09 Mayıs 2025
What is Attendance Allowence? How is Attendance Allowence Calculated?
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Boards of directors, one of the cornerstones of corporate governance, undertake many critical functions such as determining company strategies, managing risks, and creating long-term value. Among the payments made to board members in return for these responsibilities, the most common one is the attendance allowence. However, the definition of the attendance allowence, its legal framework, taxation process, and accounting treatment can often be confusing. So, what is an attendance fee? Who is entitled to receive it? How is it calculated and taxed?
In this comprehensive article, we will examine the entire process related to the implementation of attendance allowence in companies, based on the relevant legislation—from the legal framework and calculation methods to the taxation aspects and accounting records.
What is Attendance Allowance?
Attendance allowance is a type of regular payment made to individuals serving as board members, company partners, or managers in joint stock or limited liability companies, in return for the time they dedicate to meetings and the strategic responsibilities they assume. In accordance with Article 394 of the Turkish Commercial Code (for joint stock companies) and Article 623 (for limited liability companies), the amount must be determined by a resolution of the general assembly or the shareholders' meeting; otherwise, the payment is considered invalid and cannot be recorded as an expense.
Described as a contribution "ensuring the executive attends the meeting in peace," this income component is now a critical metric in terms of corporate governance and stakeholder transparency.
Key Features:
- Payment Method: Determined by a resolution of the general assembly or shareholders' meeting.
- Gross Basis: Payments are made on a gross basis; income tax, stamp tax, and (if applicable) social security premiums are applied on the gross amount.
- Tax Advantage: It is a tax-deductible expense for companies, provided that it complies with the arm's length principle.
- Transparency Requirement: Especially for publicly traded companies, information regarding attendance allowances must be disclosed transparently in annual reports or Public Disclosure Platform (KAP) statements.
Who is Entitled to Receive Attendance Allowance?
Attendance allowance may be paid to individuals who directly serve in the management, executive, or supervisory bodies of a company. The key point is that these individuals must not be in an employee-employer relationship with the company. Attendance allowance is different from salaries received under an employment contract. However, under the framework of the Income Tax Law, it qualifies as "wage" income and is taxed accordingly. The eligibility for attendance allowance may vary depending on the type of company and the role of the individuals involved:
| Type of Company | Eligible Individuals | Legal Basis | Notes |
|---|---|---|---|
| Joint Stock Company | Members of the Board of Directors (partners or external) | TCC Art. 394 | Includes independent board members |
| Limited Liability Company | Managers or Members of the Board of Managers | TCC Art. 623 | May include non-partner managers. |
| Public Institutions & Associations | Members of assemblies, audit or advisory boards | Special Laws | Subject to specific regulations such as Art. 32 of Law No. 5393. |
Note: Payments made to audit or advisory board members should not be classified as "attendance allowance" but rather as "consultancy fees," and a separate resolution must be added to the company ledger.
How is Attendance Allowance Calculated?
The calculation process of attendance allowance is shaped by determining the statutory deductions applied to the gross amount. These deductions may vary depending on the individual's payroll status and tax liability.
- Determining the Gross Amount
- Income Tax Withholding (Article 94 of the Income Tax Law)
- 0 – 158,000 TRY %15
- 158,001 – 330,000 TRY %20
- 330,001 – 800,000 TRY %27
- 800,001 – 4,300,000 TRY %35
- 4,300,001 + %40
- Stamp Tax
- Social Security Institution (SSI) Premiums
- Joint Stock Company Board Member → Subject to 4/B (BAĞ-KUR); premium deductions are not shown on the company payroll.
- Limited Company Manager who also works under an employment contract → Subject to 4/A premiums.
- Minimum Wage Exemption (Income Tax & Stamp Tax)
A fixed monthly gross amount or a gross amount per meeting is determined by a resolution of the general assembly or shareholders' meeting.
Attendance allowance is classified as wage income. The income tax brackets for 2025 are as follows:
Gross Amount × 0.00759.
For 2025, the gross minimum wage amount of TRY 26,005.50 is exempt from Income Tax and Stamp Tax.
Attendance Allowance Calculation Example
Assumption: Let's assume a monthly gross attendance allowance of TRY 80,000.00, and that the board member has no other payroll income.
| Item | Amount (TRY) | Explanation |
|---|---|---|
| Gross Amount | 80,000.00 TRY | - |
| Minimum Wage Exemption | 26,005.50 TRY | Exempt from Income Tax & Stamp Tax |
| Taxable Base | 53,994.50 TRY | 80,000.00 TRY – 26,005.50 TRY |
| Income Tax Withholding | 8,099.17 TRY | 53,994.50 TRY × %15 |
| Stamp Tax | 607.20 TRY | 80,000.00 TRY × 0.00759 |
| Net Payment | 71,293.63 TRY | 80,000.00 TRY – 8,099.17 TRY – 607.20 TRY |
(Scenario without Social Security Premium deduction)
How is Attendance Allowance Taxed?
The taxation of attendance allowance involves a dual process, consisting of income tax withholding and stamp tax. When the company makes this payment, it must:
- Declare it to the tax office via a Withholding Tax Return (Muhtasar Beyanname),
- Pay the corresponding withholding and stamp tax,
- Prepare the payroll slip including the payment,
- Record the payment as a wage expense in the accounting system.
If attendance allowance payments exceed the threshold specified in the Income Tax Law within a calendar year (TRY 330,000 for 2025), the recipient is also required to submit an Annual Tax Return.
What Should Be Considered in Attendance Allowance Calculations?
Common mistakes in the implementation of attendance allowance may expose companies to financial and legal risks. Therefore, the following points must be carefully observed:
- Attendance allowance payments made without a general assembly resolution are invalid. An official decision must be taken and recorded in the resolution book.
- When determining payment amounts, a comparable wage analysis should be conducted. Otherwise, high payments may be examined under the scope of disguised profit distribution.
- If the same individual receives both attendance allowance and a salary, this must be clearly stated in the payroll records.
- In the payroll system, attendance allowance must be accounted for as a separate item and not merged with the general salary payroll.
- For compliance with Corporate Tax Law (KVK) and Income Tax Law (GVK), it is crucial that the payments and deductions are reported transparently.
Can Attendance Allowance Be Recorded as an Expense?
Attendance allowance payments can be recorded by companies as general administrative expenses and deducted from corporate income. However, for this to be valid, certain conditions must be met.
Key Considerations
- Decision Basis: Must be determined by a resolution of the general assembly or shareholders' meeting.
- Documentability: Should be supported by payroll slips, payment receipts, and tax declarations.
- Arm's Length Compliance: The payment amount must align with market equivalents in similar roles and industries.
- Accounting Entry: Typically recorded under Account 770 (General Administrative Expenses).
Risk of Disguised Profit Distribution
Payments significantly above market averages may be considered disguised profit distribution and disallowed during tax audits. Therefore, payment amounts must be determined carefully, and if needed, independent wage benchmarking studies should be used.
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