What are the new regulations?

1. The Private Pension System now has a state contribution

The tax advantages previously provided by the state through tax deductions have ceased. In its place, a state contribution system has been adopted. In the Private Pension System, the state now pays state contributions equal to 25 percent of the contributions participants pay into the Private Pension System into individual private pension accounts.

The state contribution is an incentive that the state provides for private pensions by paying all private pension participants a fixed percentage of their contributions. One does not have to be a taxpayer in order to qualify for the state contribution.

Effective January 1, 2013, all contributions paid into Private Pension accounts (except for those paid by employers) will be matched by a 25 percent state contribution. For example, the state now deposits 25 Turkish lira as a state contribution into the account of a participant that pays 100 Turkish lira pension contribution.

2. Participants that have left the system by terminating
their pension agreements in the Private Pension System
shall not be eligible for the state contribution until December 31, 2014.

For participants that were in the Private Pension System on May 29, 2012, but who terminated a pension agreement by withdrawing their savings within the two-year period following June 29, 2012, no state contributions shall be paid for the contributions they pay to the Private Pension System until December 31, 2014.

3. The withholding tax deduction upon leaving the system
– Only the earnings to be taxed

Effective August 29, 2012, the previous method of calculating the withholding tax, which was based on the total contributions and earnings made, has ceased. In its place, a solely earnings-based method of withholding tax calculation was adopted for the withdrawal of savings.

The taxable revenue amount shall be computed by subtracting all the contributions paid and the portion of state contributions received from the total savings that are subject to payment, including any state contributions and their earnings (without deducting the deferred admission fees, if any).

4. There has been an increase in the tax advantages of the Employee Group Pension Agreements

Effective January 1, 2013, employers may deduct the contributions they pay for their employees from their taxable income. This is provided that the contribution does not exceed 15 percent of the wage earned in the month the payment is made, and it not to exceed the minimum wage on an annual cumulative basis.

5. Transfers from Associations, Foundations and Pension
Funds have been extended until December 31, 2015

The deadline for transferring any savings and commitment-related amounts held by associations, foundations or pension funds on April 16, 2012 for any pension-related commitments they have made to their members or employees to the Private Pension System has been extended until December 31, 2015. New provisions have been added that grant tax-exempt status (VAT, corporation tax, fees, stamp tax, BITT) to such transfers.