10/10/2023

Payroll Tax Rates, Conditions, and Definitions for a Limited Liability Company (LLC) in Turkey

llc turkey

Running a Limited Liability Company (LLC) in Turkey comes with various financial responsibilities, one of which is managing payroll taxes. Payroll taxes are a crucial part of every business’s financial obligations, as they contribute to social security and other government programs. 

This article provides an overview of payroll tax rates, conditions, and definitions specific to LLC in Turkey.

Payroll Taxes in Turkey

Payroll taxes in Turkey primarily consist of contributions to social security and related programs. These taxes ensure that employees receive benefits like healthcare, retirement pensions, and unemployment benefits, while also supporting other social services. Employers and employees both contribute to these taxes.

  1. Social Security Premiums

    • Employees: Employees in Turkey are obligated to contribute a portion of their salary to social security premiums. The exact rate depends on their earnings, with higher-income earners contributing more.
    • Employers: Employers also make contributions to social security premiums on behalf of their employees. The employer’s contribution rate varies depending on the employee’s salary, but it is generally higher than the employee’s rate.
  2. Unemployment Insurance Premiums

    • Employees: Employees contribute to the unemployment insurance fund based on their earnings.
    • Employers: Employers are responsible for a separate contribution to the unemployment insurance fund, which is typically higher than the employee’s contribution.
  3. Income Tax

    • Both employees and employers should be aware of the income tax deductions that are made from the employee’s salary. The amount depends on the employee’s income level and tax brackets.

Conditions and Requirements

  1. Registration with the Social Security Institution (SGK): As an LLC in Turkey, you must register with the SGK for your employees. This registration ensures that both the employer and employees are contributing to the social security system as required by law.

  2. Keeping Accurate Records: It’s essential to maintain accurate records of your employees’ earnings, contributions, and deductions. Proper documentation will help you comply with tax regulations and avoid potential penalties.

  3. Monthly Reporting: Employers must submit monthly payroll reports to the relevant authorities, detailing the salaries, deductions, and contributions for each employee.

  4. Timely Payments: Payroll taxes must be paid on time, usually by the 23rd of each month for the previous month’s payroll. Late payments may result in fines and interest charges.

Definitions

  1. Social Security Premium: This is the contribution made by both employees and employers to the social security system. It covers various benefits, including health insurance, retirement, disability, and survivorship.

  2. Unemployment Insurance Premium: This contribution is made to the unemployment insurance fund, which provides income support to eligible individuals who have lost their jobs.

  3. Income Tax: Income tax is deducted from an employee’s salary based on their income level and applicable tax rates. It is collected by the employer and remitted to the tax authorities on behalf of the employee.

Understanding payroll tax rates, conditions, and definitions is essential for running a Limited Liability Company (LLC) in Turkey. Compliance with these tax regulations is crucial to avoid legal issues and financial penalties. Be sure to keep up-to-date with any changes in tax laws and consult with tax professionals if needed to ensure that your LLC meets its payroll tax obligations in Turkey.

Azkan Group can support you in your Employer of Record (EOR) and payroll requests (also called Umbrella Company) in Turkey. We can manage your HR requests even if you don’t have a legal entity in Turkey.