How to Pay Taxes on Your Steam Revenue?

Certified Public Accountant (CPA) Evren Özmen

Earning revenue through Steam as a game developer is becoming an increasingly popular business model. However, ensuring that these earnings are taxed properly is crucial for avoiding any tax-related issues. In this post, we will take an in-depth look at the tax process for Steam revenues—from the necessity of establishing a company to the tax advantages available—covering all the key points you need to know.

The Basics of Earning Revenue via Steam

1. Develop Your Game and Upload It to the Platform
The first step to earning revenue on Steam is to develop your game and upload it in accordance with Steam’s requirements. Once your game passes the approval process, it will be made available for sale, with all transactions managed by Steam.

2. Revenue Tracking and Sales Management
Steam provides a management panel that allows you to closely monitor your sales and revenue, both domestically and internationally. Keeping a detailed record of these transactions is essential for accurate tax reporting.

The Role of Company Formation in the Taxation Process

For proper taxation of your Steam revenue, you must operate through a company rather than reporting income as an individual. Filing taxes as an individual without establishing a company is not a feasible option for Steam earnings.

Choosing the Right Type of Company

Sole Proprietorship:
- Tax Rates: Ranges between 15% and 40%
- Advantages: Ideal for smaller ventures, especially for young entrepreneurs under 29 years old who can benefit from tax exemptions on income up to a certain threshold.
Limited and Joint-Stock Companies:
- Tax Rate: A fixed rate of 25%
- Advantages: More suitable if you plan to expand or eventually sell your company, and beneficial if you operate within technology parks.

During the company formation process, it is critical to ensure that the articles of association and the NACE code are correctly set up. These elements determine the tax advantages your company can benefit from.

Revenue and Expense Management: Invoicing and VAT Application

Invoicing:
It is important to issue invoices based on the breakdown of domestic and international sales. For instance, if you earn 100,000 TL per month—with 20% of the revenue from within Turkey and 80% from abroad—you must issue invoices with VAT for the domestic sales (20,000 TL) and without VAT for the international sales (80,000 TL).

VAT Rate:
The standard VAT rate is 20% and applies to domestic sales.

Revenue Monitoring:
Regularly monitoring your income via the Steam management panel is crucial for accurate tax declarations and record-keeping.

Steam Deductions, Tax Refunds, and Incentives

Steam deducts a commission from the revenue generated through game sales. Since you need to issue invoices based on the net amount that reaches your account, these deductions should not be treated as deductible expenses in your accounting. However, it is possible to apply for tax refunds on these deductions through programs supported by the Ministry of Trade.

Comparing with Mobile Application Revenue Taxation

Unlike mobile application revenues—which benefit from a 15% withholding tax under certain social content production and mobile app development incentives—Steam revenues are not eligible for such tax exemptions. Therefore, the 15% tax advantage applied to mobile applications does not extend to Steam earnings.

Strategies to Avoid Tax Risks

To ensure full compliance with your tax obligations, consider the following:

Choose the Right Company Structure: Base your decision on your revenue level, age, and future plans.
Maximize Tax Advantages: Pay close attention to the articles of association and the NACE code during company formation.
Proper Invoicing: Issue invoices accurately based on the differentiation between domestic and international sales.
Professional Guidance: Work with a professional CPA to minimize tax risks and fully benefit from available tax incentives.

Conclusion

While earning revenue through Steam offers significant opportunities, any mistakes in the tax process can lead to serious issues. Establishing the correct company structure, managing your income and expenses accurately, and seeking professional guidance are key to meeting your tax obligations.
For more information or professional advice, please contact us at info@ozmconsultancy.com.

See you soon!
CPA Evren Özmen

How to Pay Taxes on Your Steam Revenue?