E-Commerce 1% Withholding Tax Application: What Does It Mean for Consumers?
E-Commerce 1% Withholding Tax Application: What Does It Mean for Consumers ?
E-Commerce 1% Withholding Tax Application: What Does It Mean for Consumers and Inflation?
Introduction:
Starting January 1, 2025, e-commerce intermediaries will withhold 1% of the price (excluding VAT) when transferring funds to the seller, and later offset this withholding in their own income tax filings. In this article, we will explore how this withholding tax will affect product prices, inflation, and the collection of taxes.
1. When Will This Regulation Be Implemented?
Question: When did this regulation come into effect?
Answer:
This regulation was introduced by Law No. 7524, published in the Official Gazette on August 2, 2024. It was added to income tax under Article 4 and to corporate tax under Articles 33 and 34. Initially, the withholding tax rate was set at 25% for income tax and 15% for corporate tax. However, on December 22, 2024, Presidential Decree No. 9284 lowered the withholding tax rate to 1% for e-commerce transactions starting January 1, 2025.
2. Who Will Be Affected by This Regulation?
Question: Who will this 1% withholding tax apply to?
Answer:
This regulation applies to businesses that sell or promote products online through their own websites or other digital platforms.
Example:
X A.Ş., which manufactures and sells women’s clothing, has partnered with Aracı A.Ş. to sell products on its website, with a 5% commission (including VAT). If Aracı A.Ş. sells X A.Ş.'s products for 550,000 TL in January 2025, the VAT amount is 50,000 TL. Aracı A.Ş. will withhold 1% of the amount excluding VAT (5,000 TL), and submit this via the monthly tax declaration.
| Sale Price (Including VAT) | VAT | Price Excluding VAT | Withholding Tax (1%) |
| 550,000 TL | 50,000 TL | 500,000 TL | 5,000 TL |
3. Does This Apply to Hotel Reservations as Well?
Question: Does the withholding tax apply to hotel bookings?
Answer:
Yes, this applies to hotel bookings made through third-party platforms as well. For instance, if B A.Ş. sells a 10-day stay at X Hotel in Turkey for 22,400 TL (including VAT), B A.Ş. will withhold 1% from the amount excluding VAT, and submit this via the monthly tax declaration.
| Total Price (Including VAT) | VAT & Other Taxes | Price Excluding VAT | Withholding Tax (1%) |
| 22,400 TL | 2,400 TL | 20,000 TL | 200 TL |
4. Will Second-Hand Sales Be Affected?
Question: Does this regulation apply to second-hand sales?
Answer:
No, the withholding tax will not apply to individuals who do not have a tax obligation due to non-commercial, agricultural, or professional activities. For instance, if an individual sells second-hand goods on an online platform this regulation will not apply to them.
5. What About Food Delivery Services?
Question: How will the withholding tax apply to food delivery services?
Answer:
The withholding tax will apply if you use intermediary platforms like Yemek Sepeti or Getir to place an order. If you pay directly to the restaurant, no withholding tax applies. However, if you pay via these intermediary platforms, the 1% withholding tax will be applicable.
6. Will This Increase Inflation?
Question: Does this withholding tax contribute to inflation?
Answer:
The 1% withholding tax is levied on intermediary firms, not the final consumer. Therefore, it is not a direct tax on consumers. These intermediary firms will offset the withholding tax against their annual tax filings, meaning it should not be considered as an additional tax burden. However, some companies may choose to pass on this cost to consumers by increasing prices slightly.
Summary Table:
| Subject | Effect |
| Tax Levied On | Intermediary companies, not consumers |
| Impact on Inflation | Could increase prices slightly, but indirect |
| Final Consumer Responsibility | None |
7. Conclusion:
The new 1% withholding tax regulation will primarily affect businesses acting as intermediaries in e-commerce transactions. While this tax will not directly impact consumers, there is a possibility that intermediary firms might pass on the cost by slightly increasing prices. The implementation of this regulation starting January 1, 2025, aims to streamline tax collection, but the broader effects on inflation and market dynamics will unfold over time.
Take Action:
If your business is involved in e-commerce or online sales, make sure you understand the impact of this new withholding tax regulation. Stay ahead by ensuring compliance and optimizing your pricing strategy to accommodate these changes. Contact us today for assistance with navigating these regulatory updates!
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