What Is Withholding Tax and How Is It Calculated on Rent and Wage Payments?

The short answer we give company owners who ask “what is withholding tax (stopaj)?” is this: withholding tax is a tax collection method in which the employer or company making a payment deducts the recipient’s personal income tax at the time of payment and remits it to the tax office on the recipient’s behalf. Its legal name is “tax withholding” (vergi tevkifatı), and its basis is Article 94 of Personal Income Tax Law No. 193. The income giving rise to the tax belongs to the recipient, but the responsibility for withholding and remitting lies with the payer. That is why a company paying rent, salaries or legal fees is also accountable for any tax it fails to withhold.

In this article, we explain the logic of withholding tax, the rates for the six payment types companies encounter most often, and the calculation between gross and net amounts. We cover the return itself, i.e. how and when withholdings are reported, in a separate article.

What is withholding tax, and why does the payer withhold it?

Withholding tax is a system of deduction at source in which tax is collected not from the income earner but from the payer. Instead of monitoring thousands of landlords or self-employed professionals one by one, the state makes the companies paying these people responsible for the tax. This way, the tax reaches the state at the moment the income is earned and in documented form.

Article 94 of the Personal Income Tax Law lists one by one who is required to withhold: commercial companies, public administrations, associations and foundations, cooperatives, and merchants and self-employed professionals declaring their actual income are chief among them. You can access the current version of the Law on the Personal Income Tax Law No. 193 (mevzuat.gov.tr) page. The article does not set the rates itself; it authorizes the President to reduce the rate for each payment type to zero or increase it up to double.

Are stopaj and tevkifat the same thing?

For personal income tax purposes, yes; “stopaj” is the everyday term and “tevkifat” the legal term. The confusion arises on the VAT side. In VAT withholding, the buyer declares part of the VAT on the seller’s invoice itself, and this amount is paid through the VAT return . Personal income tax withholding, on the other hand, is a deduction made on account of the recipient’s personal income tax and is reported on the withholding (muhtasar) return.

On which payments does personal income tax withholding arise?

Personal income tax withholding arises when a person or entity listed in the Law makes a payment also listed in the Law. Both conditions must be met: the payer must be a withholding agent, and the payment must fall under one of the subparagraphs of Article 94. For example, a tradesperson taxed under the simplified method does not withhold tax when paying shop rent, because the Law does not list them among the responsible parties.

Withholding applies to payments made “in cash or on account.” Under Article 96 of the Law, payment on account means any record showing the payer as indebted to the recipient. In other words, even if you have not yet sent the rent to the bank account, the withholding obligation begins as soon as you record the rent liability in your books. Payments made as advances are also within this scope.

To whom the payment is made also changes the outcome. If you rent your office from a company, the lessor company’s income is considered commercial income and the rent subparagraph of Article 94 does not apply; you document the payment with an invoice. When you rent the same office from an individual, however, the rent is income from immovable property and withholding is mandatory.

6 types of withholding tax companies must withhold, and withholding tax rates

Withholding tax rates are set by Council of Ministers Decision No. 2009/14592, based on Article 94 of the Personal Income Tax Law, and amended by subsequent Presidential Decrees. The Revenue Administration’s table of withholding rates under Article 94 of the GVK brings the current rates together in a single document. The table below summarizes the items a company encounters most often in its day-to-day operations.

Some of the rates in the table have changed in the last two years. The dividend rate rose from 10% to 15% in December 2024; multi-year construction rates were reset from 1 April 2025; the 1% rate for nuclear power plant works has applied since 1 June 2026. That is why working from an old table or last year’s accounting software settings is the most common cause of under-withholding we encounter.

Withholding tax on wages: the progressive schedule

There is no single rate for wages. The withholding is calculated on the employee’s cumulative tax base during the year under the schedule in Article 103 of the Personal Income Tax Law. The 2026 brackets were set by General Communiqué on Personal Income Tax Serial No. 332, published in the Official Gazette of 31 December 2025: 15% up to 190,000 TL, 20% up to 400,000 TL, 27% up to 1,500,000 TL, 35% up to 5,300,000 TL and 40% above that.

Withholding tax on wages also has a minimum wage exemption. Under Article 23, subparagraph 18 of the Law, the portion corresponding to the tax base of the minimum wage is exempt from personal income tax. The employer first calculates the tax on the employee’s entire base and then deducts the tax attributable to the minimum wage from this amount.

Withholding tax on rent: the tenant company’s responsibility

Withholding tax on rent is deducted from the amount a company pays for business premises, a warehouse, a vehicle or machinery it rents from an individual. According to the Revenue Administration’s 2026 guide on rental income, the tenant withholds 20% of the gross rent payment. Rent paid in advance for future months is also subject to withholding.

Residential rents usually fall outside this picture, because the tenant is an individual and not a withholding agent. However, if a company rents an apartment as housing for its employee, the situation changes: since the tenant is a company, withholding also applies to residential rent. For business premises rent, payment through a bank or PTT (the postal service) is also a separate documentation requirement; paying in cash creates risk for both withholding and expense recognition.

Withholding tax on self-employment fees and dividends

For self-employment payments, withholding is applied to the gross fee on the receipt. According to the Revenue Administration’s 2026 guide on self-employment income, this withholding is a preliminary taxation; the self-employed professional offsets it against the tax calculated on their annual return. If you receive the service from a limited liability or joint stock company, the other party issues an invoice and no personal income tax withholding is applied.

For withholding tax on dividends, the responsible party is the company distributing the profit. When dividends are distributed to an individual shareholder, 15% is withheld; adding profit to capital does not count as a distribution and does not give rise to withholding. According to the Revenue Administration’s guide on income from movable capital, the shareholder treats half of the dividend as exempt and, if they file a return, offsets the full amount of tax withheld.

Withholding tax calculation: gross and net amount examples

This calculation is what the question “what is withholding tax?” means in practice. Withholding tax is always calculated on the gross amount. If the contract states a net amount, i.e. the company has assumed the tax, the net amount is first grossed up. Under Article 96 of the Personal Income Tax Law, the tax in this case is calculated on the sum of the amount actually paid and the tax assumed by the payer.

Let us make the calculation concrete with three fictional examples:

• Net rent: A company agrees with an individual on a monthly net rent of 40,000 TL. The gross rent is 40,000 / 0.80 = 50,000 TL. The company pays 40,000 TL to the landlord and remits 10,000 TL to the tax office as withholding tax.
• Gross self-employment fee: The company pays its self-employed lawyer a gross fee of 30,000 TL. The withholding is 30,000 x 20% = 6,000 TL; the lawyer is paid 24,000 TL plus any VAT on the receipt.
• January wage: Suppose the employee’s personal income tax base in January 2026 is 51,000 TL. The tax calculated at the first bracket is 51,000 x 15% = 7,650 TL. After deducting 4,211.33 TL attributable to the 28,075.50 TL tax base of the minimum wage, the personal income tax to be withheld is 3,438.67 TL.

The base in the wage example is found by deducting the employee’s SGK and unemployment insurance premiums from the gross wage. In later months of the year, when the cumulative base exceeds 190,000 TL, the rate rises to 20% and the net amount of the same gross wage falls. Showing this change on the payroll in advance makes the “why did my salary go down?” conversation with the employee easier.

How is withheld tax declared and paid?

Withheld tax is reported on the withholding and social security premium return (muhtasar) in the month following the month in which the withholding was made and is paid within the same deadline. For the filing deadline, the option to file quarterly and the correction rules, see our article what is the muhtasar (withholding) return . Here it is enough to stress this: withholding tax is not the company’s own tax, but if it is not paid, the debt remains with the company.

The company making the withholding must also document the payment. The payroll for wages, the receipt for self-employment, and the payment receipt and lease agreement for rent are the basic documents. When the other party files an annual return, they deduct the withholding amounts on these documents from their own tax.

Who is responsible if withholding is not made?

If withholding has not been made at all or has been made incompletely, the company making the payment is responsible for paying the missing tax. The Tax Procedure Law defines those required to withhold as tax-responsible parties; the tax office claims the missing amount from the responsible party together with late payment interest and a tax loss penalty. The company may later claim this amount from the other party, but this often creates a separate problem in the business relationship.

A situation we often see in practice is agreeing on a net rent and calculating withholding on the net amount instead of the gross. In the example above, a company withholding 40,000 TL x 20% = 8,000 TL declares 2,000 TL too little tax each month. After one year, the difference reaches 24,000 TL, and an even higher amount with penalties and interest.

Additional checks for companies with foreign shareholders

Withholding on license, consulting and dividend payments to a company abroad is made under Article 30 of the Corporate Income Tax Law, and on payments to an individual living abroad under Article 94 of the Personal Income Tax Law. A double taxation avoidance agreement signed by Turkey with the relevant country may provide for a lower rate. To apply the treaty rate, a document showing that the other party is resident in that country is expected to be on file before payment.

In these payments, withholding tax and VAT often arise at the same time: for a service received from abroad, the company also declares VAT as a responsible party. Tracking both obligations on the same checklist prevents gaps that come to light later in payments to the parent company.

How do we at Akal CPA approach withholding tax?

The question “what is withholding tax?” is answered on paper with a short definition, but in practice every payment requires a separate decision. That is why we do not see withholding tax as a line automatically calculated by the accounting software at month-end. Whether a lease agreement is stated gross or net, whether a consultant is an individual or a company, or whether the shareholder is resident in Turkey determines the amount of withholding from the outset. Clarifying the answers to these questions before the contract is signed is less costly than corrections made afterwards.

In our tax consulting and planning service, we classify your company’s payment types one by one and determine the correct rate and documentation for each. You can follow other filing and withholding obligations in the articles in our tax legislation category.

Last updated: 17.10.2026