Subject: Some major changes where the individuals would be affected in terms of the proposed changes presented to the Grand National Assembly of Turkey as of 24.10.2019
Some of the major changes in the draft law are as follows:
1) Tax bracket and rates would be as follows for the income as of 01.01.2019.
First 18.000 TRY
From 18.000 to 40.000 TRY
From 40.000 TRY to 98.000 TRY (for employment income from 40.000 TRY to 148.000 TRY)
From 98.000 TRY to 500.000 TRY (for employment income from 148.000 TRY to 500.000 TRY)
Over 500.000 TRY
2) Individuals are not required to report their employment income if they are employed by only the same employer in a given year through annual income tax return under the current practice. However, through the new proposed amendments, all individuals will be asked to file annual income tax return by the end of March of the following year where their employment income is more than the amount in the fourth tax bracket (i.e. 500.000 TRY). This amount will be subject to increase in the following years up to the revaluation rate of the previous year.
3) Transportation allowances granted as fare card, ticket or similar payment instruments would be tax exempted up to 10 TRY per day, whilst exceeding amount will be taxed as part of salary. Transportation shuttles arranged by the employer are still tax-free. If the draft regulation enters into force, the amount subject to the exception will be increased by calculating the revaluation rate of the previous year.
4) There will be certain limitations for company cars to be deemed as deductible expenses:
• For rented company cars, up to 5.500 TRY per month,
• For purchased company cars, up to 115.000 TRY for consumption tax and VAT,
• Maximum up to %70 of the expenses (i.e. maintenance, fuel, insurance, toll fees, etc.) related to rented or purchased vehicle,
• 135.000 TRY (Excluding consumption tax and VAT) would be taken into account for depreciation calculation of the company cars,
• 250.000 TRY (Where the consumption tax and VAT are added into the purchase cost) would be taken into account for depreciation calculation of the company cars or second hand cars,
• If the draft regulation enters into force, it is planned to apply this part of change as of 01.01.2020.
5) Deadline for the implementation of Provisional Article 72 of the Income Tax Law which determines the taxation basis of professional athletes has been extended till 31.12.2023 (currently it is 31.12.2019). The applicable withholding tax rate for the salaries of professional athletes from the first divisions would be increased to %20 from %15.
6) Additionally, professional athletes would be liable to report their salary through annual income tax return in case their salary exceeds the fourth bracket of the income tax law. In the current practice, salary withholding taxes applied by the sports clubs are the final taxes. If the draft regulation enters into force, it is planned to apply this part of change as of 01.11.2019.
7) %20 of deduction will be applied for those taxpayers who waive to open a court case and who pays their accrued taxes and penalties in a month of accrual. If the draft regulation enters into force, it is planned to apply this part of change as of 01.01.2020.
8) Due date for tax explanation or tax filing as a result of a tax office invitation is prolonged from 15 days to 30 days. If the draft regulation enters into force, it is planned to apply this part of change as of 01.01.2020.
9) %50 of deduction will be applied on tax loss penalty regardless of the frequency the taxpayer is charged for. Under the current practice; 50% of deduction is applied for the first time, 1/3 is applied in the consecutive tax loss penalties. If the draft regulation enters into force, it is planned to apply this part of change as of the effective date of the regulation.
10) The salaries paid to the referees managing the sports competitions are exempted from income tax in the current practice. However, it is proposed to apply income tax for this type of payments as of the effective date of the regulation.
For further information with respect to this subject, please contact Barbaros Yeşin.
Director – Global Employer Services
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