TAXATION IN TURKEY
As the minimum gross salary in Turkey in 2021 is 3557,5 TRY. on the gross salary, social security deduction (15% in total) and income tax are deducted by employer on behalf of employee and paid as net wage. The employer declares these deductions on behalf employee in the following periods (monthly or quarterly according to the number of personnel) and pays them to the relevant institutions.
While the income tax of employee has been calculating, it has to take into account the tax brackets of the gross wage earning of the staff. Therefore, while less income tax is calculated in the first months of each years, income tax will increase in the following months of the same years.
Like the subsistence allowance, there are also tax relief that can be added back to the net salary of the staff by the government. Its calculation varies according to the family status (married/unmarried and number of children) of the employee.
There is also extra monetary liabilities of employer called employer’s contribution for social security which is 17,5%. It’s amount is calculated on gross salary of employee and declared to related authorities with the same declarations of other deductions of salary.
There is a limit-up of 26,831.40 TRY on social security obligations. This means that if the gross salary of the employee exceeds this amount, the social security deductions are calculated on this maximum amount, and no social security premium is calculated for the parts above this amount.
Example: Total cost of an unmarried employee with a gross salary of 10,000 is as follows:
SGK Employee share (14%)
SGK Employee Unemployment Share (1%)
Tax Deduction (15%)
Stamp Tax (0,759%)
Minimum Living Allowance
Net Amount of Salary
The cost to the employer is as follows:
SGK Employment Share (15,5%)
SGK Employment Unemployment Share (2%)
According to the Social Security Law, an employer has to pay severance pay to employee who has worked at least one full year in the workplace in the following cases.
- &Dismissal by the employer without a just cause
- &Leave of the job for a just cause
- &Male employees to leave work because of military service (there is compulsory military service in Turkey)
- &Female employees leaving their jobs within one year after marriage
- &Leave of the job, because of retirement
- &Because of completing the retirement conditions, leave of job for waiting for the remaining time without working,
- &Death of the employee
When calculating severance pay, it is calculated by multiplying the last gross salary by the total years worked. Only the tax deduction is made from the calculated severance pay, the employer makes a net payment to the employee and pays the tax deduction to the relevant institutions. The upper limit for severance pay is 7,698.36 TRY. For gross salaries above this amount, severance payment is calculated on upper limit of severance pay, not on the gross salary.
For Example: Personnel with a gross monthly salary of 10,000 TRY and who worked for 18 months were dismissed without a justified reason. In this case, because the gross salary exceeds the upper limit of severance pay, for severance calculation the upper limit of severance pay is taken into account, not the gross salary.
Severance Payment: 7.698,36 TRY x 1,5 year (18 months) = 11.547,54 TRY
The employer makes the deduction of income tax calculated by taking into account the salary payments during the period and pays it net.
Payment in lieu of notice
Another compensation is payment in lieu of notice. Payment in lieu of notice arises when any party terminates the employment contract without informing the other party within the periods specified by law. So, it is not one-sided. If one of the two parties will terminate the employment contract, it must be notified according to the following legal conditions. Otherwise, they have to pay payment in lieu of notice.
Less than 6 months
2 week before
6 -18 months
4 week before
6 week before
More than 36 months
8 week before
When calculating payment in lieu of notice, gross salary and other additional payments are taken into account. As with severance pay, there is no upper limit on the amount to be taken into account in the calculation.
The payment in lieu of notice is the portion of the gross salary and additional payments that corresponds to the notice period violated in the table above.
Example: In this example, we can calculate the same severance pay example. Because there is no upper limit on payment in lieu of notice, gross salary shall be taken into account. the employee has 18 month working period, so the notice period is 4 weeks.
The payment in lieu of notice: (10.000 TL/ 30 day) x 28 day (4 weeks)= 9.333,33 TRY