Exemption for payments made for electricity, natural gas and similar heating expenses
The General Communique on Income Tax No. 322, published in the Official Gazette No. 32059 (2nd Supplementary) on 30.12.2022, regulates the procedures and principles for the application of income tax exemption on payments by employers to employees for electricity, natural gas, and other heating expenses, under the provisions of the Law No. 7420, which was enacted on 03.11.2022.
In Temporary Article 1 of Law No. 7420, it is stated that:
“(1) Starting from the effective date of this article, until 30.06.2023 (inclusive), the monthly payments made by employers to employees for electricity, natural gas, and other heating expenses, not exceeding 1,000 Turkish Liras, will not be included in the premium-based earnings according to the Social Insurance and General Health Insurance Law No. 5510, and income tax will not be calculated according to the Income Tax Law No. 193, dated 31.12.1960, on this amount.
(2) The Ministry of Treasury and Finance and the Ministry of Labor and Social Security are authorized to determine the procedures and principles for the application of this article, as applicable.”
The exemptions outlined in the mentioned Communique are summarized below:
a) Article 61 of the Income Tax Law No. 193 defines the concept of wages. According to the relevant article of this law, all payments and benefits provided to employees, such as salary, overtime, bonuses, reimbursements, and other similar payments, are considered part of the wage.
Between 09.11.2022 and 30.06.2023 (inclusive), payments made by employers to employees for electricity, natural gas, and other heating expenses, not exceeding 1,000 Turkish Liras, will be exempt from income tax.
b) The conditions for income tax exemption on payments made by employers for electricity, natural gas, and other heating expenses, as set forth in Communique No. 322, are as follows:
- Made between 09.11.2022 and 30.06.2023 (inclusive),
- Made for electricity, natural gas, and other heating expenses,
- Not exceeding 1,000 Turkish Liras per month,
- Made in addition to the existing salary of the employee.
Example: An employee (H) with a gross monthly salary of 13,000 TL receives an additional payment of 1,000 TL from the employer (I) for electricity, natural gas, and other heating expenses from 09.11.2022 onwards. In this case, all payments made by the employer (I) to the employee (H) until 30.06.2023 will be exempt from income tax.
Example: An employee (I) with a gross monthly salary of 10,000 TL receives an additional payment of 700 TL from the employer (J) for electricity, natural gas, and other heating expenses from 09.11.2022 onwards. In this case, all payments made by the employer (J) to the employee (I) until 30.06.2023 will be exempt from income tax.
c) Payments exceeding 1,000 Turkish Liras in addition to the employee’s salary, even if made for the mentioned expenses, will be subject to income tax for the excess amount.
Example: An employee (K) with a gross monthly salary of 15,000 TL receives an additional payment of 1,500 TL from the employer (L) for electricity, natural gas, and other heating expenses from 09.11.2022 onwards. In this case, the 1,000 TL portion of the payment will be exempt from income tax, but the excess 500 TL will be subject to income tax.
d) The payments for these expenses must be made in addition to the employee’s existing salary. If there is no increase in the existing salary or if a portion of the existing salary, overtime, bonus, or social assistance is shown as being for these expenses, the exemption cannot be applied.
Example: An employee (M) receives a gross salary of 10,000 TL and a social assistance payment of 1,000 TL, totaling 11,000 TL. The employer (N) makes an additional payment of 1,000 TL to the employee (M) for electricity, natural gas, and other heating expenses. In this case, the 1,000 TL additional payment made to the employee (M) will be fully exempt from income tax.
If no additional payment is made and the 1,000 TL social assistance payment is claimed to be for electricity, natural gas, and other heating expenses, this amount will not be exempt from income tax.
e) Employers will not be required to request invoices or documents from employees for these expenses to apply the exemption.
Example: Employer (O) makes a payment of 500 TL for heating expenses in 2022, in addition to the employee’s (Ö) gross salary of 9,000 TL. This payment will be exempt from income tax and not subject to tax between 09.11.2022 and 30.06.2023.
f) The additional payments for these expenses must be shown in the salary slip, and the portion up to 1,000 Turkish Liras will not be included in the taxable income.
g) There is no stamp tax exemption for payments made for these expenses.
You can access the related Communique here.
Best regards,
BİLGENER
