With the newly proposed tax exemption package, a tax exemption of up to 12 months is planned for employees who switch from full-time to part-time work. Although the draft initially targeted those over 50, the proposal submitted to the Grand National Assembly of Turkey (TBMM) has been broadened: all employees who move from full-time to part-time employment will be eligible for the exemption.
Tax Exemption for Those Switching to Part-Time Work
As part of the employment package, a tax exemption of up to 12 months has been introduced for workers who reduce their hours from full-time to part-time. Under the bill submitted to parliament, the income tax exemption will apply for 12 months to every employee who makes this transition. The earlier idea of counting non-worked days as pension contribution days has been dropped; accordingly, days not worked will not be counted as retirement-entitling days.
The employment package, prepared before the TBMM’s summer recess and updated with several amendments, was resubmitted to parliament last week. It is expected to be discussed in the Plan and Budget Commission during the current week. According to the proposal, wages of those who change from full-time to part-time will be covered by an income tax exemption. In other words, income tax will not be collected from employees working part-time after the change. For the exemption to apply, the employer must hire a new part-time employee and that employee must remain employed for at least six months, as specified in the draft. The exemption cannot exceed 12 months and will continue for the period the newly hired part-time employees remain employed.
Part-Time Tax Exemption Set at 294 TRY
The amounts for the part-time work tax exemption have also been clarified. For example, if one employee reduces their work from 30 days to 15 days per month and the employer hires an additional employee to cover the remaining 15 days, the income of the worker who shifted from full-time to part-time will be exempt from income tax. The primary aim is to increase the number of part-time workers and to create new employment opportunities. The monthly tax amount waived will not exceed 10% of the minimum wage. In this context, for 2020 the monthly tax exemption for part-time workers is up to 294 TRY. In return for the income tax exemption, there will be no stamp tax deduction on the gross salary.
The bill stipulates that the tax exemption will apply to transitions from full-time to part-time work completed by December 31, 2020. Those wishing to benefit from this right therefore must complete the necessary procedures by that date. However, the period can be extended by presidential decree, one year at a time. The 12-month income tax exemption itself may also be extended up to four years in certain cases through further presidential decisions.
Significant Changes in the Employment Package
The bill includes important changes regarding pension contributions for periods not worked by employees who switch from full-time to part-time. The previous draft had included coverage of retirement contributions for non-worked days by the state. Under the amended proposal, employees and employers will continue to pay premiums to the Social Security Institution (SGK) for the days actually worked; the state will not cover pension contributions for days not worked. There will be no age limit to benefit from this measure: the proposal originally designed for those aged 50 and over has been expanded to include employees of all ages. The amendment is intended to reduce unemployment and expand employment opportunities.
Overall, the revised proposal aims to encourage employers to create part-time positions and to support employees who opt for reduced working hours by relieving their income tax burden for a limited period. While certain incentives originally targeted older workers, the current draft opens the benefit to a wider population in an effort to stimulate the labor market and increase participation across age groups.