International companies operating in Turkey frequently want to determine employee salaries in euros, US dollars, British pounds or another foreign currency.
This is particularly common when an employee is part of an international group, when compensation is benchmarked globally or when a foreign employee is relocated to Turkey.
However, salary payments in foreign currency in Turkey are subject to specific foreign exchange, employment, tax and payroll rules.
Employers should therefore distinguish between three separate questions:
- Can the salary be contractually denominated in a foreign currency?
- Can the salary actually be paid in that foreign currency?
- How should the salary be processed through Turkish payroll?
This guide explains the main points foreign employers should consider.
Can Salaries Be Agreed in Foreign Currency in Turkey?
Not always.
Turkey introduced restrictions on foreign-currency-denominated contracts in 2018 under Decree No. 32 on the Protection of the Value of Turkish Currency and the related Communiqué No. 2008-32/34.
As a general principle, persons considered resident in Turkey cannot freely determine certain contractual payment obligations between themselves in foreign currency or indexed to foreign currency unless an applicable exemption exists.
Employment contracts are among the categories affected by these rules.
However, the legislation provides important exceptions.
As a result, the answer depends on:
- the residence status of the employer;
- the residence status of the employee;
- the employee’s nationality and circumstances;
- the employer’s ownership structure;
- whether the employee works abroad; and
- whether another statutory exception applies.
Foreign employers should therefore avoid assuming that every employment contract in Turkey can simply state a salary in EUR or USD.
Foreign Employees in Turkey
One of the most important exceptions concerns certain foreign employees.
Turkish foreign exchange legislation provides exceptions allowing foreign-currency-denominated employment contracts in specified situations involving individuals who are not Turkish citizens.
This makes foreign currency compensation particularly relevant for expatriates and foreign nationals employed in Turkey.
For example, an international company employing a foreign executive in Turkey may potentially structure the employee’s contractual remuneration in EUR or USD where the applicable exemption is satisfied.
The exact circumstances should nevertheless be reviewed before the employment agreement is signed.
Turkish Employees Working for Foreign-Owned Companies
The situation can also differ where the employer has a foreign ownership or international structure.
The foreign exchange legislation provides exceptions for certain employment contracts involving:
- branches, representative offices, offices and liaison offices in Turkey of persons resident abroad;
- companies in Turkey in which persons resident abroad directly or indirectly hold at least 50% of the shares;
- companies under common control of persons resident abroad; and
- certain companies operating in free zones in connection with their activities in those zones.
Where an applicable exemption exists, foreign-currency-denominated employment arrangements may therefore be possible.
The corporate structure of the employer should be checked before relying on an exception.
Turkish Employees Working Abroad
Another important situation concerns Turkish residents performing employment activities abroad.
Employment contracts concerning work performed outside Turkey can fall within exceptions allowing foreign-currency-denominated remuneration.
This is particularly relevant for Turkish companies assigning personnel internationally.
Employers should nevertheless distinguish between employees working abroad and employees physically working in Turkey, because the applicable rules may differ.
Contract Currency vs Payment Currency
An important distinction should be made between:
Contract Currency
The currency used to define the employee’s contractual remuneration.
and
Payment Currency
The currency actually transferred to the employee.
For example, an employment agreement could potentially specify remuneration by reference to:
EUR 4,000 gross per month
where legally permitted.
The payroll calculation must nevertheless determine how the amount is treated for Turkish statutory purposes.
Employers should therefore not assume that agreeing a salary in euros automatically means every payroll calculation and statutory declaration will also be performed entirely in euros.
Turkish Payroll Is Calculated in TRY
Turkish payroll obligations must ultimately be reflected in Turkish lira (TRY) for statutory calculation and reporting purposes.
This includes the determination of items such as:
- SGK contribution base;
- employee SGK contributions;
- unemployment insurance;
- income tax base;
- income tax withholding;
- stamp tax;
- applicable exemptions; and
- employer contributions.
Consequently, where an employee’s salary is determined in EUR, USD or another currency, the foreign currency amount generally needs to be converted into TRY for payroll purposes according to the applicable rules.
Example: Salary Agreed in EUR
Consider an employee whose contractual gross salary is:
EUR 5,000 gross per month
The payroll process cannot simply deduct Turkish taxes directly in euros.
Instead, the relevant foreign currency amount must first be translated into TRY for the applicable payroll calculation.
The payroll process can then determine:
TRY Gross Salary
minus
Employee SGK
minus
Employee Unemployment Insurance
minus
Income Tax
minus
Stamp Tax
equals
TRY Net Payroll Amount
Depending on the contractual arrangement and applicable foreign exchange rules, the amount ultimately transferred to the employee may then need to be handled according to the permitted payment structure.
Which Exchange Rate Should Be Used?
The exchange rate used for payroll is an important practical issue.
Employers should establish a clear and consistent methodology based on the applicable Turkish tax and payroll rules.
The relevant exchange rate may depend on:
- the nature of the payment;
- the payroll date;
- the accrual date;
- the payment date; and
- the applicable tax rules.
Employers should not arbitrarily select the most favourable exchange rate each month.
The methodology should be consistent, documented and applied through payroll.
Exchange Rate Fluctuations
Foreign currency salaries create an additional budgeting issue for employers.
Consider an employee earning:
EUR 5,000 gross per month
If EUR/TRY increases, the TRY equivalent of the employee’s gross salary increases.
This can affect:
- TRY payroll amount;
- income tax base;
- SGK contribution base until the applicable ceiling is reached;
- employee net salary; and
- total employer cost expressed in TRY.
The employee’s contractual EUR salary may remain unchanged while the employer’s TRY payroll cost changes significantly.
Example of Currency Fluctuation
Imagine a hypothetical employee with a fixed salary of:
EUR 5,000 gross
If the payroll exchange rate were hypothetically:
EUR 1 = TRY 50
the TRY equivalent would be:
TRY 250,000 gross
If the exchange rate later became:
EUR 1 = TRY 55
the same contractual salary would represent:
TRY 275,000 gross
The employee’s salary has not changed in EUR terms.
However, the Turkish-lira payroll value has increased by TRY 25,000.
This illustrates why foreign currency salary agreements can create fluctuating payroll costs in Turkey.
Are Taxes Paid in Foreign Currency?
Even where an employee’s salary is denominated in foreign currency, Turkish statutory payroll liabilities are generally calculated and reported in TRY.
Employers therefore need to distinguish between the commercial currency of the employment agreement and the currency used for Turkish statutory obligations.
The payroll provider must determine the TRY equivalent before calculating the employee’s statutory deductions and employer liabilities.
Foreign Currency Salaries and SGK
Where the employee is subject to Turkish social security, SGK contributions must be calculated according to the employee’s applicable TRY contribution base.
The salary converted into TRY is therefore relevant when determining:
- employee SGK contribution;
- employer SGK contribution;
- employee unemployment insurance;
- employer unemployment insurance; and
- whether the applicable SGK contribution ceiling has been reached.
For highly paid employees receiving salaries in EUR or USD, the SGK ceiling can become particularly relevant.
Once the applicable maximum contribution base has been reached, the relationship between additional gross salary and social security contributions changes.
Foreign Currency Salaries and Income Tax
Foreign-currency-denominated salary does not remove Turkish income tax obligations.
Where the employee’s remuneration is subject to Turkish payroll taxation, the TRY equivalent is incorporated into the employee’s taxable employment income.
Turkey applies progressive income tax rates on a cumulative basis.
Consequently, an employee whose TRY-equivalent salary increases because of exchange rate movements may reach higher cumulative tax brackets sooner.
The employee’s net remuneration can therefore be affected by both:
Exchange Rate Movements
and
Progressive Income Tax
This makes foreign-currency payroll more complex than a standard fixed TRY salary.
Gross vs Net Foreign Currency Salaries
Employers should clearly specify whether a foreign currency salary is agreed on a gross or net basis.
Gross Foreign Currency Salary
For example:
EUR 5,000 gross per month
The salary is converted according to the applicable payroll methodology and statutory employee deductions are calculated.
The employee bears the impact of applicable payroll deductions.
Net Foreign Currency Salary
For example:
EUR 5,000 net per month
This arrangement is considerably more complex.
The employer effectively guarantees that the employee will receive the agreed net value after Turkish payroll deductions.
A net-to-gross calculation is therefore required.
Because Turkish income tax is cumulative and progressive, the gross amount required to guarantee the same net salary can change during the year.
Why Net EUR or USD Salaries Can Be Expensive
Consider an employee guaranteed:
EUR 5,000 net per month
The employer must determine the TRY gross salary required to produce the agreed net value.
As the employee moves into higher Turkish income tax brackets, the required gross amount can increase.
Currency movements can create another variable.
The employer may therefore face both:
Tax progression risk
and
Currency risk
when guaranteeing a net foreign currency salary.
For this reason, employers should request a full-year simulation before agreeing to a guaranteed net EUR or USD salary.
Bonuses in Foreign Currency
International companies may also want to pay bonuses in foreign currency.
For example:
Annual Performance Bonus: EUR 10,000 gross
Where the bonus constitutes employment remuneration subject to Turkish payroll, the payment must be incorporated into the employee’s payroll according to the applicable rules.
The TRY equivalent can affect:
- cumulative income tax;
- SGK contribution base;
- unemployment insurance;
- net bonus; and
- employer cost.
The fact that a bonus is denominated or paid in foreign currency does not automatically remove it from Turkish payroll.
Foreign Parent Company Payments
A particularly important situation arises where a foreign parent company pays part of an employee’s compensation directly.
For example:
Turkish payroll salary: TRY 150,000
plus
Foreign parent company bonus: EUR 15,000
Employers should not assume that the foreign payment has no Turkish tax consequences simply because it is paid from a bank account outside Turkey.
If the payment relates to employment performed in Turkey, Turkish tax or payroll obligations may arise.
Cross-border salary and bonus arrangements should therefore be reviewed before payment.
Work Permit Considerations
Foreign employees in Turkey may also be subject to minimum salary criteria associated with their work permit.
The Turkish Ministry of Labour determines minimum remuneration levels for different categories of foreign employees by reference to the statutory gross minimum wage.
Where an employee’s contractual salary is denominated in foreign currency, the employer must ensure that its TRY equivalent continues to satisfy the applicable work permit requirements.
Payroll and work permit information should therefore remain consistent.
What Happens if the Exchange Rate Falls?
Where a work permit requires the employee to receive at least a certain TRY-equivalent salary, exchange rate movements can create compliance considerations.
An employer relying on a foreign-currency salary should monitor whether the TRY equivalent continues to satisfy any applicable minimum salary requirements.
This is particularly important when:
- applying for a new work permit;
- renewing a work permit;
- changing the employee’s position; or
- amending the employment agreement.
Should Employers Use TRY or Foreign Currency?
There is no universal answer.
A TRY salary can offer simpler payroll administration and greater predictability for local employment costs.
A foreign currency salary can be attractive when:
- the employee is an expatriate;
- compensation is benchmarked internationally;
- the employer belongs to an international group;
- the employee has financial obligations outside Turkey; or
- the applicable employment structure qualifies for a foreign currency exception.
The employer must nevertheless ensure that the arrangement complies with Turkish foreign exchange legislation.
Payroll Budgeting for Foreign Currency Salaries
Foreign companies should ideally prepare several scenarios before agreeing to foreign-currency compensation.
For example:
Scenario 1 – Current Exchange Rate
Estimated TRY gross salary and employer cost.
Scenario 2 – TRY Depreciation
Estimated cost if EUR/TRY or USD/TRY increases.
Scenario 3 – Higher Income Tax Bracket
Estimated payroll cost later in the calendar year.
Scenario 4 – Net Salary Guarantee
Estimated gross-up cost if the employer guarantees a fixed net foreign currency amount.
This provides a more realistic picture of potential annual employment costs.
Common Mistakes Foreign Employers Make
Common errors include:
- assuming every employee can legally have an EUR or USD employment contract;
- confusing contract currency with payroll reporting currency;
- using inconsistent exchange rates;
- failing to consider the SGK ceiling;
- ignoring cumulative income tax;
- guaranteeing a net foreign currency salary without a full-year simulation;
- assuming foreign payments are outside Turkish taxation;
- failing to align payroll with work permit salary requirements; and
- copying another country’s foreign currency payroll structure without reviewing Turkish rules.
Checklist Before Agreeing a Foreign Currency Salary
Before signing an employment agreement, employers should determine:
1. Is foreign currency denomination legally permitted?
Check whether the employment relationship falls within an applicable exception.
2. Which currency will be used?
EUR, USD, GBP or another permitted currency.
3. Is the salary gross or net?
This should be explicitly stated in the employment agreement.
4. Which exchange rate methodology will apply?
Establish a consistent payroll approach.
5. How will SGK be calculated?
Determine the TRY contribution base and applicable ceiling.
6. How will income tax be calculated?
Consider cumulative Turkish income taxation.
7. How will the employee actually be paid?
Confirm that the payment method complies with the applicable foreign exchange rules.
8. Does the employee have a work permit?
Ensure that remuneration satisfies the applicable salary criteria.
9. Are bonuses also denominated in foreign currency?
Establish their payroll treatment in advance.
10. What is the employer’s currency exposure?
Prepare different annual cost scenarios.
Salary payments in foreign currency in Turkey require careful coordination between employment contracts, foreign exchange regulations and Turkish payroll rules.
The first question is whether the employment relationship qualifies for an exception allowing remuneration to be denominated in EUR, USD or another foreign currency.
Even where foreign currency remuneration is permitted, Turkish payroll obligations still need to be calculated and reported according to the applicable TRY-based statutory framework.
Employers must therefore consider exchange rates, SGK contributions, cumulative income tax, work permit requirements and the distinction between gross and net remuneration.
Foreign companies should review these issues before signing an employment contract rather than attempting to restructure the salary after payroll has already started.
Set Idari Destek supports international companies with payroll management in Turkey, including foreign currency salary calculations, EUR and USD gross-to-net simulations, employer cost calculations and monthly payroll processing.