Athletics have always attracted a high level of social interest, but as sports become more and more commercialized, sports activities have become somewhat of an “industry.”
Though we must consider the commercial aspects, we cannot dismiss the social importance of athletics. The Constitution of the Republic of Turkey has provided assurance for the development and popularization of sports activities and the protection of athletes. The Turkish tax system reflects a social approach towards sports and athletes. Special and advantageous tax regulations with the purpose (or stated justification) of developing athletics and protecting athletes were enacted as of the mid-1990s and are still in force.
In this article, the taxation regime that professional sports players are subjected to in Turkey will be addressed in the outline stated below. It should be mentioned that in principle, there are no fundamental differences between athletes on the basis of whether they are (i) occupied with team sports or individual sports, (ii) participating as professionals or amateurs.1
On the other hand, although the taxation regime does not change regardless of whether the field of sports is professional or amateur, the regime does change if the individual is occupied with the sports activity as a professional or amateur.
Therefore, the term “athlete” used in this article refers to all individuals occupied in all fields of sports. The differing exceptional regulations that apply to amateur athletes will be mentioned separately.
This article will address the following points:
- First, the basic details of the Turkish tax system for the taxation of real persons will be briefly addressed for the purpose of creating a foundation for the explanations to follow.
- Subsequently, we will provide an explanation regarding the “type of income” that is obtained by athletes.
- Next, a general overview of the taxation regime regarding the incomes of athletes and the double taxation prevention agreements of which Turkey is a party will be provided.
- Finally, the situation regarding incomes obtained from activities, which are not directly related to sports activities, will be addressed.
General Overview of the Taxation of Incomes Obtained by Real Persons under the Turkish Taxation System
Although there are several criteria such as income, consumption and wealth on which the taxation system is based, the most important source of tax revenue in modern taxation systems is from income tax.2
In the Turkish taxation system, there are two types of income that are taxed: personal income and corporate income. Personal income tax encompasses the earnings and revenues of real persons. Corporate income taxation, on the other hand, regulates the taxation of institutions. Although both taxes are in relation to the taxation of the same economic element they have been regulated under two different codes. Details regarding the principal elements and taxation process of personal income are stipulated in the Personal Income Taxation Law3 numbered 193 (“PITL”).4
PITL is founded on the source principle and stipulates sources (components) of income subject to tax in a limiting manner (numerus clausus). In accordance with the PITL Article 2 the personal income subject to taxation includes commercial earnings, agricultural earnings, wages and salaries, self-employment earnings, revenues from immovable property, revenues from movable property and other earnings and revenues.5 Therefore, in order to speak of personal income subject to taxation, it must fall within the scope of these types of personal income as specified under the PITL.6
Before specifically examining the taxation of athletes it will be beneficial to touch upon the basic elements of the system determined by the PITL:
- A system based on a calendar year declaration has been determined. In principle, the taxpayer submits a declaration of his/her gross net personal income accumulated in one calendar year and will pay the tax amount as determined in accordance with their declaration.
- A progressive tax tariff has been determined. The tax rate begins at 15 percent and increases up to 35 percent.7
- Tax liability is comprised of two types: Full liability and limited liability. Those persons within the scope of full liability are taxed all personal incomes accumulated within and outside of Turkey. Those with limited tax liability are taxed only on personal income accumulated in Turkey. The principle element between the distinction of full and limited liability is “having a domicile in or outside of Turkey.”8 Having a domicile in Turkey, in turn, is determined by two criteria: residence and duration of living. Those who have a certified residence in Turkey and who live in Turkey continuously for more than six months in one calendar year are considered to have a domicile in Turkey and therefore, are regarded as fully liable.9
- In line with the calendar year declaration principle, personal tax income of a calendar year will be paid in two installments in the following year.10 However, as an exception to the principle, there are situations in which the tax deduction at source /tax withholding method is applied. In such situations, the taxes deducted at the source monthly will be paid the following month.
- PITL has regulated the characteristics and details of the methods of taxation (obtaining the income, determination of tax base, items deductible form the tax base, etc) of all the personal income elements stated above separately. The determination of which category of earning or revenue personal income should fall into is made in accordance with such provisions.
Characteristics of the Wages and Salaries of an Athlete
Regulations regarding wages and salaries as a form of personal income are stipulated in the PITL Article 61 and those following thereafter.
In accordance with the relevant articles, wages and salaries can be shortly defined as monies and benefits provided to employees working under an employer in a specific workplace. The payment of wages and salaries as reimbursement, indemnity, grant, raise, advance, monthly contribution, premiums, bonuses or under other names will not affect the nature of this form of income. Subsequent to such definition the PITL determines some payments individually and expressly as those which will be deemed as wage and salary. Payments made to athletes are among those which have been individually and expressly determined: payments made and benefits provided to athletes as transfer remuneration or under any other names are determined as wage and salary income.11
As stated above, in principle, a system based on the deceleration principle has been adopted for taxation of personal income. However, there is a deviation from this principle in regards to the taxation of wages and salaries; it has been determined that such form of personal income is to be taxed via the method of taxation at source (withholding tax).12
The PITL determines, in principle, that in cases where taxation at source (withholding) is utilized, fixed rates as stipulated by the law will be imposed instead of the progressive taxation tariff. Nonetheless, progressive taxation tariff rates will be applied to wage and salary incomes. Regardless of this, as stated in detail below, an exceptional and different arrangement exists in relation to the personal incomes of athletes. Although such incomes are characterized as wages and salaries they will be taxed over fixed rates.
Taxation Regimes for Athlete Income
Having determined the fundamental elements of income tax and the characterization of personal incomes of athletes it is now necessary to examine the specific regulations under the PITL regarding this topic.
The taxation of athletes has been on the public agenda and discussed since the mid 1990s and has been the topic of several special laws. With the influence of football clubs this area has been accepted by lawmakers as one that is required to be incentivized and several special regulations on the legal level have been carried out.13
On the other hand, as especially football has morphed into a form of “industry” over time, securing tax advantages for football players whose incomes have increased significantly above the average income level and even to astronomical levels has become an issue of continued criticism among the public.14
As for the situation today: provisional Article 72 has been added to the PITL with the law numbered 5766, and includes a system which is specific to and advantageous in regards to the taxation of athletes.15
The respective article is as follows:
“Provisional Article 72 – –
(1) Tax withholding of the percentages determined below will be imposed on wage and salary payments and those considered as such which are made to athletes until 31/12/2017.
a) Sports which are subject to league systems:
1) For those in the top league 15%,
2) For those in the league below the top league 10%,
3) For those in other leagues 5%,
b) 5% for payments made to athletes who are not subject to the league system and payments made to national athletes in return for their participation in international sports tournaments.
(2) Withholding shall not be carried pursuant to article 94 for such payments. A yearly declaration shall not be made for these personal incomes and in the event a declaration is made in relation to other incomes these incomes shall not be included in the declaration.
(3) Wage and salary payments and those considered as such, which are made before the effective date of this article, will be subject to provisions in force on the date of 31/12/2007.
(4) The Ministry of Treasury is authorized to determine the procedures and principles for the application of this article.”
As can be seen, there is a specific and advantageous regulation in regards to the taxation of athletes that diverges from the principal system of taxation of personal income of the PITL. Accordingly, wage and salary payments and those considered as such are subject to taxation by withholding. Three different percentages have been determined for the withholding to be carried out: 15 percent for athletes in the top league, 10 percent for athletes in the leagues below the top league and 5 percent for athletes in other leagues and those who are not subject to the league system.
As the tax imposed in accordance with provisional Article 72 is characterized as a final tax, an additional withholding will not imposed as per PITL Article 94, which determines the general withholding procedure and those who obtain such personal income will not be subject to annual declarations and will not include such personal incomes in the declarations they submit for other incomes.
Wages and salaries of athletes may be paid as monies or in kind. In the event that an athlete’s wage and salary payments are made in means other than monies, such as immovable property or vehicles or other means in kind, in accordance with the PITL Article 63 final paragraph the net amount of the wage and salary will be determined in accordance with the criteria below and withholding tax will be imposed over the total amount of payment made:16
- The payments in kind will be valued in accordance with the average market price at the place and date they were provided,
- Provision of housing or benefits in a similar means will be valued in accordance with the lease amounts of exemplary housing or the value of benefit.
At this point it is important to mention the regulation under PITL Article 29. This is a provision which is an exception to the principle. According to the respective provision, prizes and bonuses provided for the purpose of motivating are left out of the scope of personal income tax. In accordance with paragraph three of the provision, “prize and bonus payments made to amateur athletes who participate in sporting events” are remained out of the scope of personal income tax. The main criterion for the determination of professionalism or amateurism is if the sports activity is being carried out for the purpose of earning income or not.17
Social Security Premiums
Under the framework of the system determined by the Social Security Law numbered 5510; the withholding method, as a form of liability is utilized for the payment of social security premiums of athletes as it is with taxation of their wage and salary incomes. Employers (sports clubs) who provide income characterized as wages and salary to athletes are obligated to make monthly payments of social security premiums. The employer is partially responsible for the social security premium payments and deposits a portion of this payment (which is not subtracted directly from the employees’ wages and salary) while another portion of the payment is made under the name of the athlete and originates from the athletes’ wages and salary.
It is mandatory to make premium payments under three different insurance types; this payment requirement is determined in different ratios for both the employer and the employee. Similar to the procedure for taxation of wages and salary, the premium which is required to be paid by the employee is deducted from the wages and salary of the employee and deposited by the employer to the Social Security Institution. The insurance types of which the premiums have to be paid and the percentage of such premiums are displayed in the table below (Law numbered 5510 article 4):
Although social security premiums can reach extremely high percentages there is a ceiling limit determined in the calculations. The ceiling limit for the second six months of the year 2012 is 6.113,40.- TL/month. In other words, no matter how much the monthly wage and salary of a real person is, only the portion of the first 6.113,40.- TL in wages and salary will the base of the social security premium calculations; the wages and salary exceeding this figure will not be taken into account during the calculation of the premiums.
Situation in Regards to Agreements on Prevention of Double Taxation
The subject of taxation of athletes in relation to Agreements on Prevention of Double Taxation is, in principle, regulated within the scope of Article 17 titled “Artists and Athletes.” These agreements consistently leave the authority of taxation of the personal incomes derived from sports activities of the athlete residing in the country of the party state, to the country in which the athlete is performing sports activities. Even in the event that the income obtained by the athlete is directed at another person, the authority to tax will remain with the country in which the athlete is performing sports activities.18
Income of Athletes which is not directly Obtained through Sports Activities
We have established that:
- Wages and salaries and those considered as such which are made to athletes are taxed in an advantageous manner by withholding,
- What should be understood from the term wages and salaries and those considered as such are transfer payments and payments and benefits provided by sports clubs under other names in return for the sports activities performed.
In light of this, it should be noted that athletes may acquire incomes that do not fall within the above-mentioned scope. At times, athletes, if their name carries a marketable brand value, may be involved in sponsorship or endorsement relations independent from their sports clubs and may acquire income in relation to such activities. In addition, it is possible for athletes, as with any other real persons, to invest in an area completely different from their occupation and acquire income; for example, it is quite possible for them to acquire real estate ownership and incomes of rent thereto or acquire interest income over savings.
If such income should be acquired the advantageous and special tax regime stated above will not be available. In other words, the personal incomes athletes acquire outside of the scope of the income they receive from sports clubs in return for their sports activities will be taxed according to general provisions. In such cases, the principal taxation regime will be in effect and such personal incomes will be taxed in principle in accordance with the progressive tax tariff percentages and under principle of annual declaration.
Under the Turkish tax system the personal incomes professional team sports players receive directly in relation to their sports activities are subject to an advantageous and specific taxation regulation.
In this scope, such personal incomes are taxed at a maximum limit of 15 percent by way of taxation at source (withholding). Such tax amount is deducted from the personal income by those (sports clubs) making the payments and the tax owed is directly paid to the tax office.
The basis of such regulations is not a part of the principle systematic of the PITL and is regulated under a provisional article (Provisional Article 72). The respective provisional article encompasses personal incomes obtained until 2017. That being said, such special regulations have been renewed with provisional articles since the mid 1990s. Therefore, the likelihood of the continuation of the current system after 2017 with similar provisional articles to be enacted with the prompting and pressure of football clubs is very high. On the other hand, the high levels of income, especially in relation to football players, are causing an increase in negative public reactions to tax advantages every day.
- Başaran Murat Atay, Tezcan; Spor ve Sporcunun Vergilendirilmesi ve Vergi Avantajları (Taxation of Sports and Athletes and Tax Advantages), Ankara 2003.
- Boztaş Hakan, “Sporcu Ücretlerine İlişkin Yeni Vergisel Düzenleme” (“New Taxation Regulation in relation to Athletes’ Salary and Wages”), Yaklaşım, Ağustos 2008.
- Budak, Tamer; “Anayasal Vergileme İlkeler: Sporcu Ücretlerinin Vergilendirilmesi” (Constitutional Taxation Principles: Taxation of Athletes’ Salary and Wages), Vergi Dünyası, Haziran 2010.
- Özpehriz, Niyazi / Çelik, Zafer; “Sporcu Ücretlerindeki Vergi Teşviğinin Sportif Başarı Üzerindeki Etkisi ve Sporcu Ücretlerinde Vergi Yükü” (The Effect of Tax Incentives in Relation to Sports Successes and the Tax Burden on Athetles’ Salary and Wages), Vergi Dünyası, Mart 2012.
- Demirbaş, Sadık, “Sporcu Ücretlerinin Vergilendirilmesi” (Taxation of Athlete’s Incomes) Maliye Postası, Aralık 2009.
- Erkiner, Kısmet (Editör); Spor Hukuku Tezleri (Thesis in Sports Law), İstanbul 2007.
- Ertaş, Şeref / Petek Hasan; Spor Hukuku (Sports Law), Ankara 2005.
- Kaneti, Selim; Vergi Hukuku (Tax Law), İstanbul 1989.
- Kara, Çetin; Çifte Vergilendirmeyi Önleme Anlaşmaları Türkiye Uygulaması (Application of Prevention of Double Taxation Agreements in Turkey), Ankara 2000.
- Öncel, Mualla / Kumrulu Ahmet / Çağan Nami; Vergi Hukuku (Tax Law), İstanbul 2011.
- Özdoğan, Onur; Türkiye’de Sporun Vergilendirilmesi (Taxation of Sports in Turkey), Thesis which has not been Published, İstanbul 2011.
- Soydan, Billur Yaltı; Uluslararası Vergi Anlaşmaları (International Tax Agreements), İstanbul 1995.
- Şahin, Özlem; “Yabancı Sporcuların Geliri” (“Income of Foreign Athletes”), Maliye Postası, Şubat 2011.
- Şebnem Pınar Yeşilyurt; “Sporculara Yapılan Ücret ve Ücret Sayılan Ödemelerin Vergilendirilmesinde Yeni Düzenlemeler” (“New Regulation Regarding the Taxation of Wage and Salary Payments and those Considered as such made to Athletes”), Vergi Sorunları, Ağustos 2008.
Yatkın, M. Cüneyt; Türkiye’de Sporcuların Vergilendirilmesi (Taxation of Athletes in Turkey), Thesis which has not been published.
 Under the relevant legislation, the only professional field of sports in Turkey is determined as football. However, under the regulations enacted by federations of other fields of sport which are developing (such as the Turkish Basketball Federation) “actual professionalism” is also defined. Ertaş /Petek; 2005:223
 Kaneti, 1989:309
 Official Gazette numbered 10700 and dated 06.01.1961
 It should be noted that another source which details the processes of taxation is the Taxation Procedure Law numbered 212 (10703 numbered Official Gazette dated 10.01.1961).
 What is meant by “other earnings and revenues” is not “all forms of earning which do not fall under the six types stipulated”. Other earnings and revenues consist of appreciation gain and incidental incomes.
 Öncel, 2011:245.
 The tariff segments applicable for the year 2012 as is below (PITL article 103):
15% up to 10.000 TL
20% between 10.000 TL and 25.000 TL
27% between 25.000 TL and 58.000 TL (up to 88.000 TL for wage and salary incomes)
35% for exceeding 58.000 TL (exceeding 88.000 TL for wage and salary incomes)
 Although this is the principal criterion the PITL has included the supplementary criterion of citizenship. Citizens of the Republic of Turkey who are abroad for the purpose of working for a public or private institution in Turkey are subject to full liability.
 PITL article 5 has provided some leniency in regard to length of residency and has determined that under some circumstances, even after six continuous months of living in Turkey foreign persons will not be deemed to be residing in Turkey and therefore will not be subject to full liability.
 In the event that the declarations are made in March, the installations will be paid in March and July; in the event that the decelerations are made in February, the installations will be paid in February and June.
 Başaran/Atay, 2003:342
 The general details of taxation at source (those who are responsible for carrying out taxation at source, under what circumstances taxation at source will be applicable) are stipulated under PITL article 94.
 The chronological developments regarding regulations of taxation of athletes’ incomes can be summarized as (Demirbaş, 2009:134; and Özdoğan, 2011:58-60):
- Before 01.01.1994: Transfer payments are subject to 15% taxation; premiums, wages and salary and incomes alike are subject to general principles.
- Between 01.01.1994-01.05.1995: There are no applicable special or advantageous provisions, general principles are applicable.
- Between 01.05.1994-31.12.1998 (PITL provisional article 40): Transfer payments are subject to 15% taxation; premiums, wages and salary and similar incomes are subject to taxation under general principles.
- Between 01.01.1999-24.04.2003: There are no applicable special or advantageous provisions, general principles are applicable.
- Between 24.04.2003-31.12.2007 (PITL provisional article 64): Premiums, wages and salary, and all similar wage and salary payments including transfer payments are subject to 15% taxation. .
 It is noted that, even if athletes had the same economic power in comparison to other persons who obtain wage and salary income (although athletes have exponentially more economic power) the advantageous regulations made for the benefit of athletes’ incomes will negatively affect the social balance and the principle of social states. Budak, 2010:346; Yeşilyurt, 2008:279. Whether tax incentives on athlete wages and salaries have any positive effect on sports accomplishments is a matter of discussion. Budak, 2010:346; Yeşilyurt, 2008:279
 This provision is not the first regulation in relation to this subject matter. Since the application period of the previous provisional article (provisional article 64) elapsed by 31.12.2007, regulations similar in principle but with a few amendments have been added to the respective law. As the latest changes embody the imposition of different tax rates in accordance with the standing of the athletes it has been welcomed with the notion that “the principle of equality and justice has been kept in regard for the athlete at least” Boztaş, 2008:77.
 This aspect is stated in the Personal Income Tax Law General Communique numbered 267 and issued by the Ministry of Treasury.
 Yatkın, 2006:45; Erkiner, 2007:70.
 There are agreements in which the taxation of the income acquired from these activities is to be carried out by the state sending the athlete to the event if the activities of the athlete are supported by public funds. Soydan, 2005:247; Kara, 2000:75,76; Şahin, 2011:147