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Mutual rescission contracts and formed should be of a quality that does not harm the
tax-related matters safety of the job and must contain provisions that provide
reasonable benefits to the worker.

Mutual rescission agreements are not explicitly regulated Due to the principle of providing reasonable benefits to the
in the Labour Law no. 4857. This opportunity is accepted worker as a legal condition, the inclusion of some amounts
within the context of freedom of contract both in judicial in the contract brings various tax issues. Although it is
decisions and in the doctrinal disciplines. The principle accepted that the relevant amounts will be evaluated as
of freedom of contract that is based on the Constitution wages, the exemption of the portion up to the ceiling of the
gives the parties the power to form a contract, determine severance pay from income tax has been accepted through
its content and terminate the contract. In this regard, the the latest regulations. On the other hand, the sections
employment contract, whether fixed-term or indefinite-term, exceeding the severance pay ceiling amount will be subject to
can also be terminated upon the agreement of the employee income tax.
and the employer. This agreement on the termination of the
employment contract is called a mutual rescission. The issue of the assessment of indemnities arising from
mutual rescission contract in terms of income tax which has
As it can be understood, it is possible for the employee and been subject of litigation many times and different court
employers to agree and terminate the employment contract decisions and rulings previously has been concluded with the
as a way other than termination by contract method, in Law no. 7103, Law no. 7162 and the relevant communiques.
other words mutual rescission as a reflection of the freedom Pursuant to the regulations introduced, the payments
of contract in law. Mutual rescission does not stand as a received as a result of the mutual rescission contracts were
termination, while it appears as a method that is approached included into the scope of income tax exemption and it was
with suspicion since it is probable that the workers' rights decided to refund the deductions made before 27/03/2018.
are damaged. Therefore, termination of the employment
contract by mutual rescission is not valid since it threatens On the other hand, since the mutual rescissions do not
the job safety due to the lack of provisions regarding the stand in the category of contracts exempted from stamp
protection of the worker sufficiently and the relevant tax and because it is a new contract due to its nature, it is
situation is considered as the unilateral termination of the understood that they should be subject to a stamp tax of
employment contract by the employer. In this respect, in 9.48 per thousand.
order to be considered as a mutual rescission, the contract

Explanations in this article reflect the writer's personal view on the matter. EY and/or Kuzey YMM ve Bağımsız Denetim A.Ş. disclaim any responsibility
in respect of the information and explanations in the article. Please be advised to first receive professional assistance from the related experts before
initiating an application regarding a specific matter, since the legislation is changed frequently and is open to different interpretations.
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