Details revealed: VAT exemption to be applied to tips and motorcycle courier income

The Ministry of Treasury and Finance, following demands from the sector, has included changes to the taxation method for tip income and motorcycle courier activities in its tax package preparations, while no new taxes will be introduced in these areas.

According to information obtained from the Ministry, the demands of sectors seeking ease in taxation are also being evaluated in the package currently under preparation.

In this context, upon the application of the relevant sectors, work has been carried out to simplify the taxation method in these areas without introducing new taxes on tip income and income derived from motorcycle courier activities.

SECTOR SOUGHT EASE AS TIPS WERE SUBJECT TO VAT

According to the Income Tax Law, in businesses providing food and beverage services, if tips collected are distributed to employees by the employer, these payments are considered part of the wages received from the employer and are taxed by withholding, added to the wage tax base and calculated according to the income tax tariff.

With the widespread use of debit cards, credit cards, and other payment systems, customers have begun to pay tips by card in addition to the cost of food and beverage services. In this case, since it cannot be shown separately, the payment made as a tip is accepted as an element included in the tax base of the food and beverage service and is subject to VAT.

Taking action upon the request for ease from sector representatives, the Ministry conducted work with other relevant ministries. In this context, global examples were also examined, and it was determined that paying tips with bank and credit cards is very common and that these amounts are shown separately on payment documents and are not included in the VAT base.

THE ENTIRE AMOUNT WILL BE DISTRIBUTED TO EMPLOYEES

According to the draft study prepared, tip payments will be shown separately from the service fee on payment documents, provided that they do not exceed 10 percent of the service fee. These incomes, which are in the nature of wages, will be collected in a bank account and the entire amount will be distributed to employees. Money distributed to employees up to the monthly gross amount of the minimum wage will not be associated with normal wage income and will be subject to only a 10 percent income tax withholding instead of the tariff.

Provided that tip payments are shown separately from the service fee, these payments, which are in the nature of wages, will not be included in the service fee by the employer and therefore will not be subject to VAT.

SECTORS TO BE COVERED HAVE BEEN DETERMINED

The regulation will cover businesses operating in the food and beverage sector, including those that offer food via package delivery and other methods, as well as businesses that provide service to customers.

Units of hotels and similar accommodation businesses that provide food and beverage services will also be covered, provided that they issue separate invoices or similar documents for these services.

Work is also underway on regulations supporting the application in terms of insurance premiums and severance pay within the scope of labor and social security legislation.

MOTORCYCLE COURIERS WILL NOT HAVE A BOOKKEEPING OBLIGATION

It is planned to transition to a simplified taxation method for earnings arising from motorcycle courier activities, which are currently taxed as commercial income, through a withholding method.

If couriers work under an employment contract for an employer, the income they earn is taxed as wages. If they work independently on their own behalf and account, the income earned is considered within the scope of commercial income, and delivery services are subject to VAT. There are 126 thousand 112 motorcycle couriers operating as commercial income taxpayers.

Following requests from motorcycle couriers and professional associations, work has been completed to make a regulation for them to be taxed easily, replacing obligations such as bookkeeping, issuing documents, and filing temporary and annual tax returns.

A certain rate of withholding will be made from payments made to motorcycle couriers who are commercial income taxpayers in return for these services, and if the income they earn within a calendar year does not exceed the 4th bracket of the tariff (3 million liras for this year), the withholding will be the final tax.

Those who switch to this practice will not have obligations such as bookkeeping, issuing documents, or filing temporary and annual tax returns. Furthermore, their service provisions will also be exempt from VAT.