when the beneficiary resumes a professional activity.
It can be combined with another pension in respect of accidents at work or occupational diseases. In this case, the insured person will receive all of the higher pension and half of the other pension.
2) Old age
The pension system has undergone successive reforms. The insured, according to their periods of affiliation, are therefore attached to 3 separate pension plans.
with conditions
The conditions and method of calculating the old-age pension vary according to the contribution periods of the insured:
For insured persons who contributed before September 8th, 1999, the old age pension can be requested from 55 years for men and 50 years for women who have totalled 5,000 days of contributions, or 15 years of insurance with 3,600 days of contributions, or without age condition if the claimant has been insured for 25 years for a man and 20 years for a woman, and accumulated at least 5,000 days of contributions.
For insured persons who started contributing after September 8th, 1999, old-age pension rights are available from the age of 60 for men and 58 for women. Interested parties must have completed 7,200 days of contributions, or 25 years of insurance with 4,500 days of contributions (9,000 days for the self-employed).
For insured persons (salaried and self-employed workers) who started to contribute after October 1st 2008, the old age pension can be requested from the age of 60 for men and 58 for women who have completed 7,200 days of contributions (9,000 days for the self-employed). The Payroll Turkey company accountant calculates this amount too.
From 2036, the retirement age will be gradually raised to 65:
in 2044, for men,
in 2048, for women.
The retirement age may be delayed; there is no maximum age.
There is a possibility of early retirement (from 55 years of age) for people with disabilities or people who have worked in mines for at least 20 years.
Amount
The spouse can receive:
75% of the pension due to the deceased, if he has no dependent children, does not work and does not receive a direct pension,
50% in other cases.
In the event of remarriage, the pension is suspended.
Each child can claim a pension equal to:
25% if fatherless or motherless,
50% if fatherless and motherless.
The ascendants dependent on the deceased can claim 25% of the pension if the rights are not exhausted after the payment of benefits to the spouse and children of the insured.
The total of survivors’ pensions paid must not exceed 100% of the pension of the deceased insured.
The minimum amount of the survivor’s pension cannot be less than 35% of the monthly minimum wage.
When the pension rights are not open, a capital settlement can be allocated according to the same percentages as the pensions.
Finally, a fixed contribution to the funeral costs of 594 TRY can also be served.
Unemployment
Self-employed workers do not yet benefit from unemployment insurance. However, a 2017 amendment to the law on unemployment insurance provides for the extension of coverage to self-employed workers from January 1st, 2020.
Employees working under Payroll Turkey company can benefit from it if they:
have lost their job involuntarily,
have contributed at least 600 days in total during the last 3 years,
worked and paid contributions during the 120 days preceding the termination of the employment contract.
Unemployment benefit is paid after a waiting period of 30 days and for a number of days linked to the number of days of contributions.
It is paid for a period of:
180 days for an employee who has contributed to unemployment insurance for 600 days,
240 days for an employee who has contributed to unemployment insurance for 900 days,
300 days for an employee who has contributed to unemployment insurance for 1,080 days.
Its daily amount is at least equal to 40% of the average salary received during the last 4 months of work.
The benefit paid monthly is capped at 80% of the gross monthly minimum wage.
Economic unemployment
The complete or partial suspension of work (at least two thirds of the duration of employment) for at least 4 weeks, following the total or partial cessation of business gives entitlement (if the insured meets the above conditions) to an allowance equivalent to 60% of the average gross daily salary calculated over the last 12 months of salary without exceeding 150% of the gross amount of the legal minimum monthly salary.
The benefit is paid for a maximum of 3 months.
For more information on corporate taxation in Turkey paid by Payroll Turkey companies and Turkish Social Security System, please visit our Umbrella Company Turkey website.
