TURKISH TAX SYSTEM PERSONAL INCOME TAX Aysun ÖZDAMAR ULUÇAY State Revenue Expert 2011.
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Transcript of TURKISH TAX SYSTEM PERSONAL INCOME TAX Aysun ÖZDAMAR ULUÇAY State Revenue Expert 2011.
TURKISH TAX SYSTEMPERSONAL INCOME TAX
Aysun ÖZDAMAR ULUÇAYState Revenue Expert 2011
TAXES ON INCOMEPERSONAL INCOME TAX
THE TAXPAYER
• Real persons
TAXES ON INCOME PERSONAL INCOME TAX
DEFINITION OF INCOME
• The total net earnings and profits gained in a calendar year.
• Source principle is adopted related to the acquisition of earnings and income elements are fixed and named.
TAXES ON INCOME PERSONAL INCOME TAX
CHARACTERISTICS OF INCOME
• Personal• Annual• Net amount• General
TAXES ON INCOME PERSONAL INCOME TAX
TAX LIABILTY
• Full tax liability
• Limited tax liability
TAXES ON INCOME PERSONAL INCOME TAX – Types of Liability
Full tax liabilityThose who have the full tax liability are subject to tax on income generated within Turkey and in foreign countries.
Limited tax liabilityThose who have limited tax liability are subject to tax only on income generated within Turkey.
TAXES ON INCOME PERSONAL INCOME TAX – Types of Liability
FULL TAX LIABILITY
Real persons indicated below are taxed on their total income obtained within and outside of Turkey.
1. Those domiciled in Turkey (the persons indicated below are considered as residents of Turkey):
• Those whose residence is in Turkey,• Those who abide in Turkey continuously for more
than six months in a calendar year.(183 days)
TAXES ON INCOME PERSONAL INCOME TAX – Types of Liability
FULL TAX LIABILITY
2. Turkish citizens attached to public undertakings and institutions or establishments of which head offices are situated in Turkey and residing abroad due to their work related with the above said institutions, undertakings and establishments.
TAXES ON INCOME PERSONAL INCOME TAX – Types of Liability
FULL TAX LIABILITY
3. Foreigners indicated below are not considered as residents of Turkey, even if they stay in Turkey for more than six months;
• Businessmen, scientists, specialists, officials, press and radio correspondents, who come to Turkey on a given or temporary mission or for business, and other persons in a similar situation as well as those who come to Turkey to study, medical treatment, rest and travel.
• Those who are detained or remain in Turkey for reasons beyond their control, such as detention, conviction or illness.
TAXES ON INCOME PERSONAL INCOME TAX – Types of Liability
LIMITED TAX LIABILITY
Real persons, who are not residents of Turkey are taxed only on their income obtained in Turkey.
TAXES ON INCOME PERSONAL INCOME TAX
ELEMENTS OF INCOME
– Commercial income– Agricultural income– Wages– Professional income– Income from immovable property – Income from movable property– Other earnings and profits;
● Gains from value appreciation● Incidental profits
TAXES ON INCOME PERSONAL INCOME TAX – Elements of Income
COMMERCIAL INCOME
Income derived from all types of commercial and industrial activities.
Labor-capital organisation
Continuity
Volume of business
TAXES ON INCOME PERSONAL INCOME TAX – Elements of Income
AGRICULTURAL INCOME
• Income derived from agricultural activities
• Any activity performed in land, sea, lakes and rivers in forms of cultivating, planting, breeding, fishing, hunting and etc.
TAXES ON INCOME PERSONAL INCOME TAX – Elements of Income
PROFESSIONAL INCOME
Professional and scientific expertise rather than capital
Self employment
Continuity
TAXES ON INCOME PERSONAL INCOME TAX – Elements of Income
WAGES
Payment for dependent personal service
Employment by an employer
Working at a certain work place.
TAXES ON INCOME PERSONAL INCOME TAX – Elements of Income
INCOME FROM IMMOVABLE PROPERTY
• Rental income derived from the lease of real estates which include land, buildings, leasehold rights and transporting vehicles
TAXES ON INCOME PERSONAL INCOME TAX – Elements of Income
INCOME FROM MOVABLE PROPERTY (Saving Income)
• Income such as interest, dividend, rent and the like derived from capital in cash or capital in kind.
- Dividends,
- Interest accrued on all types of bonds and Treasury bills,
- Interest paid on all credit,
- Interests on deposits,
- Repo incomes
- The payments made by the retirement funds and insurance companies etc.
TAXES ON INCOME PERSONAL INCOME TAX – Elements of Income
OTHER INCOME AND PROFITS
Gains from value appreciation
- Value increases from partial or total transfers of commercial undertakings, value changes gained from transfers of goods, rights and movables
Incidental profits
- Income from occasional commercial and professional activities
TAXES ON INCOME PERSONAL INCOME TAX
TAXATION PROCEDURE
DECLERATION
WITHHOLDING
TAXES ON INCOME PERSONAL INCOME TAX
TAXATION PROCEDURE IN COMMERCIAL INCOME
DECLERATION
WITHHOLDING
income derived from construction and repair works extending over more than one calendar year
TAXES ON INCOME PERSONAL INCOME TAX
DETERMINATION OF COMMERCIAL INCOME
Real basis
- Balance sheet method
- Operating account method
Simple procedure basis
TAXES ON INCOME PERSONAL INCOME TAX
REAL BASIS
Expenses to be deducted
General expenses incurred for the purpose of earning and maintaining commercial gains
- Wages of bureau employees- Insurance payments- Communication expenses- Bureau expenses
TAXES ON INCOME PERSONAL INCOME TAX
REAL BASIS Food and lodging expenses for employees and
workers Expenses for treatment and drugs Insurance premiums and retirement payments Clothing expenses paid for workers and employees Travel and lodging expenses Losses, damages and indemnities paid upon
agreements, judgement of court or by order of love Expenses for vehicles used in the business Taxes and fees ( Stamp and municipal taxes, registration
fees etc.related to the enterprise)
TAXES ON INCOME PERSONAL INCOME TAX
SIMPLE PROCEDURE BASIS
- For some small businesses with certain threshold criteria, which are assumed as they are not able to calculate their income on real basis
- Commercial income is the positive difference between receipts and the expenses in a calender year.
- These taxpayers don’t have the responsibilitiy to keep books.
TAXES ON INCOME PERSONAL INCOME TAX
TAXATION PROCEDURE IN AGRICULTURAL INCOME
WITHHOLDING
DECLERATION
TAXES ON INCOME PERSONAL INCOME TAX
TAXATION PROCEDURE IN AGRICULTURAL INCOME
All payments made for the agricultural products and services are subject to withholding tax.
Withholding is the final taxation if the size of agricultural enterprises don’t exceed the limits determined in ITL.
TAXES ON INCOME PERSONAL INCOME TAX
LIMITS FOR DECLERATION
The size of the land where agricultural activities conducted exceeds certain limits or possessing more than certain number of bovine animal or sheep and goat.
Possessing a combine harvester or other similar motor vehicles or possessing more than two tractors up to age of ten.
TAXES ON INCOME PERSONAL INCOME TAX
TAXATION PROCEDURE IN WAGE AND SALARIES
WITHHOLDING income from one employer
DECLERATION income from more than one employer and second income is higher than the threshold assessed for each year.
TAXES ON INCOME PERSONAL INCOME TAX
WAGES
According to Income Tax Law, wages is classifed into two groups.
Real wages Other wages.
TAXES ON INCOME PERSONAL INCOME TAX
TAXATION PROCEDURE IN REAL WAGES
Real wages is subject to withholding tax.
Employees do not have to file tax return if they receive income from one employer.
In case of receiving income from more than one employer, it is not necessary to file tax return if the second income is lower than the threshold assessed for each year.
TAXES ON INCOME PERSONAL INCOME TAX
TAXATION PROCEDURE IN OTHER WAGES
Net wages of the following employees shall be 25% of the annual gross amount paid to the workers above 16 years of age employed in the industrial sector.
Persons employed by merchants whose earnings is determined on simple basis
Drivers employed in private servicesConstruction workers employed by private owners of
constructionPersons employed by the owners of revenue from real estate
TAXES ON INCOME PERSONAL INCOME TAX
TAXATION PROCEDURE IN PROFESSIONAL INCOME
DECLERATION(Except income of copyright holders)
WITHHOLDING
TAXES ON INCOME PERSONAL INCOME TAX
TAXATION PROCEDURE IN IMMOVABLE PROPERTY
DECLERATIONRental income subject to withholding tax exceeding the annual thresold
Rental income not subject to withholding tax
WITHHOLDING ( Except rental income of residences)
TAXES ON INCOME PERSONAL INCOME TAX
TAXATION PROCEDURE IN IMMOVABLE PROPERTY
A part of the income gained from renting buildings as residence in a calendar year is excepted from income tax (3.000TL for 2012)
TAXES ON INCOME PERSONAL INCOME TAX
TAXATION PROCEDURE IN MOVABLE PROPERTY
DECLERATION Dividents, Interest paid on all credits, Saving income
obtained in abroad
WITHHOLDING Article 94 (Dividents, payments made by the retirement
funds and insurance companies etc.)
Temprorary Article 67 (Interest from all kinds of bonds and Treasury bills, interests on deposits, repo incomes etc.)
TAXES ON INCOME PERSONAL INCOME TAX
TAXATION OF DIVIDENDS
• The half of the gross amount of the obtained dividend is excepted.
• For the year 2012, if the residual amount of the exception is exceeding 25.000 TL , the return shall be submitted.
• If the return is submitted, the amount witheld is written-off.
• In cases where there is no obligation for declaration, the witholding will be the final tax.
TAXES ON INCOME PERSONAL INCOME TAX
TAXATION OF SAVING INCOME NOT SUBJECT TO WITHHOLDING TAX OR EXEMPTION
Interest paid on all credits
Saving income obtained in abroad
Decleration in case of exceeding the annual threshold assessed for these kind of income.(1.290 TL for 2012)
TAXES ON INCOME PERSONAL INCOME TAX
WITHHOLDING TAXATION II) Temporary Article 67
Interest from all kinds of bonds and Treasury bills,(10 %)
Interests on deposits, (15 %)
Repo incomes, (15 %)
Withholding is applied by banks and financial intermediaries
Withholding is the final tax
TAXES ON INCOME PERSONAL INCOME TAX
WITHHOLDING TAXATION
II) Article 94
Dividents
The tax withheld by the full liable corporations can be set-off from the income tax in case of filing a tax return.
TAXES ON INCOME PERSONAL INCOME TAX
Payments made by the retirement funds and insurance companies (private pension payments)
- Payments made to the persons who depart from system withhout paying their premiums for ten years (15%)
- Payments made to the persons who paid their premiums for ten years but depart from individual retirement system withhout acquiring the right of retirement (10%)
- Payments made from the other funds and insurances to the individuals having paid their premiums or allowances for ten years, but leaving due to compulsory reasons such as death, disability or liquidation (10%)
- Payments made to the persons acquiring the right of retirement bound to application of individual retirement system, and to the individuals who depart from system due to compulsary reasons such as death, disablement or liquidation (5%)
Withholding is the final tax.
TAXES ON INCOME PERSONAL INCOME TAX
TAXATION PROCEDURE IN OTHER EARNINGS
AND PROFITS
DECLERATION
Gains from value appreciation
( In case of exceeding 8.800 TL for 2012)
Incidental profits
( In case of exceeding 20.000 TL for 2012)
TAXES ON INCOME PERSONAL INCOME TAX
TAXATION PROCEDURE IN OTHER EARNINGS AND PROFITS
Gains from value appreciationIn the determination of appreciation gains, inflation adjusted gains are taxed through indexing the acquisition costs of goods and rights which have been disposed.
If the difference between the indexed purchase price and the sales price is exceeding 8.800 TL for 2012, it is necessary to file a tax return.
Incidental profits If incidental profit exceeds 20.000 TL for 2012, the tax
payer submits a decleration.
TAXES ON INCOME PERSONAL INCOME TAX –Declaration of the Tax
TYPES OF TAX RETURNS
Declaration of personal income tax shall be made by means of:
1) Annual tax return
2) Withholding tax return
3) Special tax return
TAXES ON INCOME PERSONAL INCOME TAX – Declaration of the Tax
ANNUAL TAX RETURN
used for consolidation of earnings derived from various sources in the calendar year.
The fact that income is associated with a particular period of the year, does not affect the annual character of the tax return.
TAXES ON INCOME PERSONAL INCOME TAX – Declaration of the Tax
WITHHOLDING TAX RETURN
used for declaring total taxes to the tax office withheld by employers and other providers
TAXES ON INCOME PERSONAL INCOME TAX – Declaration of the Tax
WITHHOLDING TAX RETURN
Those required to apply withholding tax:
Public administrations and institutions, Public commercial concerns and other corporations,Commercial companies, business partnerships,Associations, foundations,Economic enterprises of associations and foundations,Cooperatives,Managers of investment funds,Merchants and self-employed persons obliged to declare their actual incomes,The farmers determining their agricultural earnings in according to principle of balance sheet or agricultural operations
TAXES ON INCOME PERSONAL INCOME TAX – Declaration of the Tax
SPECIAL TAX RETURN
used by taxpayers subject to limited tax liability, to declare profits and earnings for which they are not obliged to file annual tax return
TAXES ON INCOME PERSONAL INCOME TAX –Declaration of the Tax
DECLERATION TIME
Annual tax return: 1-25 th day of MARCH
Withholding tax return: By the 20 th day of the foollowing month
Special tax return: In fifteen days from acquirement.
TAXES ON INCOME PERSONAL INCOME TAX
TAX EXEMPTIONS AND EXCLUSIONS IN INCOME TAX
Exemption for Small Artisans and Tradesman Diplomatic Exemption Exclusion on Salaries Exemption for Education Enterprises Exclusion on professional income (copyright holders income) Exclusion on income from immovable property Exclusion on income from movable property Disablement deductionMinimum subsistence(living) allowance
TAXES ON INCOME PERSONAL INCOME TAX
EXEMPTION FOR SMALL ARTISANS AND TRADESMAN
Those engaged in retail trade without opening a workplace or by travelling without using motor vehicles
Small artisans doing works by travelling and directly for the consumers without opening a place of work
Those who sell homemade products such as towels, coverings, bed sheets, food etc. which are produced at their homes without using motorised devices, opening a workplace or hiring external workers.
TAXES ON INCOME PERSONAL INCOME TAX
DIPLOMATIC EXEMPTION
Ambassadors, consuls as well as officers who are members of embassies and consulates and who are citizens of that country and people who are assigned to an official duty in Turkey are exempt from the individual income tax.
These exemption does not extend to withholding taxes collected on movable capital earnings.
TAXES ON INCOME PERSONAL INCOME TAX
EXCLUSION ON SALARIES
Salaries of officials and employees of foreign embassies and consulates who are not subject to diplomatic exemption are also exempt from income tax.
TAXES ON INCOME PERSONAL INCOME TAX
EXCEPTION FOR EDUCATION ENTERPRISES
Income from private schools for pre-school education, primary education, special education and secondary education are excluded from individual income tax for five taxation terms.
TAXES ON INCOME PERSONAL INCOME TAX
EXCLUSION ON PROFESSIONAL INCOME
Gains obtained by copyright owners and their legal heirs are exempt from individual income tax.
• But those who are mentioned above are subject to witholding tax at a rate of 17 % and they don’t have to submit tax return.
TAXES ON INCOME PERSONAL INCOME TAX
EXCLUSION ON INCOME FROM IMMOVABLE PROPERTY
3.000 TL of the proceeds earned within one calendar year from leasing the building as residence shall be exempt from income tax.
•This exception shall not extend to persons who must submit yearly declaration for their commercial, agricultural or professional earnings
TAXES ON INCOME PERSONAL INCOME TAX
EXCLUSION ON INCOME FROM MOVABLE PROPERTY
The half of the gross amount of the obtained dividend is excepted from income tax.
The divident should be paid by full liable corporations
TAXES ON INCOME PERSONAL INCOME TAX
EXCLUSION ON INCOME FROM MOVABLE PROPERTY
Exclusion on private pension savings-25% of the payments made to the persons acquiring the right of retirement bound to application of individual retirement system, and to the individuals who depart from system due to compulsary reasons such as death, disablement or liquidation
-10% of the payments granted to the persons who paid their premiums for ten years from the insurance companies and to the individuals who leave office due to compulsary reasons such as death, disablement or liquidation;
-The total amount of payments granted from the annual income assurances by single premium
TAXES ON INCOME PERSONAL INCOME TAX
DISABLEMENT DEDUCTION
The monthly deductions applicable to the salaries of the employees according to the degree of disablement shall be as follows;•For first degree disabled, 770 TL.•For second degree disabled, 380 TL.•For third degree disabled, 180 TL.
(for 2012)
TAXES ON INCOME PERSONAL INCOME TAX
ADDING UP INCOMEFULL TAX LIABILITY
I) Income to be declared regardless of the amount
Commercial income Agricultural income Professional income Merchants, farmers and self-employed persons shall submit yearly tax return even they have not obtained any earning from their commercial, agricultural and professional activities.
TAXES ON INCOME PERSONAL INCOME TAX
ADDING UP INCOME
II) Income to be declared incase of exceeding the annual threshold assessed for each year. Wages
(Income from more than one employer exceeds the threshold assessed for each year.)Income from movable property taxed by withholdingIncome from immovable property taxed by withholdingIncome from movable and immovable property without any exemption or withholding taxation.
TAXES ON INCOME PERSONAL INCOME TAX
ADDING UP INCOME
LIMITED TAX LIABILITY
I) Income not to be declaredWages,Professional income,Income from movable property, Income from immovable property
subject to withholding tax in Turkey
TAXES ON INCOME PERSONAL INCOME TAX
ADDING UP INCOME
LIMITED TAX LIABILITY
II) Income to be declared (Special tax return.)
Income from movable and immovable property not subject to withholding tax in Turkey Other income and profits
TAXES ON INCOME PERSONAL INCOME TAX
DECLARATION IN CASE OF OBTAINING INCOME FROM DIFFERENT SOURCES
• To determine the threasold of 25.000 TL Wages are considered separetely from the other elemets of income The other income excluding (except) wages are considered together
If income from more than one employer is declared the other income will be included in annual tax return even if the other income do not exceeds 25.000 TL in total.
If income from more than one employer is not declared the other income will be included in annual tax return in case of exceeding 25.000 TL in total.
TAXES ON INCOME PERSONAL INCOME TAX
WRITTING-OFF LOSSES AGAINST PROFITS
•Losses incurred from some elements of income and the losses suffered as a result of the activities abroad in full liability are set-off against the gains from other elements.
•Remaining part of the losses which could not be deducted can be carried forward for the five successive years.
TAXES ON INCOME PERSONAL INCOME TAX
WRITTING-OFF LOSSES AGAINST PROFITS
Losses resulting from “Other Earnings and Profits”,
Diminutions of capital in the income from movable and immovable capitals,
Losses incurred abroad related to the gains exempted from income tax in Turkey
Can not be set off against the gains from other elements.
TAXES ON INCOME PERSONAL INCOME TAX
DETERMINATION OF INCOME TAX BASE
OTHER DEDUCTIONS
Insurance premiums and contribution payments effected to individual retirement system,
Education and health expenditures, Annual deduction calculated for the declared income of
the disabled, Aids and donations to public administrations Expenses made for the construction of schools, health
facilities and dormitories , rest homes, care and rehabilitation centres,
TAXES ON INCOME PERSONAL INCOME TAX
OTHER DEDUCTIONS
Cost of foodstuff, hygiene, heating materials and cloths donated to associations and foundations engaged in food providing activities with an aim to helping the poor,
Aids and donations made for supporting cultural and art activities,
Sponsorship expenditures, Research and development expenditures, Aids and donations made related to natural disasters
TAXES ON INCOME PERSONAL INCOME TAX
TAX SCHEDULE
Tax rate schedule is determined as progressive in the Income Tax Law. The tax schedule to be applied to any income of 2012 is as follows:
Taxable Income (TL) Tax Rate (%)
Up to 10.000 15
10.001 - 25.000 20
25.001 - 58.000 27
Over 58.000 35
TAXES ON INCOME PERSONAL INCOME TAX
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