CONSEQUENCES OF VIOLATING SOCIAL SECURITY PREMIUM PAYMENT OBLIGATION 2.08.2018
Declaring the wages lower than actual amounts for the purpose of avoiding financial and tax obligations, is a common practice in Turkey applied by the employers. However, Social Insurances and General Health Insurance Code numbered 5510 and the Tax Procedure Code numbered 213 set forth the provisions that regulate heavy administrative fines and penalty of imprisonment for these situations.
I. Provisions in the Social Insurances and General Health Insurance Code Numbered 5510
1. Administrative Fines
Article 102 of the Code No. 5510 regulates the administrative fines and there are several regulations in this article regulating the consequences of declaring the employee’s wage lower than actual amount, for reducing the insurance premium to be paid.
According to Article 102/c (4) of the Code No. 5510, an administrative fine is applied twice the monthly minimum wage if the services and gains are not declared at all or declared lower than actual wages is discovered through investigation, inspection and/or examinations or from the documents that are obtained from banks, public agencies and/or state institutions and organizations that are established by law.
According to Article 102/e(5) of the Code No. 5510, if the wage of the insured and the amount of the wage paid is not declared in the monthly payment payroll that is submitted by the employer, such payroll is invalid and for each invalid payment payroll, an administrative fine amounting to the half of the monthly minimum wage is applied.
According to Article 102/m(4) of the Code No. 5510, if it is discovered upon investigation, inspection or examinations or from the documents that are obtained from the banks, public agencies and state institutions and organizations that are established by law that the declaration that has to be given pursuant to Article 86/13 of the Code No. 5510 is related to the insured whose the services and gains of the are not declared at all or declared less than the actual amount, an administrative fine starting from 1/3 of the monthly minimum wage to double of it, shall be applied to the employer.
2. Default Penalty and Default Interest
The default penalty and default interest are regulated in Article 89 of the Code No. 5510. According to this Article, in case the premium and other amounts to be paid to the Social Security Institution are not paid on time and completely, the increasing penalty as %3(%2) for each month in first 3 months are applied for the unpaid part. Additionally, the monthly average interest rate of government domestic debt securities is calculated on a compound basis to calculate the default interest.
According to the same Article, the filing of lawsuits and enforcement proceedings will not affect the collection of default interest and delay penalty.
II. Provisions of the Tax Procedure Code Numbered 213
Showing the wage lower in the payroll is being considered as a misleading document and the Tax Procedure Code regulated serious criminal sanctions for these circumstances.
1. The Scope and Punishment of the Loss of Tax
According to Article 341 of the Code No. 213 the loss of tax occurs where the tax has not accrued or accrued insufficiently due to the failure of the taxpayer or responsible person on fulfilling his/her taxation obligations accurately or timely.
Article 344 of the Code No. 213 regulates the punishment of the loss of the tax. Pursuant to this Article, since the payroll is deemed to be a misleading document, this circumstance is considered to be within the scope of the Article 359 and the three times of the loss of the tax is charged as a fine to the taxpayer or the responsible person.
2. Penalty of Imprisonment
The misleading document is defined in Article 359 of the Code No. 213. According to this Article, the payroll in which the wage is displayed less than the actual wage constitutes a misleading document.
According to the same Article, the ones who counterfeit or hide the accounts, records and documents or who prepare or use these misleading documents are charged from 1 to 3 year imprisonment.
As a result, a high amount of administrative fines and penalty of the imprisonment are set out for the employers who prepare payrolls contrary to actual facts for the purpose of paying lower insurance premiums.