Travel Allowance and Subsistence

Subsistence (Daily Subsistence)

The concepts of travel allowance and subsistence are constantly being confused in our legislation. Although there are very important differences, it is known that SSI premiums are deducted from travel allowance and subsistence is not included in SSI premiums. Below are Mr. Resul Kurt and Mr. Mehmet Maç’s articles on the subject.

As subsistence is included in the Income Tax Law Article 24 which mentions the equivalents of expenses, they are fundamentally a business-related expense and not an allowance provided to an employee. However, they happen to be a benefit and allowance in cases when they are paid in lump sum under the name of daily subsistence and not as an exact and certified travel expense and when partially saved by the employees. The amount beyond the legal degree qualifies as a payment subject to taxation.

According to Article 24/2 of the Income Tax Law, in private sector, there is not an application paying travel expenses in lump sum payment based on kilometer, just as how it is in organizations subject to Subsistence Law. It is only valid for employees who travel with their own cars to be paid based on kilometer as an equivalent of exact charges. Thereby, there is no benefit that qualifies as savings and cost regarding the travel expenses and the exact amount of the expense shall be paid to the employee without any condition or limit.

It is different for meal and accommodation expenses. In case when the exact charge principal is accepted, even though there may not be any benefit or allowance in question, if the employee is paid daily subsistence and accommodation allowance in lump sum both for travels made in and out of the country, the amount the employee saves during the travel by being deprived of his/her daily life emerges as a benefit exempt from any deduction.

As it is known, the employees in the private sector are paid subsistence to an extent to those received by the highest-level officers and that is not subject to income tax deduction, which makes the subsistence preference an advantage for the employees. Daily subsistence above this extent is regarded as a net payment subject to tax and deduction calculated over the gross amount.

In the stamp tax applications, the total amount of the money given as subsistence are subject to stamp tax stoppage (Position IV / 1 – I of the Table numbered (1) included in the Stamp Tax Law). Even though the statutory provision is as stated above, we are of the opinion that this provision which includes subsistence in the scope of the stamp tax is flawed the stamp tax on the costs should be abolished.

In the Article 77 of the Law No 506, subsistence is excluded from SSI premium calculation and no limit for this is set forth. Thereby, while all the payments made to the employee under the name of subsistence are subject to the stamp tax and the part exceeding the limit (the amount given to the highest level of officers according to the Subsistence Tax) is subject to the income tax stoppage as a net cost, these payments are not subject to the SSI premium without any limitation.