The social security system in Turkey is predominantly similar to Bismarck model, one of four basic insurance systems which are Continental Model (Bismarck), Liberalistic Model (Beveridge), Northern European Model and Mediterranean Model. Bismarck Model refers to a system where the premiums paid over the wages of employees according to their insurance status are collected in a joint pool and the benefits are provided based on the paid premiums only when old-age pension is entitled. The amount of the benefits to be granted to the insurance holders in cases of retirement, accident and sickness varies by the income they previously had. The main actors in this system are employees, employers and representatives in public sector. This system has more regulatory measures in labor market than liberalistic system, which hinders labor market flexibility. Concordantly, strict rules and collective bargaining mechanisms have come to the fore.

Turkish Social Security System has also some elements of the Mediterranean Model as well as Bismarck Model. The Mediterranean Model is derived from the Continental Model and bears a resemblance to this model in the sense that the paid social insurance premiums provide a basis for future social security benefits. Another aspect of the Mediterranean Model similar to Turkish Model is the wideness of informal economy. For this reason, the system does not cover many people; however social risks are tried to be eliminated through family ties. This model has brought into prominence the concepts of traditional family and agricultural society; thus people are supported by their families without considering whether the state provides benefits or not in case of revenue loss or social risks.

A number of structural changes have been made on Turkish social security system. A transition has been realized from the system which entitles various rights to different professional groups to the system which ensures the unity of standards and norms in terms of retirement insurance.
Having the aim to ensure the sustainability of the system, these structural changes have not led to deviation from the Mediterranean Model-Continental Model.

(Table: Social Security System in Turkey)

Financing of Social Security

Social security is generally financed through premiums or contributions collected from workers, employers and state around the world.
There are two ways to follow in financing social security system:

1. Capitalization or saving method (fund management)
2. Pay as you go (allocation) method

The pay-as-you-go method is used for financing social security system in Turkey. Under Turkish social security system, premiums are collected for long and short term insurance; unemployment insurance and universal health insurance. In order to lessen the effects of early retirement on national economy, social security premium is collected from pensioners who continue to work after retirement.

Individuals to Pay Premiums

Individuals to pay premiums vary according to the status of insurance holders:

The long and short-term insurance, universal health insurance and unemployment insurance premiums of the individuals working on service contract (workers) shall be paid to the Social Security Institution by their employers by deducting the amount equal to the rate of premium collected over total earnings from workers’ wages and adding the amount of premium to be paid by the employers.

The long and short-term insurance and universal health insurance premiums of the individuals working on own names and accounts (employers) shall be paid to the Social Security Institution by themselves.

The long-term insurance and universal health insurance premiums of civil servants shall be paid to the Social Security Institution by the Public Institution where they work by deducting the amount equal to the rate of premium collected over total earnings from civil servant’s salary and adding the amount of premium to be paid by the institution.

The long-term insurance and universal health insurance premiums of optional insurance holders shall be paid to the Social Security Institution by themselves.

Source: Social Security Institution (link: http://www.sgk.gov.tr/wps/portal/sgk/en/detail/social_security_system)
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

Pursuant to the Labor Law, there are various types of employment contracts:

a) Employment contracts for “temporary” and “permanent” work
b) Employment contracts for a “definite period” or an “indefinite period”
c) Employment contracts for “part-time” and “full-time” work
d) Employment contracts for “work-upon-call”
e) Employment contracts with a trial period
f) Employment contacts constituted with a team contract

Employment contracts are exempt from stamp tax and any type of duties and fees.

Any kind of discrimination among employees with respect to language, race, gender, political opinion, philosophical approach, religion or similar criteria is prohibited by law. Discrimination based on the gender of an employee is prohibited when determining the amount of remuneration for employees working in the same or equivalent jobs.

Working Hours and Overtime
Under the Labor Law, the maximum regular working hours are 45 hours per week. In principle, 45 hours should be split equally among the working days. However, in accordance with the Labor Law, working hours may be arranged by the employer within the legal limits.

As a rule, hours exceeding the limit of 45 hours per week are to be paid as “overtime hours”. The wage/salary for each hour of overtime work is paid by raising the hourly rate of the regular working salary by fifty percent. Instead of the overtime payment, employees may be granted 1.5 hours of free time for every overtime hour worked. Overtime hours worked during weekends and public holidays are to be paid as wage for one-day holiday and overtime wage. These rates may be increased on the basis of a collective or personal employment contracts between employees and employers. The total number of overtime hours worked per year may not exceed 270 hours.

Annual Paid Vacation
There are six paid public holidays per year (January 1^st, April 23^rd, May 1^st, May 19^th, August 30^th, October 29^th), plus two paid periods of religious holiday, which comes to eight days in total.
Employees are entitled to paid annual vacation for the periods indicated below, provided that they have worked for at least one year including the probation period:

These benefits are the minimum levels set by law and may be increased on the basis of a collective or personal employment contracts.

As per the Regulation regarding the Payment of Wages, Premiums, Bonuses and Any Other Remuneration, in case the employer recruits at least 5 workers within the same workplace or across the whole country; any payment to workers shall be made through banks. If wage and salary amounts are not paid into employees’ bank accounts, an administrative penalty is charged to the employer. It is possible to denominate wages/salaries in terms of a foreign currency. In this case, wages/salaries shall be paid in TRY calculated on the basis of the relevant foreign currency rate prevailing as of the payment date.

 Date: 13 March 2017

Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

…The accident and insurance premiums paid on behalf of the partner of your company are not subject to deductible expenses referred in the related laws. So it is required to accept these premiums as profit shares and apply 15% withholding to profits shared. So it is not possible to write these premiums as expense when detecting the income of your company.

Source: İSMMMO
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

1- WHAT EXPENSES ARE COUNTED AS PREMIUMS?
Incomes attained from legally obligated institutions by real people and incomes counted as premiums in terms of the enforcing Income Tax law as follows:

1.1- Premiums of stock certificates
1.2- Income from trade investments
1.3- Premiums given to the members and board of governors.

2- HOW TAX IS IMPLEMENTED ON KAR PAYLARI NASIL VERGİLENDİRİLİR?
2.1-The half of the premiums attained from legally obligated institutions are exempt from, the rest amount is going to be considered as liable to tax.

In the case that there is no other income which is liable to tax, tax income will be declared if it exceeds 30.000 Turkish Lira.

2.2- %15 part of the all tax cut, (including the exceptional part) will be centered in an account, the rest amount after the entrance will be denied and returned within the frame of general provisions.
2.3- In the case that institutions distribute their earnings which they acquired before 31 December 1998, these profit shares that is acquired by real people, will not be declared with annual tax declaration no matter how much it is.
2.4- Account period between the years of First January of 1999 and 31^st December of 2002, earnings which are not liable to tax and the other earnings which are liable to tax according to the income tax law article number 61, 1/9 Premium will be added to net amount.
2.5– 1/5 rate of declared amount will be entered in to account from the calculated income tax.
2.6- While giving notice regarding income from moveable capitals, working partners of the companies, partners of limited companies and of corporates, the members of board, are able to decrease the social security organization for artisans and the self-employed premiums.

Source: Income Law Tax
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

In determining taxable amount of salaries and wages, the following expenditures are allowed to be deducted from gross amount:
– Legal deduction made according to various laws or regulations,
– Payments made for pensions,
– Payments made for various insurances,
– Payments made for labor union membership.

Source: Revenue Administration

Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.