If you are looking for Payroll in Turkey, you need to know some important information regarding taxation in Turkey.

What is Payroll in Turkey ?

Payroll in Turkey is attracting more and more professionals who wish to become freelance without the constraints of an independent status. Before presenting the many advantages, it is necessary to give a more general presentation based on its characteristics and practical operation.

Payroll is an atypical and hybrid form of employment which combines the autonomy and flexibility of self-employment, with the advantages and protection of employee status.

The principle of Payroll in Turkey

Payroll is a tripartite relationship that includes the following three parts:

An independent consultant (called a worn employee);

A client company (which may also be a local authority or an association);

A Payroll company based in Turkey

The mission

Payroll consists for a self-employed person in finding and negotiating assignments himself with client companies (negotiation of the terms of execution, duration and prices of the assignment).

The work contract

He then goes to a wage portage company with which he signs an employment contract. He therefore becomes an employee and benefits from social protection of this status.

Payroll in Turkey and the commercial contract

The Payroll company is linked to the client company by a commercial contract, which is based on the elements transmitted by the employee. It also takes care of the invoicing of the mission to the client company and frees the affected employee from various administrative constraints.

Corporate and dividend tax in Payroll Turkey

Law no. 5422 relating to corporation tax (« IS ») subjects Turkish companies to all companies having their administrative centre or an establishment located in Turkey.

Thus, any company registered in Turkey, even owned by foreign investors, is subject to Turkish corporate tax. Being considered as tax residents, these companies are taxed on their overall income.

Non-residents who receive income from their Payroll in Istanbul, their property, commercial transactions or any other income generating activity, are also subject to tax on income generated in Turkey.

The basic corporate income tax rate is 20%.

Certain taxes are levied at source (in Turkish « stopaj ») on certain types of income of resident companies:

– Dividends: tax rate of 15%.

– Interest on Treasury bills and bonds realised by resident companies: tax rate of 0%.

– Interest on other bonds and bonds realised by resident companies: 0% tax rate, bank deposits: 15% tax rate

– Profit shares paid by participating banks in consideration of participating accounts: tax rate of 15%.

– Pensions on securities: tax rate of 15%

The taxes levied at source on certain charges applicable to non-resident companies are as below:

– Dividends: tax rate of 15%

– Interest on Treasury bills and bonds realised by non-resident companies: tax rate of 0%.

– Interest on other warrants and bonds realised by non-resident companies: tax rate of 0%,

– Bank deposits: tax rate of 15%.

– Profit shares paid by participating banks in consideration of participating accounts: tax rate of 15%.

– Pensions on securities: tax rate of 15%

Corporate tax in Turkey and Payroll

The corporate tax rate under Turkish tax law is one of the most competitive in the OECD. The new corporate tax law has brought clearer, objective and more coherent measures which are now in line with international standards.

With regard to the Turkish tax system, there is a unique regime inspired by the basic principles of European tax law, which applies to both natural and legal persons. The Turkish tax system has three main components: income taxes, expenditure taxes and wealth tax.

Income tax applies to both companies and individuals

Payroll company in Turkey are subjected to taxes. In Turkey, income tax is levied on all income, from companies and individuals, whether Turkish nationals or foreigners resident in the country. Non-resident companies are only subject to income tax for Turkish source income.

Income tax itself falls into two different categories: corporate income tax and personal income tax. The basic corporate income tax rate is 20%. The different rates of corporate tax deducted differ according to the type of income. Individuals with the status of perfect or restricted taxpayers are subject to income tax and the rate of their taxation varies from 15 to 35% since it depends on the gross annual income brackets.

Four types of defense taxes

As far as taxes on expenditure are concerned, the first is value added tax (VAT), the generally applicable rates of 1%, 8% and 18%. The VAT system applied in Turkey is similar to the system applicable in the European Union. Commercial, industrial, agricultural and self-employed goods and services, imported goods and services and the supply of goods and services through other activities are subject to VAT. Secondly, it is the special consumption tax (TSC) to which groups of products are subject to different rates. This tax is collected at the production stage or during the import phase. VAT is applicable at each stage of the supply chain while the special consumption tax is payable only once.

Third, there is the tax on banking and insurance, which provides that transactions of banks and insurance companies, that is, the income of banks, are subject to this tax. The rates also differ according to the type of income. Fourthly, it is the stamp duty which applies to numerous documents concluded by and / or between persons such as contracts, agreements, capital contributions, letters of credit, letters of guarantee, financial statements and pay slips. The stamp duty levied is proportional to the value of the document. The applied rate varies from 0.15 to 0.75%.

Three types of wealth tax

The different types of wealth tax can be grouped as follows: inheritance and gift taxes, property tax and motor vehicle tax. Properties are subject to different property tax rates.

More informations on Payroll in Turkey are available on our website.