TAXATION OF WAGE INCOME
The Law No. 7194 not only imposes the obligation to submit statements on persons who earn an annual gross wage income of over TL 600,000 but also introduces changes in the income tax tariff. However, this regulation also has several advantages.
Dear Fortune readers,
I would like to hereby share with you my assessments regarding the regulation on the statement of wage income through the Law No. 7194, which was put into force towards the end of last year. Before this regulation, the wages received from a single employer by an employee employed at a certain workplace were withheld at source and were not subject to an income statement.
Similarly, if wages were received from multiple employers and the annual wage from the second employer to be determined by the wage-earner exceeded the amount in the second tranche of the income tax tariff, the total amount of gross wages earned from both employers would be declared with an annual income statement.
The new regulation introduces two basic changes regarding the taxation and statement of wage income. The first is the addition of a 40% tax rate to the tax rates of 15%, 20%, 27% and 35% already provided by the income tax tariff in the Income Tax Law. Accordingly, as of 2020, individuals with an annual gross income of over TL 600,000 will pay 40% income tax for the wage income exceeding this amount. Another regulation is that, starting from 2020, those with an annual gross wage income of over TL 600.000 from a single employer will declare such wage income through an annual income statement in March of the following year.
Therefore, the rental income, returns on securities, and other earnings of individuals who earn an annual gross wage income of over TL 600,000 from a single employer will be added to their wage income in the statement to be submitted and be taxed at a rate of 40%.
If the person concerned does not have any income other than his wages, he will not be subject to an additional tax payment if he submits a statement. It will even be possible for him to receive a refund due to reductions over the statement. In the previous regulation, if wages were received from multiple employers and the income tax of the wage received from the second employer did not exceed the amount in the second tranche of the income tax tariff, there was no need to submit a statement for such wage income.
However, according to the new regulation, if a person earns wages from multiple employers and even if the wage he earns from his second employer does not exceed the second tranche in the tariff, they will still need to declare this second wage income in March of the following year if the total of the two wages exceeds TL 600,000.
Those falling in this scope will be able to reduce some expenses in their statement. These expenses are personal insurance premiums, education and healthcare expenditures, donations and aids, and sponsorship expenditure as well as donations and aids that meet various conditions and can be completely reduced according to the law.
I recommend that the said statements be prepared by experts of the subject, considering that the documents related to the aforementioned reductions need to be collected by the end of the relevant calendar year and there are some conditions and limitations on the expenses to be reduced.
Leon Aslan Coskun
The Chairman of Mazars Denge