What is withholding tax and how is it calculated? – Param Blog admin, March 17, 2024 Public investments and social programs that will stimulate economic growth and development need sustainable financing sources. These programs, which provide health, education, infrastructure and other services, are important to achieving the goal of a developed, functional and orderly society and are the ones we pay for as citizens. taxesIt is financed by. You hear the name often stoppage It is also an important component of the tax system and aims to provide the necessary tax flow on a smaller scale and continuously. In this article, we will focus on the issue of withholding tax, which concerns all of us as taxpayers. “What is withholding tax?”, “What is rent withholding tax?”, “How is withholding tax calculated?” We will touch on many topics such as. Withholding Tax and Its Structure Withholding tax It has a different structure than other taxes. Basically, our tax system is based on declaration and is paid at certain periods of the year. Withholding tax is deducted directly from the source of income, not from the declared base. Payment is made separately for each withholding tax deduction. Thanks to this structure, withholding tax accelerates tax collection, ensures that the state keeps tax revenues at a certain level, and helps prevent tax evasion. It is also important in that it offers businesses and individuals an easier and more convenient way to pay taxes. Scope of Withholding Tax Withholding tax is a concept you may encounter in many areas. If you own a company and therefore pay your staff, the concept of withholding tax is important to you. If you are providing a service to a company or renting out an immovable asset, you need to know the concept of withholding tax. Regarding withholding tax, which is of great concern to everyone who has any form of income,What is withholding tax? How to Calculate?You can find detailed information on the subject in this article. What is Withholding Tax? Withholding is a word that comes from French in origin. Withholding tax, which literally means “withholding from the source”, is a type of tax. As it is known, taxes are payments collected by the state from citizens through various channels. The tax system is basically based on proportional reporting. When any taxable transaction occurs, a tax declaration is made by calculating it according to the tax rate determined by the state. Afterwards, the person who is obliged to pay taxes pays his tax debt. Although the general tax declaration and payment procedure works like this, there may be some exceptions. Withholding tax on earnings subject to income and corporate taxes is one of these exceptions. Withholding tax deduction occurs before payment is made to the person who owns the earnings. What is Rent Withholding Tax? The withholding tax deduction made on rental payments is called rent withholding tax. It should be noted that withholding tax is only collected on rental payments for commercial real estate. The tenant, who is obliged to pay the rent, must make a withholding tax on the gross rent and pay it to the state. The party who owns the property has no responsibility for paying withholding tax on rental income. The amount of rent withholding tax must be declared in March every year. The amount of withholding tax can be paid in 2 equal installments in March and July. What is Withholding Deduction? Withholding tax is a deduction made at the rates determined by the state on earnings subject to income and corporate taxes. Income items on which withholding tax is deducted in our country are as follows: rental income Salary payments to employees expense slips dividends Self-employment payments Why is Withholding Deduction Made? The purpose of withholding tax is basically to prevent possible errors in taxation. People who are knowledgeable about taxes make the necessary tax deductions and pay them to the state before the relevant payment reaches the hands of other people. Thus, it is aimed for the tax system to operate effectively and error-free. In addition, withholding tax is very important in preventing negative situations such as tax evasion. How is withholding tax calculated? Withholding tax varies depending on the type of payment. Therefore, it is calculated according to percentage rates determined by law. The deduction calculation is always made on the gross payment. Wage Withholding Calculation Methods Wage withholding is a type of tax paid by the employer on behalf of employees and is applied at varying rates depending on the tax bracket the salary falls into. Rates are calculated on the remaining amount after subtracting SSI and exemptions from the gross salary. Income tax deduction rates for 2024 are as follows: Slice (15%): 110,000 TL Slice (20%): 230,000 TL Slice (27%): 870,000 TL Tranche (35%): 3,000,000 TL Slice (40%): over 3,000,000.01 TL For example, if an employee’s gross salary is 80,000 TL, wage withholding tax is calculated as follows: Gross Salary: 80,000 TLSSI and Exceptions: (For example) 10,000 TLRemaining amount: 70,000 TLWage Withholding Tax (15%): 10,500 TL These calculations will help you understand the 2024 brackets used to determine employee income tax deductions. Rent Withholding Tax Calculation Methods Rent withholding tax is a deduction applied to rental income and is generally applied at a rate of 20%. The deduction amount is calculated as 20% or proportionately 1/5 of the gross rental price. If Gross Rent Is Specified:Gross Rent: 1,000 TLRent Withholding Tax: 1,000 x 0.20 = 200 TL If Net Rent Is Not Specified:Net Rent: 1,000 TL (example)Gross Rent Calculation: Net Rent / 0.80Gross Rent = 1.000 / 0.80 = 1.250 TLRent Withholding Tax: Gross Rent x 0.20 = 250 TL These calculations will help you understand how rent withholding will be done based on net and gross rental amounts. Withholding Tax on Sales of Movable and Immovable Property Withholding tax is not limited to financial income only. Gains from sales of movable and immovable property are also subject to withholding tax. Especially in real estate sales, withholding tax rates are applied at a certain percentage. Tax is collected from the income obtained with this applied rate. Withholding Tax on Financial Income Income from financial investments in Turkey is also subject to withholding tax. Earnings such as stock income, interest income and dividends are subject to tax withholding tax as soon as they are earned. Investors are obliged to pay withholding tax if they obtain these incomes. When is withholding tax paid? Withholding tax payments are made monthly, quarterly or annually. Monthly payments are due by the 26th day of the month following the month in which the income was earned; Quarterly payments must be made by the 26th day of the month following the third month in which the income is earned. During this process, you can fulfill your tax obligations on time and manage your financial planning more effectively by making regular withholding payments. ParamKart is your advantageous prepaid card! ParamKart is a prepaid card that you can spend as much as you load and benefit from many advantages in your spending. Now you can benefit from the advantages of Param while transferring your cash to digital. ParamKart allows you to easily transfer your money digitally. Additionally, it is a new generation prepaid card that values your existence with the advantages it offers! 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