How to Pay Contractors in Crypto in Turkey
As Turkey’s crippling financial crisis continues to wreak economic devastation, interest in crypto has risen at an unprecedented rate. In October of 2022 inflation reached a record 25-year high of 85%. By late June of 2023 economic struggles only worsened with the Turkish Lira falling to a historic low of 25.9 per USD.
Parallel to this crisis, in 2022 the number of Turks owning crypto rose to an estimated 4.6 million, or 5% of the Turkish population. Mistrust in government-regulated currency has mounted in the wake of economic collapse causing more Turks than ever before to seek security in virtual assets.
For many companies in Turkey, holding virtual assets is an appealing option for dodging the hard-hit of inflation. Amidst this steadily growing trend, as Turkey keeps pace with global regulatory bodies in the enforcement of new crypto policies, it’s of utmost importance to stay up-to-date with compliance laws.
Overview of Crypto in Turkey
In Turkey, a principal challenge in achieving compliance with crypto payments involves the complexity of interpreting Turkish tax law to accurately determine the appropriate classification of crypto assets. Currently the lack of classification for crypto makes it tricky to establish which tax bracket these assets fall under.
The only definition given for crypto assets in Turkish law is as follows:
“crypto-asset refers to intangible assets…that are created virtually using distributed ledger technology or a similar technology and distributed via digital networks”.
This follows in line with the definition provided by the European Union’s “Markets in Crypto-assets, and amending Directive (EU) 2019/1937”.
It has been speculated that crypto could fall under Turkey’s definition of commodities through the Inheritance and Transfer Tax Law, or that in the future, if the definition of property is expanded to include intangible assets, they could be taxed under movable property.
Despite the lack of clarity provided by the Turkish government, crypto remains legal to buy, trade and sell. As such, individuals in Turkey can freely invest in crypto.
Turkey’s Ban on Crypto Payments
The Central Bank of the Republic of Turkey officially banned the use of crypto for the payment of goods or services in a piece of legislation which entered into effect in April of 2021, “Regulation on the Disuse of Crypto Assets in Payment”.
In this regulation, it is explicitly stated that businesses can neither accept crypto as a form of payment nor can individuals pay for goods or services in crypto:
“Crypto assets shall not be used directly or indirectly in payments. No services provided that involved the use of crypto assets directly or indirectly in payments”.
Yet while crypto has been prohibited for payments, there is no law banning the buying, selling, and trading of crypto in company treasuries for the purpose of investments.
Income Tax on Crypto in Turkey
Freelancers working under foreign contracts can still receive remuneration in crypto despite it being banned as a form of payment. As such, it can be assumed that income earned in crypto is taxed as Personal Income.
The amount on which income tax will be levied is determined by calculating the market value of the crypto in liras at the time of its receipt.
Turkey has a progressive income tax system that was updated to reflect inflation rates for 2023. Determining taxes owed on crypto paid as wages can be determined as follows:
0-₺70,000: 15% tax rate
₺70,000-₺150,000: 20% tax rate
₺150,000- ₺550,000: 27% tax rate
₺550,000 - ₺1,900,000: 35% tax rate
Over ₺1,900,000: 40% tax rate
For capital gains generated from personal crypto investments, additional taxes will be owed.
Paying Contractors in Turkey with Rise
Ensuring tax compliance when paying contractors in Turkey is of paramount importance. Currently noncompliance in Turkey comes at a high cost with penalties that can escalate to the severity of up to 8 years imprisonment.
Rise is a compliance and payroll solution that leverages Web3 technology to support hiring and payments for traditional companies and web3-native organizations alike.
By utilizing Rise for onboarding, companies can streamline their processes for hiring and managing contractors, all while ensuring total compliance. Rise revolutionizes the hiring process through identity verification in minutes through Know-Your-Customer checks (KYC) and automated professional service agreements.
Additionally, Rise offers a unique dual payment infrastructure that allows for flexible payment schedules and automated payouts while efficiently routing between fiat and crypto. With international governments increasingly expanding options for crypto’s integration into economic activity, it can be assumed that Turkey will soon follow suit.
Let Rise take care of ensuring total compliance for your global payroll. Schedule a demo to learn more today.