An Amendment To The Legislation Governing Minimum Wage Assistance Has Been Announced

It has been announced in the Official Gazzette numbered 29871 dated 28.10.2016 that Temporary Article 86 has been added to Income Tax Law numbered 193 in order to close the gap for employees registered to social security who have experienced a decrease in net income below the level of 1300.99 TRY as of the month of October 2016 due to increaseing income taxes.

Additionally, the aforementioned Official Gazzette includes details related to the Income Tax Announcement with the serial number 294 and the applications which have come into effect as of 01.10.2016.

Due to the increase in minimum wage for 2016, employees with gross earning between 1,647.00-1741.10 TRY will be subject to income taxes in accordance with the second tax bracket in the month of October as per the tax schedule mentioned in Article 103 of Income Tax Law numbered 193. As a result, some employees within the aforementioned range of gross earnings have experienced a decrease in net earnings below the level of 1,300.99 TRY.

Wth this announced change, employees who receive a monthly net payment less than 1,300.99 TRY during the related period shall be granted additional minimum subsitance allowances in an amount which will ensure that the net payment level is no less than 1,300.99 TRY.

Scope of the practice;

• Employees who experience a decrease in their monthly net earnings below the level of 1,300.99 TRY in the months of October, November, and December in 2016 due to changing income tax brackets.
• Employees that experience a decrease in their monthly net earnings due to changing income tax brackets, but remain above the threshold of 1,300.99 TRY shall not be considered within the scope of this practice.
• Employees that receive net monthly earnings less than 1,300.99 TRY due to their start or termination dates, unpaid absences, and similar reasons shall not be considered within the scope of this application and will not be entitled to additional minimum subsistance allowances.

Fundamentals of the practice;

• Employees who have no dependents, and who earn minimum wage received a net payment of 1,300.99 TRY in the month of January, 2016. The difference between the 1,300.99 TRY received in January, and the net monthly earnings calculated in the months of October, November, and December of 2016 shall be added to the minimum subsistance allowance.
• The “Minimum Subsistnace Allowance” line displayed on the employee payslip for the related period is to include the total amount of the allowance inclusive of any additional amounts related to this practice.
• The additional minimum subsistence allowance amount that is calculated in accordance with the principles above is to be added to the existing minimum subsistence allowance amount that the employee is entitled to, and the total shall be exempted from the income tax which has been calcualted over the earnings of the empoyee. In order for the exemption to occur, the related amount needs to be paid to the employee together with regular wages.

Example;In the month of January, an employee who is single and has no children received a net payable of 1,300.99 TRY inclusive of the minimum subsistence allowance.

As a result of the increasing income taxes, the net payable of this employee at the end of October 2016 decreases to 1,231.08 TRY.

In accordance with the newly changed regulations, the amount of 69.91 TRY (1,300.99-1,231.08) is to be added to the minimum subsistence allowance and paid to the employee. As a result, the employee’s net earnings will be aligned with the required amount of 1,300.99 TRY.

Employees who are receiving a higher minimum subsistance allowance due to the employment status of their spouse, or the presence of children, will have a lesser difference between net earnings and the threshold of 1,300.99 TRY, therefore the additional minimum subsistence allowance amount within the scope of this practice will be considerably less than a single employee with no children.

The full Turkish text of Income Tax Law numbered 193 can be found at here.

The full Turkish text of the Income Tax Announcement with the serial number 294 can be found at here.