New Era in E-Commerce: Withholding Tax Rate Set at 1%
New Era in E-Commerce: Withholding Tax Rate Set at 1%
New Era in E-Commerce: Withholding Tax Rate Set at 1%
E-commerce businesses in Turkey will soon see significant changes in how they pay taxes. According to the Presidential Decree published in the Official Gazette on December 22, 2024, withholding (stopaj) tax on payments for goods and services sold through e-commerce platforms will be set at 1%. This regulation takes effect on January 1, 2025.
Below, we discuss why this 1% withholding tax rate matters, whom it affects, and what you need to know to comply with the new rules.
1. Why Is the Withholding Tax Rate Important?
Withholding tax ensures that tax is collected at the source of transactions. By setting the rate at 1% for e-commerce transactions, the government aims to:
Increase predictability and transparency for businesses.
Streamline tax collection.
Reduce unregistered (informal) activities in the rapidly growing e-commerce sector.
2. Under Which Law Was This Regulation Enacted?
The framework is provided by Law No. 7524, which amends certain aspects of the Law on the Regulation of Electronic Commerce (No. 6563).
Under these amendments, e-commerce intermediaries will withhold 1% of the payment made to sellers (goods or services) in qualifying e-commerce transactions.
3. Who Must Withhold the Tax?
Intermediary Service Providers (ISPs): Entities (individual or corporate) that provide an electronic platform for others to conduct business activities.
Electronic Commerce Intermediary Service Providers: Marketplace platforms that facilitate the ordering or contracting of goods or services offered by e-commerce service providers.
These intermediaries are now obliged to withhold 1% of any payment they process for goods or services within the scope of the Electronic Commerce Law.
4. Who Will Be Subject to Withholding?
Service Providers and E-Commerce Service Providers:
Individuals or companies engaged in e-commerce activities.
Those who offer goods or services on their own e-commerce site or a marketplace (electronic commerce environment).
When they make sales and receive payment through intermediary service providers (e.g., marketplace platforms), 1% withholding tax will be deducted from the transaction total.
5. When Does This Take Effect?
This regulation comes into force on January 1, 2025. From that date onwards, all relevant e-commerce payments will have 1% withholding tax applied.
6. How Will the Withholding Tax Affect Sellers?
Amounts withheld by intermediaries during the year count as prepaid taxes. Sellers (or service providers) can offset these amounts against their annual income tax or corporate tax liability when they file their tax returns. If there is an overpayment, it may be eligible for a refund, subject to approval from the tax authority.
Frequently Asked Questions (FAQs)
| Question | Answer |
| 1. From which date does the 1% rate apply? | January 1, 2025. Any transactions before this date are subject to previous regulations. |
| 2. Which payments are subject to this new 1% withholding tax? | All payments for goods or services sold via e-commerce intermediaries or electronic commerce intermediary service providers, as defined by Law No. 6563. |
| 3. Who must perform the withholding? | Intermediary service providers and e-commerce intermediary service providers (marketplaces). |
| 4. How do I recover or offset this withheld amount? | The withheld amount can be deducted from your annual income or corporate tax liability. If any excess remains, it may be refunded by the tax authority following the usual procedures. |
| 5. What is the advantage of setting the withholding rate at 1%? | A lower rate (1%) helps reduce the cash flow impact on businesses while maintaining a structured approach to tax collection. It also aims to curb informal transactions in e-commerce. |
| 6. Does the regulation cover only the sale of goods or also services? | It covers both goods and services sold via electronic platforms. Any revenue earned from e-commerce activities (goods or services) will be subject to 1% withholding if processed through intermediaries. |
Conclusion
The e-commerce sector in Turkey has been growing rapidly, and these tax adjustments aim to:
Support fair competition.
Simplify compliance and collections.
Ensure that all parties operate within a clear, predictable tax framework.
Starting January 1, 2025, a 1% withholding tax will be applied to payments for goods and services facilitated by e-commerce intermediary platforms. This change serves as an upfront partial tax payment to be credited against your final tax liability.
For more information you can reach us: OZMEN CPA
info@ozmconsultancy.com
