Turkey recently combined its tax return and social security declaration process: what should employers know about the new system?

After around 2 years of debate and delays, the government of Turkey has introduced a new tax declaration process which combines both tax and social security information (SSI). The new declaration process was first announced in 2016 but its introduction was pushed back through several dates in 2018 and 2019, before it will eventually be implemented on 1 March 2020.

The combined declaration will have consequences for all businesses in Turkey, or those with employees in Turkey, so obligated employers should ensure their payroll departments are capable of complying with the new regime. Get up to speed with the changes here.

How has the tax declaration process changed?

Under Turkey’s previous declaration process, monthly tax withheld from an employee’s wages by their employer, and the employee’s SSI contributions, were declared in two separate online forms. Each SSI declaration submitted to the SSI office would detail an individual employee’s’ employment activity for that particular month. Similarly, employee income tax declarations would be submitted to the Turkish Revenue Administration.

Under the new system, the two separate declarations will be combined into a single online form called the Withholding Tax and Monthly Premium Service Document.

What does the combined declaration involve?

The Withholding Tax and Monthly Premium Service Document includes all the information previously submitted on the two separate declarations to the Revenue Administration and the SSI office. Beyond the relevant SSI activity pertaining to each employee, the combined declaration will include the following tax information for the month:

  • Income
  • Stamp tax
  • R&D incentives
  • Other tax incentives

Since the breakdown of the above information is unique to each employee, each declaration must be worked out by payroll on an individual basis: the information cannot be submitted as a total for all employees.

What do employers need to do now?

The combined tax and SSI declaration iwill come in effect next month so employers must ensure that their payroll departments understand how to complete the new Withholding Tax and Monthly Premium Service Document for each employee. As part of the declaration process, employers will need to apply for two new passwords from the Revenue Administration: one for the tax document submission, and one for all other tax filings. The dual password system is intended to help protect the confidentiality of employee salaries.

How does the combined declaration affect payroll providers?

Under the previous system, if a business’ payroll was outsourced to a third party, employers would still have completed the separate declaration forms themselves. In the new regime, however, if an employer outsources their payroll, the payroll provider will complete the Withholding Tax and Monthly Premium Service Document on their behalf. Employers should pass their tax declaration passwords to their payroll providers.

How does the combined declaration improve the tax return process?

The Turkish government hopes that combining tax and SSI in a single declaration will reduce compliance costs for employers and simplify tax bureaucracy and administration. The government is also hoping that the move to reconcile tax and social security and collect both sets of important information into a single system will help in the fight against the informal work economy.

Explore the Turkish tax and social security landscape with activpayroll’s Turkey Global Insight Guide: find information on the Turkish payroll process along with insight into the country’s business practices and its global economic profile.

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