Page 10 - VGNisan_2018
P. 10
Vergide Gündem
English Translation
The state of amounts paid based on mutual
rescission contracts in terms of the Income
Tax Law
Concerning the employees with a business relation terminated through a mutual
rescission contract, some hesitations exist whether the amounts paid by their
employer is subject to income tax or not.
The rulings released by the Revenue Administration consider the portion of them
up to severance pay as exempt from income tax and indicate that the exceeding
amount should be taxed as earning.
Particularly within the latest court verdicts declared regarding this matter, opinions
exist pointing out that these payments cannot be specified as an earning since they
cover the period following the termination of employee-employer contact and within
that context, the whole amount should not be subject to income tax.
So as to remove the uncertainties and eliminate controversies; there was an
intention to make the matter of considering payments to the employee following the
termination of the business contract under various names (as job loss, termination
compensation and indemnity of mutual rescission contract) and their state in terms
of income tax exemption clear and new regulations have been introduced through
the Law Requiring Amendments to Tax Laws and Certain Laws and Statutory
Decrees no.7103 published in the 2. Repetitive Official Gazette dated 27 March
2018.
Through the amendments on articles 25 and 61 of the Income Tax Law, by a
provision added to the Law it has become apparent that these payments are
considered as earning. Besides, the aforementioned payments will be considered
together with the severance pay amounts paid if any, the portion remaining within
the indemnity limit should be exempted and the rest will be subject to income tax.
The concerning legal provisions have been enacted as of the publication date (27
March 2018).
Assessment on the reduction of lump
sum ratio through the Law no.7061
in terms of legal safety principle and
property right
The expenses, that will be considered in determining the net amount of the
revenues from immovable capital defined in the clause 1 of the article 70 of the
Income Tax Law as the income obtained by rental of the written property and
rights by their owners, possessors, owners of easement and usufructuary rights
or tenants constitute revenues from immovable capital, are determined with two
different methods, which are “Real Expense Method” and “Lump Sum Expense
Method”. Taxpayers are free to choose any of these two methods. According to
the article 74 of the Law, when taxpayers (except for those leasing their rights)
desire, they may reduce 25% of their revenues as Lump Sum Expense to be in
return for the expenses mentioned as 11 articles.
10 Nisan 2018