If you are looking for Payroll in Turkey, it means that you are going to set up there. Before doing this, you need to get some essential information regarding the economic situation in Turkey.
Develop your business in Turkey – Indicators and situation
The information below will be helpful if you are looking for a Payroll in Turkey company.
With 83 million inhabitants, Turkey is the 19th most populous country in the world. Istanbul is the economic and financial capital, which has nearly 15 million inhabitants, followed by the political capital Ankara, then Izmir, Bursa and Antalya. The country has a young population, with nearly 19 million people under the age of 14, and a median age of 32.3 years in 2019.
With a GDP of $789 billion USD in 2018, Turkey is the 19th economic power in the world. The development of the Turkish economy has been very dynamic over the past two decades. With an average annual GDP growth of 5.7% since 2010, it has become one of the most important economies in terms of wealth creation in the Middle East, just behind Saudi Arabia. Following the attempted coup in summer 2016 and security tensions, the growth rate fell to 3.2%, linked in particular to the significant drop in tourism. In 2018, Turkey recorded 2.8% growth in national income, up from 0.2% in 2019 according to the most recent forecasts.
Turkey is following a phase of tertiarisation of its economy at a moderate pace. According to the Turkish Statistical Institute, agriculture represented 5.8% of national wealth in 2018, while the tertiary sector alone accounts for 55% of GDP, and industry 29.1%. In addition, the tertiary sector is the main provider of employment, employing 55.4% of the total workforce in 2019, compared to 54.1% in 2017.
In recent years, the growth model of the Turkish economy has been based, on one hand, on domestic consumption fuelled by a dynamic distribution of bank credit. On the other hand, it is driven by the construction sector and major infrastructure projects, in the form of real estate and motorway development in Turkish metropolises. Numerous shopping centres have also opened, offering new outlets for domestic consumption. However, this policy has led to many imbalances, including a rise in inflation (the rate of which reached 10.5% in November 2019), structurally greater than the target objective displayed by the Central Bank, the depreciation of the value of the local currency (which has lost almost a third of its value in the past two years), the rise in private debt and external debt, the widening of the current account deficit or even the deterioration of the public accounts.
However, private savings remained low in Turkey. The dynamism of consumption and the construction sector was favoured by an active credit distribution policy. The limited deposits in TRY in Turkish banks have led the private sector to resort to financing in foreign currencies in order to carry out their investments and their activities.
While private debt represented 29.9% of GDP in 2007, it stood at 69% of GDP in the second quarter of 2019. The private sector’s debt level is mainly explained by the use of borrowing, prompted by post-financial crisis monetary expansionism in 2008, and fuelled by Turkey’s solid economic performance over the past decade. But the volume of external debt, which accounts for 65% of private debt, exposes the Turkish economy to variations in the value of the dollar and the euro and in the prices of basic products and fuel. This can cause difficulties in reimbursement and lead to an inflationary cycle.
Despite the increase in trade, the deficit in balance continued to widen until 2018. Turkish imports increased by 1.7% and exports decreased by -3% between 2017 and 2018, with a deficit trade of $42 billion USD. The European Union confirmed its position as the largest trading partner in 2018, while China and Germany are Turkey’s first customers and suppliers. However, depreciation of the Turkish lira and the contraction of domestic demand made it possible to reduce the Turkish trade deficit, going from $59 billion USD in 2017 to $42 billion USD in 2018. The current deficit also contracted, by $47 billion USD in 2017 to $27 billion USD in 2018.
Public debt was reduced from 60% of GDP in 2002 to 14.8% in Q2 2019, and budget deficit has been sharply reduced since the last economic crisis (2.9% in 2019 compared to 5.9% in 2009), despite some recent fiscal slack.
According to the Global Financial Centres Index, the Istanbul Stock Exchange ranks 53rd (September 2019 edition), in the category of international and non-global financial centres. The authorities are currently preparing to set up the Istanbul Finance Centre project, which should be operational in 2023 and aims to make Istanbul a leading financial centre. Borsa Istanbul has a market capitalisation of $170 M USD, comparable to Tel Aviv ($214 M USD), Santiago ($212 M USD), Qatar ($154 M USD) and Abu Dhabi ($120 M USD) stock exchanges. In 2018, Borsa Istanbul had 399 listed companies against 416 in 2016, far from the ambitions displayed by the government, which aims to reach 1,000 companies listed on the Istanbul stock exchange by 2023.
Payroll and taxes in Turkey
What are the tax types and tax names?
If you need Payroll in Turkey, you need to know some general information about taxes in Turkey.
The types of taxes that in Turkey are sometimes confusing. So, what are the different types of taxes in Turkey?
Tax types
Tax types are sorted according to their codes and there are more than 200 according to the current list of the Revenue Administration. However, there are 7 main types of taxes:
Income tax
0001 coded income tax or ‘annual income tax’ ranks first in the list. According to the first article of the Income Tax Law, the annual income of natural persons is subject to income tax. It is evaluated over the earnings and income obtained in a calendar year. Commercial and agricultural earnings consist of self-employment income, real estate capital returns, securities capital returns, wages and other income.
Corporation tax
The corporate tax covers institutions and organisations, not individuals. Profits from cooperatives, public institutions, capital companies, associations or foundations and business partnerships are subject to corporate tax.
VAT (Value Added Tax)
Value Added Tax is the most common type of tax levied on expenses. The process from the sourcing of a product, a good or a service to reaching the end consumer, incurs value added tax. In Turkey, commercial and agricultural imports of all kinds of products and services for professional activity is subject to VAT.
Stamp duty
Stamp duty is a type of tax collected by the government for every kind of contract and written agreement. It is taken from the papers documenting the validity of the agreement transactions between individuals and institutions.
Property or real estate tax
All buildings within the borders of Turkey are subject to property tax. It is levied on all immovable properties, regardless of whether they are on land or water, and regardless of the materials used in the construction of the building. Although it is divided into building tax and land tax, it basically covers immovable properties and is also known as ‘Wealth Tax’.
Land of which the gross area does not exceed 200 square metres and has a single dwelling, or has the right of ‘usufruct’.
Persons who submit documents stating that they have no income, veterans, widows and orphans and disabled citizens who are limited to their pensions, widows, orphans, death pensions and disability pensions, whose income is collected from social security institutions. All of these may be exempt from real estate tax if they fulfil the necessary conditions.
What is Payroll in Turkey ?
Now that you have all the necessary information about the economy and the types of taxes in Turkey, you are ready to get in touch with a Payroll Turkey company.
Payroll Turkey, is a tripartite relationship with the Payroll company, the client (you) and the employee. The Payroll structure (or PEO Turkey) is responsible for employing the worker under its legal structure. Then, you pay the Payroll company the salary and taxes of the employees, and the Umbrella Company based in Turkey reverses them to the state and to employees. You stay in touch with your employees, because you will give them the jobs to take on.