Turkey has released the updated income tax brackets and thresholds for the year 2023, incorporating an inflation adjustment of 122.93 percent, based on the revaluation rate from 2022, as outlined in General Communiqué No. 323 on Individual Income Tax.
In addition to the 2023 income tax updates, Social Security Authority in Turkey has announced significant changes. The maximum wage subject to social security (SSI ceiling) has risen from ₺ 48,532.50 to ₺ 75,060.00, and the minimum wage (SSI base) has increased from ₺ 6,471.00 to ₺ 10,008.00 in 2023 (₺ = TRY). This substantial 54.66 percent increase in the social security wage base reflects the high inflation experienced in Turkey during 2022.
Why It Matters
For international assignments to Turkey and for assignees still subject to Turkish taxation while working outside Turkey, it is crucial to consider these income tax bracket adjustments and changes in the SSI ceiling and SSI base when projecting assignment costs and budgeting. Employers may need to make payroll adjustments and update hypothetical tax calculations for tax-equalized assignees as needed.
Revised Tax Brackets for Individual Taxpayers Due to Inflation
With the inflation adjustment for the 2023 tax year, the employment income tax rates in Turkey for taxpayers are as follows:
- 40% for incomes over ₺ 1,900,000.00
- 35% for incomes over ₺ 550,000.00
- 27% for incomes over ₺ 150,000.00
- 20% for incomes over ₺ 70,000.00
- The lowest rate is 15% for individuals with incomes of ₺ 70,000.00 or less.
For all other income types, the tax rates for taxpayers are as follows:
- 40% for incomes over ₺ 1,900,000.00
- 35% for incomes over ₺ 370,000.00
- 27% for incomes over ₺ 150,000.00
- 20% for incomes over ₺ 70,000.00
- The lowest rate is 15% for individuals with incomes of ₺ 70,000.00 or less.
Standard Exemptions
Several standard exemptions have also been adjusted:
- Income from immovable property exemption increased to ₺ 21,000.00.
- Daily food costs exemption increased to ₺ 110.00.
- Daily transportation costs exemption increased to ₺ 56.00.
- Occasional income exemption increased to ₺ 129,000.00 (per Article 82(2) of the Individual Income Tax Law).
- Capital gains from the disposal of intellectual property (excluding authors, creators, or their statutory heirs) exemption increased to ₺ 55,000.00.
- Income from immovable property and investment exemption increased to ₺ 8,400.00.
- Income from internet sales exemption is ₺ 700,000.00 (tradesman tax exemption under Article 9(10) of the Individual Income Tax Law).
Standard Allowances
Disability allowances have been adjusted as follows:
- First-degree disability allowance is ₺ 4,400.00 (disability at 80 percent).
- Second-degree disability allowance is ₺ 2,600.00 (disability at 60 percent).
- Third-degree disability allowance is ₺ 1,100.00 (disability at 40 percent).
Azkan Group Insights
While inflation adjustments are typically routine, the impact of these changes on Turkish payroll and shadow payroll operations is significant. Therefore, it is essential to communicate these changes to relevant stakeholders promptly to ensure timely updates to payroll processes and software. Assignees subject to Turkish income tax should also be informed about the applicable tax rates, thresholds, exemptions, and allowances and their potential impact.
Employers and employees concerned about the effects of these changes and how to plan for the employee’s assignment should consider reaching out to their qualified tax professional or contacting a member of the AZKAN GROUP tax team in Turkey (see the Contact section for details).
Azkan Group can support you in your Employer of Record (EOR) and payroll requests (also called Umbrella Company) in Turkey. We can manage your HR requests even if you don’t have a legal entity in Turkey.
