According to the Turkish Income Tax Code No. 193, the income of real persons is subject to income tax. Income elements subject to income tax, consists of commercial income, agricultural income, wages, self-employment income, real estate capital income, movable capital income and other earnings and incomes.
Wages are benefits provided by money and allowances (given in return for services in the form of goods) in exchange for services to employees who are subject to an employer and affiliated with a specific workplace, as that the benefits can be represented by money (providing housing, vehicles, etc.).
Wage income earned by real persons within a calendar year is subject to income tax. Wage refers to the revenue obtained from the employer in return for physical or mental labor. This revenue may be in the form of money, or it may be in kind or in the form of benefits that can be represented by money.
The wage is determined as a certain percentage of the earnings, provided that it is paid under the name of allowance, compensation, cash compensation (financial liability compensation), allocation, raise, advance, dues, attendance fee, premium, bonus, expense provision or under other names, or that it is not a payment in the nature originating from partnership relationship. The fact that it has been made in various names does not change the nature of the wage.
In terms of income tax, whether a payment will be taxed as a wage or another item of income will be determined according to the three factors listed below. If these three elements exist together, the income earned will be taxed as a wage, otherwise it will not be possible to talk about a wage.
The three basic elements that make up wage income are as follows:
- Subordination to an employer: The first element required for any payment to be considered as a wage is that the employee is subject to an employer. Employers are natural and legal entities that employ service personnel/employees and employ them in accordance with their orders and instructions. The employee’s loyalty to the employer may be de facto or may be determined by law, statute, regulation or contract.
- Being affiliated with a specific workplace: A workplace is a place allocated for or used for the execution of a commercial, industrial, agricultural or professional activity. Loyalty to these places is a legal commitment. The service does not necessarily have to be performed at the actual workplace.
- A payment to be made in return for a service: If the payment is not in return for a service, it is not possible to consider it as a wage. The payment made in return for services can be in the form of cash (weekly, monthly, etc.), monthly (provision of goods in return for services) or benefits that can be represented in money (such as providing housing, vehicles, etc.).
If the above mentioned three criteria are being met together, than we can talk about a “wage” in terms of the Turkish Tax Law.
