Tax Applications

Taxes and Other Legal Obligations on Insurance

Premiums BSMV (Banking and Insurance Transaction Tax)

(Expense Tax Law) Insurance Transactions are taxed at the rate of 5% in accordance with Article 33, subparagraph f of the Expense Tax Law No. 6802.

With the decision dated 12.8.1991 and numbered 91/2072 published in the Official Gazette dated 16.8.1991 and numbered 20962, the BITT rate was determined as 5%. The liability of the said tax is the insurance companies, as in the value added tax, this is an interim obligation and the tax is reflected to the people who benefit from the services as a result.

However, according to article 29 of the same law, there are the following exceptions:

  1. Premiums, commissions and other monies received due to repetitive insurance transactions and retrocession transactions,
  2. Money received due to agricultural insurances concluded for all kinds of agricultural crops and agricultural animals that are not harvested or collected,
  3. Money received for insurance against nuclear risks,
  4. Money received on contracts and policies in pension contracts, life insurances (including contracts in which personal accident, disability as a result of illness and dangerous diseases are provided as additional guarantees in life insurances) and health insurances and export transport insurances,
  5. Money received in favor of mortgage finance institutions, housing finance institutions and housing finance funds for all transactions within the scope of housing finance defined in the first paragraph of Article 38/A of the Capital Market Law No. 2499,
  6. Compulsory Earthquake Insurance (D.A.S.K.) Premiums are exempt from all kinds of taxes, duties and charges.

According to Article 31 of the Law, insurance companies can deduct taxes related to canceled insurance transactions (only the portion belonging to the period after the cancellation date) from the bank and insurance transactions tax calculated in the period of cancellation. Thus, it is possible to discount the canceled BITTs in the following periods. Taxes that cannot be deducted in the next period can be deducted in the declarations of the following periods.

YSV (Fire Insurance Tax)

According to Article 40 of the 5th Section of the Law on Municipal Revenues No. 2464, "Premiums received for fire insurance for movable and immovable properties within the municipal boundaries and adjacent areas are subject to Fire Insurance Tax." Taxpayers are insurance companies.

The base of the Fire Insurance Tax is the amount of the premiums received due to the fire insurance transactions, and the rate of the Fire Insurance Tax to be paid over the determined base is 10%.

Insurance Account

The insurance Account created by Article 14 of the Insurance Law No. 5684 is regulated by the insurance Account Regulation published in the Official Gazette dated 26.7.2007 and numbered 26594.

The revenues of the account are:

  1. 1 percent of the total net premiums collected by insurance companies for compulsory insurances each year
  2. Every year, 5 per thousand of the total net premiums collected by insurance companies for Green Card Insurance (According to the said Regulation, those who have Compulsory Insurance or Green Card Insurance are transferred to the insurance Account by making the following deductions.)
  3. Participation fees to be paid separately to the insurance company at the rate of 2 percent of the net premiums of those who take out compulsory insurance
  4. Participation fees to be paid separately to the insurance company at the rate of 5 per thousand of the net premiums of those who have Green Card Insurance

Traffic Services Development Fund

The Traffic Services Development Fund was established with the Traffic Services Development Fund Regulation published in the Official Gazette dated 19.07.1998 and numbered 23407. The 5 percent Financial Liability Insurance share collected in accordance with the amended article 91 of the Highway Traffic Law No. 2918 is transferred to this fund.

VAT and Stamp Duty

All kinds of insurance transactions are exempt from Value Added Tax and Stamp Duty. 

Deduction of Personal Insurance Premiums from Income Tax Base

In terms of wage earners:

Provided that the insurance or pension contract is concluded with an insurance or pension company located in Turkey and headquartered in Turkey; Premiums paid by the service personnel for personal insurance policies such as life, death, accident, sickness, disability, unemployment, maternity, birth and collection of the employee, his spouse and young children, and contributions paid to the individual pension system,

The sum of the premiums, dues and contributions to be deducted cannot exceed 10 percent of the wage earned in the month it is paid (5 percent of the wage earned in the month it is paid, for premiums paid for personal insurance policies other than the individual pension system) and the annual amount of the annual minimum wage.

For Employers (Personal Insurance Premium Payment by Employers on behalf of their Employees):

The articles of the Income Tax Law regulating commercial income do not accept personal insurance premiums paid by employers on behalf of their employees as expenses in the calculation of their commercial earnings. In addition, the Income Tax Law considers the money or benefits expressed in money provided to the employee by the employer as wages. Therefore, personal insurance premiums paid by employers are expensed as wage payments by issuing payroll on behalf of the employee. Here, employers deduct personal insurance premiums paid as wage expense without incurring any additional cost in payments within legal limits (5 percent of gross wage). However, in premium payments exceeding the specified limits, the excess will be considered as a net wage payment, so it will be grossed in terms of income tax and stamp tax and added to the payroll, and the employer will bear the additional cost.  

In terms of Income Taxpayers Subject to Declaration:

Personal insurance premiums such as life, death, accident, illness, disability, maternity, birth and collection and contributions paid to the individual pension system (The insurance or pension contract must be concluded with an insurance or pension company located in Turkey and headquartered in Turkey, premiums and contributions must be paid in the year the income is earned. and if the spouses or children submit a separate declaration, their premiums and contributions are deducted from their own income, provided that the net amount of the wages of those who earn wage income has not been deducted separately during the calculation) of the taxpayer, his spouse and young children, provided that they do not exceed 10 percent of the declared income (5 percent of the income declared for personal insurance premiums outside the individual pension system) and the annual amount of the minimum wage.  

Corporate Tax Liability of Insurance Companies:

In Article 1 of the Corporate Tax Law No. 5520, Corporate Tax Payers are counted. Accordingly, capital companies, cooperatives, economic public institutions, economic enterprises and business partnerships belonging to associations or foundations are liable to Corporate Tax. In this case, insurance companies, whether they are incorporated as a joint stock company or a cooperative, are corporate tax payers and their earnings within an accounting period are subject to Corporate Tax. Insurance companies, which are subject to Corporate Tax due to their legal status, have to comply with the Corporate Tax Law and all relevant legal regulations.