352 NEWSLETTER 2021 • As per Article 8 of Tax Procedural Law numbered 213 (“TPL”), a legal status which is defined as a taxable event cannot be changed by a private law transaction, except for the exceptions stipulated in the law. • Tax legislation needs to be interpreted by considering both the letter and spirit of the law. • Since it is not possible to make an exception for a salary which is not subjected to taxation, “compensations and benefits” which are exempted from taxation under the ITL should be considered as salary. • Parties may decide to pay in advance for a benefit, in return for a service which will be provided in the future (in other words, notice payment). On the other hand, it is also possible for an employee to work within the notice period and terminate the employment relationship at the end of the period. The income generated from this service constitutes a salary. • Although the salary to be paid in return for a service in case of compliance with the notice period is considered salary, the fact that the notice payment is not accepted as a salary creates a difference in terms of taxation. • Consequently, under Article 61 of the ITL, the notice payment within the scope of a mutual rescission agreement signed before 27.03.2018 is salary and therefore, it is subject to income tax withholding. Conclusion It is clear that the Decision have clarified the existing discrepancies and contradictions in practice regarding the taxation of notice payment made under mutual rescission agreements concluded prior to 27.03.2018. The assessments in the Decision provide guidance related to the question of whether compensation and receivable amounts determined by mutual rescission agreements will be subjected to income tax or not. In addition, it should be noted that pursuant to the Provisional Article 89 of the ITL, income tax collected as compensation within the
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