Hiring employees in Turkey through an Employer of Record (EOR) is one of the most efficient and compliant ways for international companies to expand their teams without establishing a local legal entity. While EOR providers handle most legal and HR-related obligations, understanding the accounting and financial implications is essential for any foreign company that wants transparency, cost control, and legal compliance in Turkey.
In this article, we break down the key accounting rules, tax requirements, reporting standards, and best practices that EOR clients should understand when operating in Turkey.
What Is an EOR in Turkey?
An Employer of Record (EOR) in Turkey acts as the legal employer of record for your local employees, while you manage their daily work. The EOR handles:
- Payroll administration
- Income tax withholding
- Social security payments
- Employment contracts
- HR compliance
- Work permit applications (for foreigners)
But beyond HR services, the EOR also plays a critical role in financial and accounting compliance, ensuring that your employment operations in Turkey remain fully legal and audit-proof.
Why Accounting Compliance Matters for EOR Clients
Even if your company does not have a legal entity in Turkey, using an EOR doesn’t remove all responsibilities. You still need to:
- Understand how costs are structured
- Comply with internal and external audit requirements
- Align Turkish invoices and payroll with your global accounting system
- Maintain transparency in financial documentation for tax, budgeting, and reporting purposes
Let’s look at the key accounting areas you should know as an EOR client in Turkey.
1. Understanding Invoicing From EOR Providers
Your Turkish EOR will issue monthly invoices to your company that cover:
- Gross salaries of each employee
- Employer-side social security contributions (~20.5% of gross salary)
- Unemployment insurance contributions
- Income tax and stamp tax (withheld from salary)
- EOR service fee (usually a fixed monthly rate or % of salary)
- Any additional benefits or reimbursements
Important Notes:
- Invoices are usually issued in Turkish lira (TRY), although some EORs offer USD or EUR billing upon agreement.
- VAT may or may not be applicable depending on the structure of the EOR and the location of the client (domestic vs. cross-border invoicing).
- EORs provide supporting documentation including payroll breakdowns and employee cost reports.
These invoices are essential for your internal bookkeeping and financial planning.
2. Turkish Payroll and Expense Accounting
Each employee’s cost includes more than just the net salary. Here’s a basic breakdown of the total employer cost per employee:
| Component | Estimated % of Gross Salary |
|---|---|
| Gross salary | 100% |
| Employer’s social security (SGK) | ~20.5% |
| Unemployment insurance | 2% |
| EOR service fee | 10–15% |
| Misc. benefits (optional) | Variable |
The EOR calculates and pays these contributions to Turkish authorities. For accounting purposes, the employer cost is recorded on your books as a business expense, often under a “Personnel Outsourcing” or “Professional Services” line.
If you offer bonuses, meal cards, transport allowances, or private insurance, these will appear as separate items in monthly breakdowns.
3. Withholding Tax and Employer Obligations
Although the EOR handles tax filings, it’s important to understand what taxes are being withheld and how they affect your total cost.
Key taxes and deductions:
- Income tax: Progressive rate from 15% to 40%, deducted from the employee’s gross salary
- Stamp tax: ~0.759% of gross salary
- Employee SGK share: 14%, deducted from gross salary
- Unemployment insurance (employee share): 1%
The employer-side taxes are added on top of the gross salary and are part of the EOR invoice.
4. Accounting for VAT in Turkey
Turkey applies a Value-Added Tax (KDV) system similar to Europe. The standard VAT rate is 20% (as of 2024), although some services may be taxed at lower rates or exempt altogether.
Whether VAT applies to your EOR invoice depends on:
- The tax status of the EOR provider
- Whether the service is cross-border or local
- Whether your business is VAT-registered in Turkey (if applicable)
Most foreign companies outside Turkey are not required to pay VAT on EOR services if the transaction is treated as an export of service under Turkish tax code.
Tip:
Always request VAT-compliant invoices from your EOR and consult your tax advisor on how to handle VAT for intercompany charges.
5. Reporting and Audit Documentation
While the EOR is the legal employer, your company may still need to:
- Report international employment costs to investors or auditors
- Justify payroll expenses in cross-border P&L statements
- Record employee costs for local or group-level profit tracking
A reputable Turkish EOR will provide:
- Detailed payroll reports
- SGK contribution receipts
- Employee cost summaries
- Work permit and residency documentation (for expatriates)
These documents are essential for internal audits, external tax inspections, or investor due diligence.
6. Currency Exchange Considerations
Turkey’s economy is based on the Turkish Lira (TRY), which can fluctuate significantly. This impacts:
- Salary budgeting
- Profit margins
- Exchange rate gains/losses on cross-border payments
If your company operates in USD or EUR, and the EOR invoices in TRY:
- Your finance team must monitor exchange rates
- Consider hedging mechanisms for large payrolls
- Align accounting treatments for currency revaluation
Some EORs offer dual-currency invoicing or fixed FX agreements to stabilize costs.
7. Bookkeeping Classification for EOR Costs
In your company’s general ledger (GL), expenses from an EOR are typically categorized as:
- Contractor or personnel outsourcing services
- Payroll and benefits expenses
- SG&A (Selling, General, and Administrative)
You may also separate:
- Direct employee costs (salaries, SGK, tax)
- Administrative fees (EOR’s service charge)
- Reimbursements and non-salary benefits
Maintaining clean, categorized records ensures better visibility and tax preparation.
8. Intercompany Agreements and Transfer Pricing
If your company is billing services or allocating costs between international entities, it’s important to document:
- How the EOR costs are shared across entities
- The markups (if any) applied to these services
- Whether arm’s-length pricing is used
This is especially critical for multinational groups subject to OECD transfer pricing rules. Make sure:
- Intercompany agreements are in place
- Supporting invoices and documentation are retained
- Compliance with Turkish and home-country tax laws is maintained
9. Annual Budgeting and Forecasting
Because Turkish employment costs include several taxes and contributions, budgeting requires more than simply multiplying salary by 12.
When planning, EOR clients should factor in:
- Mid-year minimum wage increases (often announced in January and July)
- Annual SGK ceiling updates
- Inflation-driven adjustments to employee expectations
- Currency fluctuation buffers
An experienced EOR will help you project accurate annual employment costs to prevent surprises.
Working with an Employer of Record in Turkey makes it significantly easier for foreign companies to hire talent without opening a local entity. But while the EOR takes on the legal employer role, your company still needs to understand and manage the accounting, reporting, and cost structure of the engagement.
By knowing how payroll, taxes, and benefits are structured—and ensuring proper documentation and invoicing—you can confidently integrate Turkish employment into your global operations.
We provide full-service EOR solutions in Turkey, complete with transparent invoicing, compliant payroll management, and detailed financial documentation for your internal records.
Need help managing your accounting as an EOR client in Turkey?
📞 Contact us today for expert support in payroll, compliance, and international workforce planning.