Regulation on withholding tax! Starts January 1... Published in the Official Gazette

The "General Communiqué on Income Tax" by the Revenue Administration of the Ministry of Treasury and Finance has been published in the Official Gazette. Accordingly, payments made by intermediary service providers and electronic commerce intermediary service providers to service providers and electronic commerce service providers due to their activities within the scope of the aforementioned Law have been brought under the scope of withholding tax.

Following the determination of the withholding tax rate as 1 percent by a Presidential Decree previously, the communiqué was published to provide explanations and examples regarding the procedures and principles for the implementation of said regulation.

Intermediary service providers—defined as real and legal persons providing an electronic commerce environment for the conduct of economic and commercial activities belonging to others—and electronic commerce intermediary service providers—defined as intermediary service providers that enable the conclusion of contracts or the placing of orders for the supply of goods or services of electronic commerce service providers in an electronic commerce marketplace—have been made liable to withhold tax on payments they mediate due to activities falling under the Law on the Regulation of Electronic Commerce.

WHO DOES IT APPLY TO?

Withholding tax will be applied by intermediaries on payments made to service providers and electronic commerce service providers for the sale of goods and provision of services, including those who are real or legal persons engaged in electronic commerce activities, as well as service providers who conclude contracts or receive orders for the supply of their goods or services in an electronic commerce marketplace or in their own electronic commerce environment.

In cases where non-resident institutions operating through workplaces or permanent representatives in Turkey are service providers or electronic commerce service providers, payments made to them will also be subject to withholding tax.

WHO DOES IT NOT APPLY TO?

Withholding tax will not apply to payments made to those operating in an electronic commerce environment who do not have a tax liability due to commercial, agricultural, or professional activities, those exempt from tax within the scope of the relevant article of the Law, those whose earnings are determined under the simple method, and those whose withholding tax is already applied on their revenue within the scope of the Law.

IF YOU MAKE A PAYMENT IN JANUARY 2025...

In cases where intermediary service providers and electronic commerce intermediary service providers sell their own goods and services, or where taxpayers sell their own goods and services—in other words, where the payment is not mediated—withholding tax will not be applied to these payments.

Furthermore, during the transition period, if payments related to goods and services sold in 2024 are made to service providers and electronic commerce service providers in January 2025, these payments will not be subject to withholding tax.

WITHHOLDING TAX BASE

The "withholding tax base" is defined as the "product sales and service price, excluding value-added tax and accommodation tax, related to goods sales and service provisions performed by service providers and electronic commerce service providers, as well as benefits provided by intermediary service providers or electronic commerce intermediary service providers to service providers and electronic commerce service providers under names such as rewards and premiums."

While withholding tax will be applied on the gross amount, value-added tax and accommodation tax will not be included in the withholding tax base.

Under contracts made between the parties, amounts deducted from payments made to service providers and electronic commerce service providers under names such as commission fees, shipping costs, service fees, and bank commission fees cannot be deducted from the withholding tax base.

PAYMENT TIME FOR WITHHELD TAX

Intermediary service providers and electronic commerce intermediary service providers will be liable to declare and pay the withholding taxes they have deducted from payments made to service providers and electronic commerce service providers within one month, by the evening of the 26th day of the following month, via the withholding and premium service tax return.

WITHHOLDING TAX STATUS IN PRODUCT RETURNS

In the event that customers return products after a payment has been made with withholding tax applied to those engaged in goods sales and service provision, the returned product price will not be associated with the withholding tax base; it will be offset against the income and corporate tax calculated on the temporary tax returns and annual returns of those who performed the goods sales and service provision.

In the same month, if the product and its price are returned before the withheld tax is declared and paid to the tax office, withholding tax may not be applied to the returned product price, and the necessary corrections can be made in the records of the intermediary service providers and electronic commerce intermediary service providers.

STARTS JANUARY 1

Withheld taxes will be offset by taxpayers engaged in goods sales and service provision against the income and corporate tax calculated on their temporary tax and annual income and corporate tax returns.

Amounts that cannot be offset in annual returns will be subject to refund within the scope of the regulations contained in previous communiqués.

The communiqué will enter into force on January 1, 2025.

News Source: 12punto