The Act No. 4720 Amending the Income Tax Code and Some Laws and Decrees has been enacted in the Turkish Grand National Assembly recently and is expected to be in force as to be published in the Turkish Official Gazette soon.
One of the important policy that is being introduced by the law is the implementation of tax and social insurance premium exemption to the electricity, natural gas and heating expenses up to a certain amount paid by employers to their employees.
This has to be noted that, while the European Union is in going through an energy crisis during the 2022 Winter due to the Ukraine War, the Turkish state’s incentives in the field of energy constitutes an important strategical step.
The last regulation includes the monthly payments made by employers to the employees in return for electricity, natural gas and heating expenses up to TRL 1,000 to be exempt from tax and premium, as to start from the effective date of the law until the end of June 2023 (in other words, for the winter months of 2022-2023). As a precondition these payment should be made in addition to their current wages/premium earnings. It has been regulated that such payments not exceeding TRL 1,000 are to be included within the scope of exemption from the earnings subject to social insurance premium and are exempted from the income tax.
The main purpose of this regulation is to encourage employers to make such payments to their remote or hybrid workers and to encourage such payments by removing the tax and premium burden that employers face due to such payments.
It should be underlined that the exemption of heating and energy support is currently constitutes a temporary arrangement. Natural gas, heating and electricity exemption will only be applied until 30.06.2023 (including this date) under the current law. Even if the said payment is continued by the employer after this date, it will not be possible to benefit from the exemption unless an additional regulation is made. On the other hand, it should be noted that it is highly probable to make the regulation permanent with legal amendments in the future.
In this way, additional payments to be made to workers on 30.06.2023 (including this date) will not be included in the earnings subject to premium in accordance with the Social Insurance and General Health Insurance Law No. 5510, and income tax will not be calculated over these amounts in accordance with the Income Tax Code No. 193. Only stamp duty will be deducted from the payments shown in the payrolls.
In summary, with the Act No. 4720, a new incentive application has been introduced in the business life of Turkey. Accordingly, electricity, natural gas and heating supports up to TRL 1,000 paid to their employees by employers are included in the scope of tax and premium exemption. Thus, it is aimed to support the additional payments made by employers to hybrid or remote employees.
