Understanding Wages, Salaries, and Taxation in Turkey

At Atlas Global Audit & Accounting, we ensure that your payroll operations are fully compliant with the Turkish Labor Law and Income Tax regulations. Understanding the structure of wages and their tax implications is vital for both domestic and international employers.

1. Legal Definition of Wages

Under Article 32 of the Turkish Labor Law, a wage is defined as “the amount of money paid to a person by an employer or third parties in return for a service rendered.”

Furthermore, Income Tax Law No. 193 (Article 61) provides a broader definition, classifying wages as any benefit provided in cash or “in-kind” (goods/services) in return for services performed under an employer’s direction. This includes bonuses, premiums, allowances, and compensations.

2. Taxation of Wages and Salaries

All payments categorized as wages are subject to Income Tax and Stamp Tax. However, the Turkish tax system offers specific exemptions to encourage investment and support employees:

• Minimum Wage Tax Exemption (New Post-2022 System):As of 2022, the portion of an employee’s salary corresponding to the monthly gross minimum wage is exempt from both Income Tax and Stamp Tax. This is the most significant tax relief currently applicable to all wage earners.
• Meal Allowance Exemption:Meals provided at the workplace are entirely tax-exempt. For meal cards (tickets) or cash meal payments, an exemption applies up to a daily limit updated annually by the Ministry of Treasury and Finance.
• Marriage and Birth Benefits:Aid provided for marriage or birth is exempt from income tax up to an amount equal to two months’ salary.
• Child Benefits:Payments for up to two children are exempt from income tax, aligned with the limits set for public servants.

3. Special Exemption for Foreign Companies (Article 23/14)

A strategic advantage exists for employees of foreign companies. Wages paid to employees of limited taxpayers (companies whose head office and principal place of business are not in Turkey) are exempt from Income Tax if:

1. The wage is paid from earnings generated entirely outside of Turkey.
2. The payment is made in a foreign currency.
3. Payroll Components and Calculations
4. Gross Salary

The total amount earned by an employee before any deductions.

• Formula:Net Salary + Employee Social Security Contributions + Unemployment Insurance + Income Tax + Stamp Tax.

1. Net Salary

The actual “take-home” pay received by the employee.

• Formula:Gross Salary – Total Deductions.

III. Employer’s Total Cost

The real cost of an employee to the company includes the gross salary plus employer-side social security and unemployment insurance contributions.

• Formula:Gross Salary + Employer Social Security Contributions (typically 22.5%, reduced to 17.5% if the 5% incentive for timely payment is applied).

1. Social Security and Unemployment Premiums

The total contribution is 37.5% of the earnings subject to premium:

• Employee Share:15% (14% Social Security + 1% Unemployment).
• Employer Share:5% (20.5% Social Security + 2% Unemployment).

5. Income Tax Brackets (2026)

Turkey uses a progressive tax system. The tax rates for wage income are:

• 15%, 20%, 27%, 35%, and 40%.
  The income brackets (thresholds) for these rates are updated annually by the government.

6. Minimum Wage Requirements for Foreign Employees

The Ministry of Labor requires that foreign employees be paid a salary proportional to their role and expertise. Based on the current minimum wage, the following multiples apply:

• 5 x Minimum Wage:Senior Executives and Pilots.
• 4 x Minimum Wage:Unit/Branch Managers, Engineers, and Architects.
• 3 x Minimum Wage:Teachers and Specialists requiring expertise.
• 5 x Minimum Wage:Marketing, Sales, and other administrative roles.
• 0 x Minimum Wage:Domestic services and other general roles.