Here you can access most recent articles on legislative updates regarding Personal Data Protection Law, Social Security Law, Taxation Law, Occupational Health and Safety Law, Code of Obligations, Labor Law, Turkish Commercial Code, Law on Protection of the Value of Turkish Currency, Foreign Exchange Legislation, and Immigration Law in Türkiye.
You can access the dates of the most recent international bilateral social security and double taxation treaties made between Türkiye and other countries and relevant documents here.
Türkiye, among the fastest growing economies, is definitely one of the best places to grow your business. With its booming economy,
geopolitical advantage, remarkable growth opportunities, high-quality infrastructure availability,
hard-working and skilled workforce, the country captivates foreign investors offering alternative employment solutions.
The Turkish government has always prioritized systematic reforms to give legal certainty for foreign companies to invest in Türkiye. Türkiye has been adopting new regulations to meet the political and economic criteria of the EU. Despite the reforms, Türkiye has its own country-specific regulations similar to other countries.
As per the Labor Law (amended on the 6th of May 2016 by Article 1 of the Law No. 6715), a temporary labor relation may be established if there is a holding or another workplace that is affiliated with the same group of companies. The service contract can be signed for a period of maximum of four months. This contract may be renewed twice at most, provided that it will not exceed eight months in total. The employer who employs temporary workers shall not employ temporary workers again for the same work unless there is a period of six months in between. Similarly, the authorized private employment agencies can establish a temporary labor relation with the employer within the framework of the same conditions.
Türkiye enacted this law by taking the Directive of the European Parliament No. 2008/104/EC as an example. Likewise, the temporary work relation is regulated with "Arbeitnehmerüberlassungsgesetz" in Germany, and "Bundesgesetz über die Arbeitsvermittlung und den Personalverleih - Arbeitsvermittlungsgesetz, AVG" in Switzerland. Hereby, we would like to emphasize once again that, in order for the temporary work relation to achieve the aforementioned goals, it must be regulated by law, and its term and conditions must be clearly set out. The limit of 4 months period is an important restriction to give as an example in this regard.
If you are considering starting a project without creating a legal entity in Türkiye to expand your growth, you should consider Türkiye’s legal environment and country specifics about co-employment regulations. Read more
Regarding the global definition, EOR is a third-party organization that acts as a business partner. EOR usually has a registered local entity in the target country. Thanks to EOR partnership, the client is able to avoid dealing with the local authorities in terms of compliance requirements.
EOR coordinates all tasks for its employees. It is a legal employer who is fully responsible for staff administration and compliance with the regulations. There is no need to provide office space, equipment, training or sign any agreements with the new employees, it’s all done by EOR. Due to temporary labor relation regulations, EOR services have similar restrictions as PEO. In other words, EOR services cannot be used for periods longer than four months as stated in the law.
As it is seen in the above, for indefinite term employments, it is not possible to consider temporary worker agreement as mentioned in the law both for PEO and EOR services in Türkiye.
According to the continuity principle in the Turkish Taxation Law and relevant regulations, when a person provides a service continuously (meaning that the service is provided more than once or twice a year as an "incidental income"), the person has to follow one of the below two options in order not to face tax noncompliance. These are:
For multinational companies, having employees in another country via sponsor company services is a fast and simple springboard for testing their economic activity in a new market before undertaking implementation or development missions. Most of the companies do not need to establish a company thanks to Cott Hybrid Service Solution. It is also used to test the relevance of the market as well as the feasibility and success of a project.
The term "ASO" stands for Administrative Services Organization. Like PEOs, they provide outsourced Human Resource Services such as payroll, full HR, leave management, and management of compensation and benefits. The specific services provided vary by ASO .
An ASO does not sponsor employee benefit programs such as health insurance plans but can help the client company to find the best solutions, as well as handling the day-to-day administration.
Cott Hybrid Service approach is usually used for the practical solution of problems such as those arise in service areas that require different expertise from the organization's core business. In general, foreign companies need an employee who has a definite or indefinite term contract which is beyond this context.
Since PEO agreement is not regulated in the Turkish legislation, for a strategic outsourcing project, employment must be closely related to the long-term business strategy of the client in Türkiye. BPO or strategic outsourcing means that the clients can find a sub-contractor for activities that are not related to their own skills or core business. The following business functions can meet the requirements.
In the light of aforementioned structures, parties need to cooperate in order to ensure legal compliance in all matters mentioned above. Also, the following items are quite important for the compliance.
(*) The payroll calculation was created based on Tax and Social Security Deductions for . In addition, payroll calculation depends on many parameters such as the amendments in the cumulative tax base of the employee by months, exchange rates, amendments in legal parameters during the year, marital status, and the number of children.
The calculation to be made with the data here can give an overall idea on an annual basis.
It cannot be used instead of the actual payroll calculation.
Sub-contracting practices are also common in Türkiye.
Generally, the sub-employer and the main employer working together in the same workplace and with the same supply chain causes various problems. The sub-employer forms a separate workplace in the workplace of the main employer and receives another social security workplace registration number for its employees.
The crucial point in the subcontractor agreement is that the employee works at the workplace of the main employer.
In addition to the customer's internal workforce, an outsourcing relationship may be built if the customer desires and uses the vendor’s employees for one of the following:
The authority constantly emphasizes that business administration is a social science, and the main functions of organizations are mainly as follows: Marketing, Finance, Production, Accounting, Human Resources.
Thanks to the unprecedented growth of mobile communications, remote work is on the rise. Remote employees can execute their projects and surpass their goals wherever they please. With the significant advantages of the digital communication, it is easier than ever to outsource projects in another county. However, global expansion has its risks. Successful global expansion requires effective planning and diligent insights to understand the financial risks associated with doing business in a new country.
Under the OECD/G20 Inclusive Framework on BEPS (Base Erosion and Profit Shifting), over 135 countries are collaborating with each other to put an end to tax avoidance strategies that exploit gaps and mismatches in tax rules to avoid paying tax.
Permanent establishment (PE) is a tax principle that varies depending on the country; it means that a tax authority deems a business to have a stable and continuous presence in the country and is therefore subject to corporate taxes, withholding taxes, and VAT.
In case a client purchases non-income generating auxiliary and ancillary services, such as preparatory work and back office management, it does not trigger the PE status. Even so, the final authority on status is the local tax authority. The company shall be liable to demonstrate that its activities are auxiliary, and it does not warrant the PE establishment status.
Based on the above-mentioned scenarios (both for PEO and EOR), if a company (Client) is deemed to have PE, it will be subject to all the taxes it would pay for profits generated in the country, according to the local tax obligations. In addition, the company can be levied charges for interest on the taxes, and penalties regarding the period over which the company’s activities took place. The tax authority can consider all parties responsible in terms of unpaid tax duties.
General Directorate of Occupational Health and Safety, Family, Labor, and Social Services Ministry determined the measures to be implemented in the workplaces during the COVID-19 pandemic. Most of the new regulations are permanent. The fundamentals of the new regulations are as follows:
First off, as mentioned above the vendor would enter into a 'co-employment relationship'. For this reason, there shall be shared responsibilities between the vendor and the client besides the responsibilities of the vendor. And the vendor must be in direct communication with each employee as an employer of record. The vendor shall expect to be in cooperation with the client in either case.
Employment contracts with a fixed term are a valuable instrument with respect to labor laws in many countries. Over time, many firms in Türkiye have begun using this type of employment contract as a way to circumvent the grant of various legal rights that come with indefinite term contracts. Issues with the application of regulation persist despite the numerous court decisions and attempts to stop the usage of fixed-term contracts to serve purposes other than those that they are intended to serve.
Please read the full article here.
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