The Statutory Deductions on Payroll for 2021
The statutory deductions applicable in a standard Turkish payroll are social security premium, income tax, and stamp tax. Also, the salaries generated from liaison offices in Turkey are exempt from income tax per the article 34/14 of Income Tax Law and these are only subject to social security.
Social Security Premium
Social Security Premium are calculated over wages monthly and are paid jointly by the employee and the employer. The contribution rates are as follows:
|SSI Unemployment Premium||%1||%2|
|Total Discount Included||%15||%17,5|
**Timely payment of social security premiums by the employer is a pre-condition for applying the employer discount (Incentive No. 5510.)
The rates above are applied to the social security base consisting of gross wages, bonuses, and other payments subject to social security premiums.
However, if the social security base is higher than the social security premium ceiling, which is renewed every year, the social security premium ceiling amount valid for that period is considered to calculate the premiums.
SSI Base and Ceiling
|SSI||Monthly SSI Base||Monthly SSI Base Ceiling|
|2021||3.577,50 - TRY||26.831,40 - TRY|
For the year 2021, the social security ceiling amount is 26,831.40 TL. This ceiling amount is updated annually according to the changes in the minimum wage (7.5 times the minimum wage.)
Transferred Social Security Base
One of the most important topics about the social security cap amount would be the transferred social security base.
That topic is regulated under Law No. 5510 Article 80/d as below:
"d) Wages shall subject to premium by attributing to the month they are deserved. Other payments shall be included in the earning of the month they are paid and the section not subject to the premium due to exceeding the upper limit in the month such payments are made from wage shall be added to the earnings subject to a premium of the subsequent months under the upper limit, not to be later than two months following the month of payment. Based on resolutions reached by employers of workplaces subject to collective labor agreement or by public administrations or legal authorities, where the payments paid later on other than wage are paid when a service contract is not present or suspended, considering the provision of Article 82, this shall be included in the earning of the final month to which earning subject to premium belongs to. In such cases, where the insurance premiums are paid until the end of the month following the finalization date of the resolution of the abovementioned authorities, default fine or default increment shall not be collected, and provisions of Article 102 shall not be applied."
According to these regulations, if the employee's earnings within any given month are over the social security ceiling, the exceeding amount related to additional payments will be transferred to the next month for consideration in the calculation. The transferred base can be carried forward for a total of two months before being excluded from calculations.
Salaries are subject to premium on the related month. Other payments are primarily included in the earnings of the month in which they are paid, together with these payments other than wages, the portion of the SSI base that cannot be subjected to premium if the upper limit is exceeded in the relevant month, starting from the month following the month of payment and not exceeding the upper limit for two months, is added.For example,
Considering a salary of 24.000 TRY and in the current month, the employee receives a bonus of 6.000 TRY. The SSI base that exceeds the ceiling will be transferred for the next two months;
Current month SSI Base: 26.831,40 TRY (24.000 + 6.000 = 30.000 - 26.831,40 = 3.168,60 Transferring Base
Next month SSI Base: 26.831,40 TRY (24.000 + 3.168,60 = 27.168,60) / 27.168,60 - 26.831,40 = 337.20 Transferring Base
Next Month SSI Base (2nd month): 24.000 + 337.20 = 24.337,20
Liability for Income Tax
Per the Income Tax Law, Article 1, the tax year is the calendar year in Turkey and there is a cumulative income tax system that follows the calendar year. The tax rate that is applicable is determined based on the year-to-date cumulative income tax base of the employee. Therefore, the tax rate of the employees will increase throughout the year as their cumulative income tax base increases.
Below are the income tax brackets that are applicable for the salary income on 2021 tax year (Income Tax Communique No. 313):
|24.000,01 TRY||53.000,00 TRY||%20|
|53.000,01 TRY||190.000,00 TRY||%27|
|190.000,01 TRY||650.000,00 TRY||%35|
|650.000,01 TRY and more||%40|
Minimum Subsistence Allowance (MSA)
Minimum Subsistence Allowance has been regulated under the Income Tax Law, Article 32 and per that article, this is a legal requirement that allows for a tax deduction based on the personal circumstances of the employee.
The calculated MSA sum is paid to the employee by being deducted from the income tax to be paid by the employee. The MSA sums are calculated by considering the marital status of the employee, the number of children the employee is obliged to look after, and the minimum wage determined at the beginning of the calendar year, and amendments made in the minimum wage in a year do not cause any change in the calculation of MSA.
If an employee's child is over 18 years old, the employee cannot take advantage for them. But if the child is studying in university, the employee will be benefiting from them until their age will be reached up to 25.
The MSA amounts as of 2021 are listed as below:
|Employees Marital Status||Monthly discount Amount for 2021 (TRY)|
|Married-spouse not working||321.98|
|Married-spouse not working 1 child||362.22|
|Married-spouse not working 2 child||402.47|
|Married-spouse not working 3 child||456.13|
|Married-spouse not working 4 child||456.13|
|Married-spouse not working 5 child||456.13|
|Married and spouse working||268.31|
|Married-spouse working 1 child||308.56|
|Married-spouse working 2 child||348.81|
|Married-spouse working 3 child||402.47|
|Married-spouse working 4 child||429.30|
|Married-spouse working 5 child||456.13|
Liability for Stamp Tax
The stamp tax is applied on employment income through the payroll. The applied rate is 0,759 percent as of 01.01.2015.
Stamp tax base is equal to the total gross earning on the payroll and the stamp tax is calculated over that total gross earning.
You can find below a sample calculation process from gross salary to net salary;
- Total gross earning: gross base salary + all benefits and allowances
- Gross base salary: monthly base salary / 30 * working days of the employee
- SSI base: total gross payment – exemptions (i.e. inkind meal allowance)
- SSI employee contribution: Social security base * 0.14
- SSI employee unemployment contribution: social security base * 0.01
- SSI employer contribution: social security base * 0.205
- SSI employer unemployment contribution: social security base * 0.02
- Cumulative income tax base: Current income tax base + cumulative income tax base from the previous months
- Income tax base: total gross payment – SSI employee contribution – SSI employee unemployment contribution
- Income tax: income tax base * tax rate
- Stamp tax base: total gross payment
- Stamp tax: stamp tax base * 0.00759
- Total employee deduction: SSI total employee contribution + income tax + stamp tax – MSA
- Net payment: total gross payment - total employee deduction
The tax rate of the employees will increase throughout the year as their cumulative income tax base increase. As the cumulative income base of the employee change, the tax bracket of the employee changes as well. The income tax bracket for January can be 15%, and in February, the tax bracket would be increased and can be 20% due to an extra bonus payment.
Minimum Wage Employer Cost Calculation Sample
|Gross Minimum Wage||3,577.50|
|Employee SSI Contribution (14%)||500.85|
|Employee Unemployment Contribution (1%)||35.78|
|Income Tax Base||3,040.88|
|Income Tax Amount (15%)||456.13|
|MSA (Single without child)||268.31|
|Net Salary (Including MSA)||2,825.90|
|Employer SSI Contribution (20.5%)||733.39|
|Employer Unemployment Contribution (2%)||71.55|
|Employer Cost (Without 5% discount)||4,382.44|
|Employer Cost (With 5% discount)||4,203.56|
You can reach the Law No. 5510 via the link. (In Turkish)
You can reach the SSI premium rates via the link. (In Turkish)
You can reach the 2021 Income Tax Tariff via the link. (In Turkish)
You can reach the Income Tax Circular No. 313 via the link. (In Turkish)
Should you have any queries or need further details, please contact your customer representative.