Procedures and Principles for E-commerce Withholding in 2025 Announced

The Ministry of Treasury and Finance has published the communiqué outlining the procedures and principles for the 1% withholding tax rate applicable to the sale of goods and services in e-commerce. This new regulation will be effective as of January 1, 2025.

Official Announcement

The Revenue Administration under the Ministry of Treasury and Finance has issued the "Income Tax General Communiqué," published in the Official Gazette. According to the ministry, payments made by intermediary service providers and electronic commerce intermediary service providers to service providers and electronic commerce service providers under the scope of the relevant law have been included in the withholding tax regime.

Following the earlier Presidential Decree, which set the withholding tax rate at 1%, this communiqué provides detailed explanations on the implementation of the regulation, including examples to guide taxpayers.

Who Is Obligated to Withhold Tax?

The obligation to withhold tax applies to:

Intermediary service providers facilitating economic and commercial activities of third parties through e-commerce platforms.
E-commerce intermediary service providers who enable agreements or orders for the supply of goods or services in e-commerce marketplaces.
Any payments made to service providers within the scope of the Law on the Regulation of Electronic Commerce are subject to withholding tax.

From Whom Will the Withholding Tax Be Collected?

Withholding tax will be collected from:

Service providers engaged in electronic commerce, including individuals or legal entities operating on e-commerce platforms or their own platforms.
Payments made to service providers in exchange for goods sold or services rendered will be subject to withholding tax.

Additionally, payments to non-resident entities operating in Türkiye through a permanent establishment or representative office will also be subject to withholding tax.

Exemptions from Withholding Tax

The following are exempt from withholding tax:

Individuals or entities operating in e-commerce who are not taxpayers due to their commercial, agricultural, or professional activities.
Craftspeople exempt from taxation under the relevant articles of the law.
Those whose earnings are determined under the simplified tax regime.

Payments to these exempt categories or those already subject to withholding under other provisions of the law will not incur additional withholding.

Payments Excluded from Withholding Tax

When intermediary service providers or e-commerce intermediary service providers sell their own goods or services, such transactions are exempt from withholding tax. Similarly, payments not facilitated by these intermediaries will not be subject to withholding.

For transactions occurring in 2024 but paid to service providers in January 2025, withholding tax will not apply.

Withholding Tax Base

The withholding tax base is defined as the gross amount of the payment for goods and services provided, excluding value-added tax (VAT) and accommodation tax. Any benefits such as bonuses or rewards provided by intermediary service providers to service providers will also be included in the tax base.

Fees such as commission charges, shipping costs, service fees, and bank commission charges cannot be deducted from the withholding tax base.

Declaration and Payment Deadlines

Intermediary service providers and e-commerce intermediary service providers must declare the withholding tax collected on payments made to service providers by the 26th of the following month using the withholding and premium service tax return.

Refunds and Adjustments for Product Returns

If customers return goods after the withholding tax has been applied, the tax base for the returned goods will not be considered for withholding. These amounts will instead be adjusted against the income or corporate tax reported in interim and annual tax declarations.

If the return occurs within the same month before the withheld tax has been declared or paid, the withholding may be adjusted, and necessary corrections made in the intermediary’s records.

Offsets and Refunds of Withholding Taxes

Taxes withheld can be offset against the income or corporate tax liabilities declared by the service providers in their interim and annual tax returns. Unused offsets in annual declarations may be refunded according to previously established guidelines.

This regulation will come into effect on January 1, 2025.

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Procedures and Principles for E-commerce Withholding in 2025 Announced