Are the salaries paid to the spouse and children of a limited company partner deductible from the tax base?

Are salaries paid to the spouse and children of a limited company partner deductible from the tax base?

Salaries paid to the spouse and children of a company partner for their actual work can be deducted as expenses and reduce the tax base.

Which account should we record salaries and insurance premiums paid to a spouse and child in a sole proprietorship?

According to Article 41/2 of the Income Tax Law (GVK), salaries, wages, bonuses, commissions, and compensations paid from the business to the owner, spouse, and minor children of sole proprietorships are not deductible from the tax base.

INCOME TAX LAW

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Non-Deductible Expenses

Article 41

The following payments are not accepted as deductible expenses:

1. Amounts or other values drawn from the business by the owner, their spouse, or children (values received in kind are added to the amounts drawn by the owner, valued at the market price).
2. Salaries, wages, bonuses, commissions, and compensations paid to the owner, their spouse, or minor children from the business.
3. Interest on capital put into the business by the owner.
4. Interest on receivables from the business held by the owner, their spouse, or minor children.
5. Except for transactions specified in paragraphs 1 through 4 of this article, any discrepancies between the market value or price and the amount or price applied by the owner in transactions involving goods or services with related parties are considered as drawn from the business.

   Related parties include the spouse, ancestors, descendants, third-degree relatives, and companies directly or indirectly partnered with the owner, including shareholders, those controlling the management, audit, or capital of other related companies.

   In this context, transactions involving manufacturing, construction, leasing, borrowing or lending money, wages, bonuses, and similar payments are always considered as the purchase or sale of goods or services.

   Discrepancies considered as drawn from the business will be adjusted in the tax assessments of the related parties if accounted for in the declared income or corporate tax base. For issues not covered by this article, the provisions of Article 13 of the Corporate Tax Law No. 5520 apply.

6. Any fines and tax penalties, as well as compensations arising from the owner’s crimes (penalties stipulated in agreements are not considered compensations of a penal nature).
7. (Added by Law No. 3571, Article 8) 50% of advertising and promotion expenses related to alcohol, alcoholic beverages, tobacco, and tobacco products (previously 0% according to Decree Law No. 90/1081) (amended by Decree Law No. 700, Article 45; effective 09.07.2018) The President (*) is authorized to increase or decrease this rate up to 100% or down to zero.
8. (Added by Law No. 4008, Article 25; effective 01.01.1995) Costs and depreciation of motorized marine vehicles (yachts, boats, speedboats), aircraft (planes and helicopters), that are not related to the main business activity.
9. (Added by Law No. 6322, Article 6; effective 15.06.2012) In businesses where foreign resources exceed equity, interest, commissions, differences in terms, profit shares, exchange rate differences, and similar expenses and cost elements related to the used foreign resources, excluding those added to the investment cost, shall not exceed 10% of the total.

   The President (**) is authorized to determine this rate for sectors and the Ministry of Finance is authorized to set procedures and principles for implementing this provision.

10. (Added by Law No. 4756, Article 28; effective 21.05.2002) Compensation expenses for material and moral damages caused by acts committed through the press or radio and television broadcasts.

For the application of this article, partners of collective companies and general and limited partners of commandite companies are considered as owners.

11. (Added by Law No. 7394, Article 1; effective 15.04.2022) Advertising expenses given to those under advertising bans as per Article 4 of Law No. 5651 on the Regulation of Publications Made on the Internet and Combating Crimes Committed Through These Publications.

(*) Previously: Council of Ministers

(**) Previously: Determined by the Council of Ministers