TAXES AND FUNDS LEVIED ON INSURANCE POLICIES UNDER THIS REGULATION ARE EXPLAINED BELOW

In accordance with the Regulation on Informing Policyholders in Insurance Contracts, which entered into force on March 1, 2008, the procedures and principles regarding the obligations of insurers to eliminate information gaps and to inform policyholders of any changes and developments during the contract and subsequent stages are specified.

Taxes Levied on Insurance Premiums:

BANKING AND INSURANCE TRANSACTIONS TAX (BITT)

According to Article 28 of the Law on Expenditure Taxes No. 6802:
"All transactions carried out in any form by banks and insurance companies, except those conducted under the Financial Leasing Law No. 3226 dated 10.06.1985, are subject to the Banking and Insurance Transactions Tax (BITT) on the monies received in cash or on account for their own benefit under any name."

Article 33, clause (h) of the same law sets the BITT rate at 5%.
Article 29 lists the transactions exempt from BITT, some of which include:

• Pension contracts, life insurance policies (including those that also provide personal accident, disability due to illness, and critical illness cover as additional benefits),
• Health insurance policies and export-related transport insurance policies,
• Insurance contracts issued within the scope of housing finance as defined in Article 38/A of the Capital Markets Law No. 2499,
• Payments received from reinsurance or retrocession transactions,
• Agricultural insurance premiums related to unharvested crops or livestock,
• Insurance policies covering nuclear risks.

FIRE INSURANCE TAX (FIT)

According to Article 40 of the Municipal Revenues Law No. 2464:
"Premiums collected for fire insurance policies covering movable and immovable properties within municipal borders and adjacent areas are subject to the Fire Insurance Tax."

The tax base for the Fire Insurance Tax is the premium amount collected for fire insurance transactions, and the tax rate is 10% of the determined base.

Other Legal Liabilities Levied on Insurance Premiums:

TRAFFIC SERVICES IMPROVEMENT FUND

The Traffic Services Improvement Fund was established under the Regulation published in the Official Gazette dated July 19, 1998, and numbered 23407.
According to the amended Article 91 of the Highway Traffic Law No. 2918, 5% of the premiums collected for compulsory motor third party liability insurance is transferred to this fund.

INSURANCE GUARANTEE ACCOUNT

The Insurance Guarantee Account was established under Article 14 of the Insurance Law No. 5684 and is regulated by the Guarantee Account Regulation published in the Official Gazette dated July 26, 2007, and numbered 26594.

The sources of income for the Account are as follows:

• 1% of the total net premiums collected annually by insurance companies for compulsory insurances,
• 0.5‰ of the net premiums collected for Green Card Insurance policies,
• 2% of the net premiums paid by policyholders for compulsory insurance as an additional contribution to insurers,
• 0.5‰ of the net premiums paid by policyholders for Green Card Insurance as an additional contribution.

Insurance types under the scope of the Guarantee Account include:

• Compulsory Motor Third Party Liability Insurance (Traffic Insurance),
• Compulsory Motor Vehicle Carrier’s Liability Insurance,
• Compulsory Passenger Personal Accident Insurance for Road Transport,
• Compulsory Liability Insurance for LPG Use,
• Compulsory Liability Insurance for Hazardous Substances and Hazardous Waste,
• Green Card Insurance.

DEDUCTIBILITY OF PERSONAL INSURANCE PREMIUMS FROM INCOME TAX BASE

FOR EMPLOYEES

Provided that the insurance or pension contract is concluded with a company based and established in Turkey, the premiums paid by employees for personal insurance policies covering themselves, their spouses, and dependent children (including policies for life, death, accident, illness, disability, unemployment, maternity, childbirth, and education) and contributions paid into the private pension system may be deducted from the income tax base.

The total amount of such premiums, dues, and contributions deductible cannot exceed:

• 10% of the employee’s monthly salary (15% for non-pension insurance premiums),
• and the annual amount of the minimum wage.

FOR EMPLOYERS

(Employer-Paid Personal Insurance Premiums on Behalf of Employees)

Personal insurance premiums paid by employers on behalf of their employees are not accepted as deductible expenses when calculating commercial income.
However, according to the Income Tax Law, monetary or monetarily equivalent benefits provided to employees by employers are considered part of their wages.
Therefore, insurance premiums paid by employers on behalf of employees must be accounted for as wage payments by being recorded on the employee's payroll.

FOR INCOME TAXPAYERS SUBJECT TO DECLARATION

Contributions paid to the private pension system and premiums for personal insurance policies covering the taxpayer, their spouse, and dependent children (covering life, death, accident, illness, disability, maternity, childbirth, and education) may be deducted from the declared income, provided the following conditions are met:

• The contract must be with an insurance or pension company based and established in Turkey,
• The premiums must be paid in the same year the income is earned,
• If the taxpayer also earns wage income, the same premiums must not have been already deducted from their net wage amount.

The deductible amount cannot exceed:

• 10% of the declared income (5% for non-pension insurance premiums),
• and the annual amount of the minimum wage.