As with most countries, Turkiye's immigration procedures are influenced by local tax requirements. Tax, social security and employment issues all need to be considered by the Turkish employer sponsoring the work permit. In this article, we will focus on tax related matters.

The salary of a work permit holder can be paid in Turkey or - under certain conditions - abroad, provided that all social security requirements are met (see previous article on " Social Security Rules Related to Sponsoring Work Permits in Turkiye"). If the Turkish employer pays the foreigner's salary in Turkey, the sponsor is obliged to withhold the income tax due from the employee's salary at source and pay the withheld amounts to the tax authorities.

Under the Income Tax Law, wages or employment income is defined as the sum of all benefits (in cash and in kind) paid by an employer to an employee. Note that this is not the same as the definition of earned income for work permit purposes, which does not include benefits, bonuses, etc.

Employees are taxed on their earned income, net of social security and unemployment insurance contributions (see below), at progressive rates that will be as follows in 2024:

  • 15% of annual income up to TRY 110,000;
  • 20% of annual income from above TRY 110,000 to TRY 230,000;
  • 27% of annual income from above TRY 230,000 to TRY 870,000;
  • 35% of annual income from above TRY 870,000 to TRY 3,000,000; and
  • 40% of annual income above TRY 3,000,000.

Employees' tax liability is reduced by the net minimum wage (TRY 17,002.12 for the year 2024) through an income tax exemption. Employees earning employment income over TRY 3,000,000 for the year 2024 should submit an annual tax return. This must be submitted in March 2025 for the fiscal year 2024. In addition to income tax, employees must pay a "stamp tax" of 0.759% of gross wages, which their employer must deduct from pay at source and remit to the tax authorities.

Unless the employee is exempt from the social security system in Turkiye, both the employer and the employee are obliged to pay contributions to the public social security system administered by the Social Security Institution ("SSI"). Employers are generally required to register employees with the SSI at least one day before the start of employment. In newly registered companies, employees can be registered within one month of starting employment. Note that these deadlines differ from the notification of commencement of employment that must be sent to the Ministry of Labour and Social Security ("MOL") for certain work permit holders.

It should also be noted that Turkiye has an extensive network of double tax treaties that assign taxing rights to signatory countries for defined types of income. With the exception of a US treaty, all double tax treaties signed by Turkiye are modelled on OECD regulations. The double tax treaties define earned income under "Article 15 - Dependent personal services". This article may, under certain conditions, give the right to tax the earned income not to Turkey but to the other signatory country. The conditions may vary depending on the individual treaty, but the criterion for taxing rights usually depends on the length of stay of the person, the payment jurisdiction and the existence of a permanent establishment. Therefore, where a double tax treaty is applicable, it is important to assess the tax position of each individual on an individual basis.

In conclusion, compliance with tax and social security regulations is extremely important for sponsors of work permits. As the work permit is adjudicated by a directorate under the MoL, any non-compliance identified during the application/renewal of the work permit or observed during a MoL inspection can and will be referred to the appropriate directorate within the MoL, including: SSI, Employee Health and Safety, National Health Care, etc. Therefore, even a violation of tax requirements can result in compliance penalties in other areas (such as fines, increased risk of audit, prohibition to benefit from social security incentives, etc.) for employers of work permit holders.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.