Turkey operates a progressive tax system that includes significant obligations for both employers and employees. Understanding these requirements is crucial for compliant operations, whether you are a domestic company or an international business employing staff within the country. Employers play a key role in the collection and remittance of various taxes and social security contributions on behalf of their workforce.
Compliance with Turkish tax and social security regulations involves accurate calculation, timely withholding, and proper reporting to the relevant authorities. This includes managing contributions to social security funds, withholding income tax from employee salaries, and navigating various potential deductions and allowances that can impact an employee's net pay and the employer's overall payroll costs.
Employer Social Security and Payroll Tax Obligations
Employers in Turkey are responsible for contributing to the social security system on behalf of their employees. These contributions cover various benefits, including retirement, health insurance, disability, and unemployment. The contribution base is typically the employee's gross salary, subject to minimum and maximum limits which are updated periodically, usually linked to the minimum wage.
The standard social security contribution rate for the employer is 20.5% of the employee's gross salary. However, a 5% discount is available for employers who meet certain criteria, such as timely payment of contributions and absence of outstanding debts to the Social Security Institution (SGK). This can reduce the employer's rate to 15.5%.
In addition to social security, employers must also contribute to the Unemployment Insurance Fund. The employer's contribution rate for unemployment insurance is 2% of the employee's gross salary.
There are no significant regional variations in standard social security and unemployment insurance rates; they apply uniformly across Turkey.
Income Tax Withholding Requirements
Employers are required to withhold income tax (Gelir Vergisi) from employee salaries on a monthly basis. The amount of tax withheld depends on the employee's gross salary and the progressive income tax brackets applicable for the year. The tax is calculated on the employee's taxable income, which is gross salary less mandatory deductions like employee social security and unemployment insurance contributions.
For 2025, the income tax brackets and corresponding rates are expected to follow a progressive structure. While specific thresholds are subject to annual adjustment, the general structure is as follows:
| Annual Taxable Income (TRY) | Tax Rate (%) |
|---|---|
| Up to [Threshold 1] | 15 |
| [Threshold 1] to [Threshold 2] | 20 |
| [Threshold 2] to [Threshold 3] | 27 |
| [Threshold 3] to [Threshold 4] | 35 |
| Above [Threshold 4] | 40 |
Note: Specific threshold values for 2025 are subject to official announcement and are typically adjusted based on economic factors.
The income tax is calculated cumulatively throughout the calendar year. As an employee's cumulative taxable income crosses into higher tax brackets, the marginal tax rate applied to the additional income increases.
Employee Tax Deductions and Allowances
Employees in Turkey are subject to mandatory deductions from their gross salary before income tax is calculated. These include:
- Employee Social Security Contribution: The standard employee social security contribution rate is 14% of the gross salary.
- Employee Unemployment Insurance Contribution: The employee's contribution rate for unemployment insurance is 1% of the gross salary.
These mandatory contributions are deducted from the gross salary to arrive at the taxable income for income tax calculation purposes.
Certain allowances may also impact the final tax liability, although the primary mechanism for reducing taxable income is through the mandatory social security and unemployment contributions.
Tax Compliance and Reporting Deadlines
Employers in Turkey must adhere to strict deadlines for reporting and paying payroll taxes and withheld income tax.
- Monthly Withholding Tax Declaration (Muhtasar Beyanname): Employers must file a monthly withholding tax declaration reporting the income tax withheld from employee salaries and other payments. This declaration is typically due by the 26th day of the following month. The corresponding tax payment is also due by the 26th day of the following month.
- Monthly Social Security Declarations (Aylık Prim ve Hizmet Belgesi): Employers must submit monthly declarations to the SGK detailing employee earnings and contributions. This declaration is typically due by the 23rd day of the following month. The social security and unemployment insurance contributions are due by the last day of the following month.
For employers with a small number of employees (typically 10 or fewer), the withholding tax declaration may be filed quarterly instead of monthly.
Special Tax Considerations for Foreign Workers and Companies
Foreign individuals working in Turkey are generally subject to the same income tax and social security regulations as Turkish citizens if they are considered tax residents. Tax residency is typically determined by physical presence in Turkey for more than six months in a calendar year.
Non-resident individuals working for a Turkish employer or a foreign employer with a registered presence in Turkey will have income tax and social security contributions withheld by the employer in the same manner as resident employees.
Foreign companies employing individuals in Turkey without establishing a legal entity (like a branch or subsidiary) face significant challenges regarding compliance with payroll tax and social security obligations. In such cases, utilizing an Employer of Record (EOR) service becomes essential. An EOR acts as the legal employer in Turkey, handling all payroll, tax withholding, social security contributions, and compliance requirements on behalf of the foreign company, ensuring adherence to Turkish labor and tax laws. This allows foreign companies to engage workers in Turkey legally and compliantly without needing to set up their own local entity.
