Evaluation of Late Submission of Private Insurance Payment Documents for Payroll

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"Provided that the insurance is contracted with a pension or insurance company established and headquartered in Türkiye; 50% of the premiums paid by the employee for life insurance policies covering the employee, the spouse, and minor children, as well as the premiums paid by the employee for personal insurance policies such as death, accident, health, illness, disability, unemployment, maternity, birth, and education (the total amount of premiums subject to deduction may not exceed 15% of the salary earned in the month in which they are paid, nor the annual amount of the minimum wage. The President is authorized to reduce the rates specified in this subparagraph by half, to increase them up to twofold, and to redetermine the specified limit provided that it does not exceed twice the annual amount of the minimum wage.)"

In summary, the requirements for private insurance premiums to be used as a deduction from the income tax base are as follows:

• The insurance must be contracted with a pension or insurance company established and headquartered in Türkiye.
• It must relate to the employee, the spouse, or minor children.
• Premiums paid by the employee for personal insurance policies such as death, accident, health, illness, disability, unemployment, maternity, birth, and education are included within the scope.

In addition, the Law has also set an upper limit for the deduction of private insurance premiums from the income tax base:

"The total amount of premiums subject to deduction may not exceed 15% of the salary earned in the month in which they are paid, nor the annual amount of the minimum wage."

Explanations on the same subject are also included in Section 8.2 titled "Deduction of Paid Personal Insurance Premiums in Determining the Salary Base" of Income Tax Circular No. 85, as follows:

"Pursuant to the amendment made to subparagraph (3) of the first paragraph of Article 63 of the Income Tax Law by Article 5 of Law No. 6327, as of January 1, 2013, in determining the taxable salary base, the portion of the premiums paid for personal insurances other than individual pension schemes up to 15% of the salary earned may be deducted in determining the salary base.

The insurance premiums to be taken into account in determining the taxable salary base, provided that the insurance is contracted with a pension or insurance company established and headquartered in Türkiye, consist of:

• 50% of the premiums paid by the employee for life insurance policies under which savings are made for the employee, the spouse, and minor children, and
• The premiums paid by the employee for personal insurance policies such as death, accident, health, illness, disability, unemployment, maternity, birth, and education."

Matters Regarding the Period of Deduction

Private insurance premiums paid by employees within the scope specified above may, in principle, be used as a deduction in the month in which the premiums are paid, in accordance with the principle of periodicity.

The relevant issues are stated in General Communiqué on Income Tax No. 256 as follows:

"In the deduction to be made on a monthly basis, in cases where the premium is paid in advance or where the installment periods are determined as longer than one month, the premium amount shall be subject to deduction by taking into account the months to which it relates (provided that it has been paid)."

At this point, it is of great importance that employees track their payment receipts on a monthly basis and submit them to the human resources department to ensure that the deductions are utilized within the prescribed period and in compliance with the limits set forth in the Law.

Income Tax Deduction Application for Payment Receipts Submitted After the Deadline

As mentioned above, employees must track their private insurance payments and submit them to their employers / human resources departments on time.

However, it is occasionally observed that employees submit the receipts of payments made for their private insurance policies to their employers / human resources departments after the deadline.

At this point, the question arises as to whether private insurance premiums belonging to previous months can still be used as a deduction from the income tax base when submitted after the due period.

The Revenue Administration has also published a Private Ruling in response to a question regarding this issue.

In the Private Ruling of the Revenue Administration dated February 3, 2025 and numbered 15584, concerning how the tax deduction should be applied if the private health insurance payment is not reported to the employer on time, the question submitted is as follows:

"It has been stated that the personnel of your institution arranged a one-year supplementary health insurance policy for his minor child covering the period October 14, 2023 – October 14, 2024 with a total premium of TRY 2,556.20, paid in installments, and that the documents related to the premium payments under this health insurance policy were submitted to your institution in July 2024. Since the payment documents were not submitted to your institution in the months when the payments were made, the premiums were not taken into account as a deduction in determining the net amount of the employee's salary. In this respect, our opinion is requested on whether the premiums paid for the one-year supplementary health insurance policy arranged for the employee's child for the period October 14, 2023 – October 14, 2024 can be treated as a deduction in July 2024."

As can be understood from the question, the private health insurance premiums paid by the employee for his child were submitted to the employer after the months in which they were actually paid. The question raised was how the income tax deduction should be applied with respect to these late-submitted payment documents.

The response of the Revenue Administration is as follows:

"Since the documents related to the premium payments under the supplementary health insurance policy covering the period October 14, 2023 – October 14, 2024 arranged for the minor child of your institution's personnel were submitted to your institution in July 2024, the monthly premium amount shall be calculated by dividing the total into the number of remaining months, including the month in which the documents were submitted (July 2024). These premiums may be taken into account as a deduction in determining the employee's salary base, provided that they do not exceed the maximum deductible amount per month."

According to the response given in the aforementioned Private Ruling, provided that it falls within the insurance policy period, the premiums may be considered as deductions by allocating them over the remaining months up to the end of the policy period, including the month in which the documents were submitted to the employer / human resources department.

Impacts of the Private Ruling on Human Resources and Payroll Processes

The outcome of the Private Ruling will have certain impacts on payroll calculation and document-tracking processes.

First and foremost, it is essential that private insurance receipts are submitted to employers on time. Employees must submit the documents for the private insurance premiums they have paid in the same month of payment, in order to benefit from a deduction in that month's income tax base.

When the process is carried out in this manner, employees can fully benefit from the tax exemption amount, within the statutory limits set forth by the Law and outlined above.

To illustrate with a simple example: An employee with a gross salary of TRY 100,000 in 2025 signs a 12-month policy with a total annual premium of TRY 60,000, payable in monthly installments of TRY 5,000, and submits the related documents to the employer during the payment period.

For an employee with a gross salary of TRY 100,000 in 2025, the maximum deductible amounts from the income tax base are TRY 15,000 per month (100,00015%). Another point to be considered here is that the total premiums subject to deduction may not exceed the annual gross minimum wage. Accordingly, as of 2025, the annual deductible amount must not exceed TRY 312,066 (26,005.5012).

In this case, for the entire policy period, i.e., 12 months, the total premium amount subject to exemption will be TRY 60,000 (5,000*12), and the employee will be able to deduct the full amount of the premiums paid from the income tax base.

• Gross salary: TRY 100,000
• Monthly private insurance premium: TRY 5,000
• Annual private insurance premium: TRY 60,000
• Maximum monthly deductible limit: TRY 15,000 (100,000*15%)
• Deductible private insurance premium: TRY 5,000 (monthly), TRY 60,000 (annual, 5,000*12)

If payment receipts are submitted to the employer after the deadline, the monthly private insurance premium amount deductible will need to be recalculated.

The total amount of premiums not previously used as a deduction will be divided into the remaining months of the policy period, including the month in which the documents are submitted to the employer, and a new monthly premium amount will be determined. This newly calculated monthly premium amount will then be subject to deduction.

For instance, if the employee in the previous example submits the payment receipts to the employer two months before the end of the policy period, the total premiums for the preceding 10 months will also be divided into the last two months and taken into account in the exemption calculation.

Thus, for the total annual policy amount of TRY 60,000, the deductible monthly premium amount will be calculated as TRY 30,000. However, since the monthly limit is TRY 15,000, the employee will not be able to deduct the full amount of the premiums paid. In this case, although the employee pays a total of TRY 60,000, only a total of TRY 30,000 (15,000*2) will be deductible.

• Gross salary: TRY 100,000
• Monthly private insurance premium: TRY 5,000
• Annual private insurance premium: TRY 60,000
• Maximum monthly deductible limit: TRY 15,000 (100,000*15%)
• Deductible monthly private insurance premium: TRY 30,000 (60,000/2), but due to the monthly cap, the deductible amount will be TRY 15,000
• Annual deductible amount: TRY 30,000 (15,000*2)

In this situation, due to the monthly cap being exceeded, the deductible amount available to the employee decreases.

Evaluation and Conclusion

When considering the impact of this change on payroll management, it is important that employees are made aware of the necessity to submit their payment documents on time.

Human resources departments may inform employees particularly about the effect of these deductions on income tax.

Although there is still a possibility to apply deductions from the income tax base in cases where payment documents are submitted late due to various reasons, this may result in a loss of entitlement for employees, depending on salary, exemption limits, and premium amounts.

It is also worth noting that for foreign employees in Türkiye, the above-mentioned deduction opportunity is valid only for premiums paid to private insurance companies established in Türkiye. Deductions from the Turkish income tax base cannot be applied in relation to private health insurance premiums paid to institutions abroad.

In many OECD countries, special tax regimes exist for employees coming from other countries; however, no such special tax regime applies to foreign employees in Türkiye. Therefore, for foreign employees in Türkiye, premiums paid to a private insurance company in Türkiye may also be used as deductions from the income tax base, subject to the same rules.

Additionally, foreign employees who receive their salaries directly from abroad and declare these salaries to the Tax Offices through an annual income tax return (pursuant to Article 95 of the Income Tax Law) may also apply deductions on their annual income tax return for premiums paid to a private insurance company in Türkiye. The exemption limits stated above remain applicable for such cases as well.

You can access the Private Ruling of the Revenue Administration through the link. (In Turkish)