E-commerce has become popular with the rapid advancement of technology and the widespread use of the internet. The change in people’s shopping habits and the ability to shop independently of time and place make e-commerce appealing. The increasing use of mobile devices, the development of secure payment systems, and the rise of platforms offering a wide range of products have accelerated the adoption of e-commerce. These changes have made e-commerce a significant part of global trade.
What is e-commerce tax?
Just like traditional commerce, e-commerce is subject to various taxation rules by the government.
E-commerce tax refers to the tax levied on commercial transactions conducted over the internet.
In e-commerce, sellers are obligated to issue invoices just as they would in traditional commerce.
What types of taxes are sellers required to pay in e-commerce?
The types of taxes that e-commerce sellers are required to pay can vary depending on the tax regulations of the country in which they operate. In Turkey, the main types of taxes that e-commerce sellers are generally required to pay are as follows:
1. Value Added Tax (VAT)
E-commerce sellers are required to pay VAT for the goods and services they sell. VAT rates can vary depending on the product, service, and country. Sellers must declare and pay the VAT they collect on their sales to the tax office monthly. The VAT rate depends on the type of product or service sold.
According to the Presidential Decree published in the Official Gazette on July 10, 2023, the VAT rate for products and services previously taxed at 18% was raised to 20%, while those taxed at 8% were increased to 10%.
Products taxed at 10% VAT include textiles, clothing, cultural events like theater and cinema, hotel accommodations, and the food and beverage industry.
Products taxed at 20% VAT include electronics, furniture and home décor, white goods, automotive products, footwear, cleaning and personal care products, office supplies, and sports equipment.
2. Stamp Duty
Stamp duty is a tax levied on specific documents and contracts, and payment may be required when these documents are issued. Contracts related to e-commerce transactions are subject to this tax. The following cases may result in stamp duty:
- Contracts and agreements: Commercial agreements made by e-commerce businesses, such as supply agreements, partnerships, or other business contracts, may be subject to stamp duty. For example, written agreements for major supply deals, lease contracts, or business partnerships.
- Financial documents: Certain documents issued for financial transactions by e-commerce businesses (e.g., loan agreements, debt instruments) may be subject to stamp duty.
- Official documents and applications: Stamp duty may be required for certain official applications and documents submitted to government agencies, such as license applications or official permits.
- Invoices and delivery notes: In some countries, invoices and delivery notes may also be subject to stamp duty, although this varies depending on the country’s tax regulations.
3. Provisional Tax Return
In Turkey, the provisional tax return is used to declare and pay provisional tax calculated and paid for specific periods. E-commerce businesses, like other commercial activities, are required to pay provisional tax. Provisional tax is paid in advance for income or corporate tax in four periods and is deducted from the final tax calculated at the end of the year.
Provisional tax is paid by individuals (sole proprietorships) and entities (corporations) that earn commercial income. E-commerce businesses must pay provisional tax based on their commercial income.
Provisional tax rates are determined based on income and corporate tax rates. For income tax payers, it is calculated at 15%, and for corporate tax payers, it is 25%.
Provisional tax is calculated and declared quarterly in the following periods:
- 1st period: January – February – March
- 2nd period: April – May – June
- 3rd period: July – August – September
- 4th period: October – November – December
The provisional tax return must be submitted by the 17th day of the second month following the end of each period.
4. Simplified Annual Income Tax
Simplified taxation is a method designed to ease the tax burden for small-scale tradespeople and artisans. Small e-commerce businesses and individual sellers can benefit from simplified taxation if they meet certain conditions. This allows those conducting e-commerce activities to fulfill their tax obligations more easily. This tax is paid once a year and is calculated based on the previous year’s profit. The payment amount varies between 15% and 35% of the profit. It is paid in two installments: the first in February, following the year the profit was earned, and the second in June.
5. Annual Income Tax
In e-commerce, annual income tax is calculated and paid based on the income generated from online commercial activities. Individuals or businesses engaged in e-commerce are subject to income tax regulations and must declare their income at specific times and pay the tax calculated on that income.
Individuals (sole proprietors) and legal entities (companies) involved in e-commerce become liable for income tax on the profits they earn. These profits are declared through an income tax return and are subject to taxation.
Income earned through e-commerce is typically considered “commercial income.” When calculating income tax, the net profit is found by subtracting expenses from gross income, and the tax is calculated based on this net profit.
E-commerce income covers earnings within a calendar year and is declared the following March with an annual income tax return. The calculated tax is paid in two equal installments, in March and July.
Provisional tax returns are also filed quarterly, with provisional tax payments made throughout the year. These payments are deducted from the final annual income tax.
Income tax rates are calculated using a progressive tax schedule. The 2024 income tax rates in Turkey are as follows:
- Up to 32,000 TL: 15%
- For 70,000 TL, 4,800 TL for the first 32,000 TL, and 20% on the remainder
- For 250,000 TL, 12,400 TL for the first 70,000 TL, and 27% on the remainder
- For 880,000 TL, 61,000 TL for the first 250,000 TL, and 35% on the remainder
- Over 880,000 TL, 281,500 TL for the first 880,000 TL, and 40% on the remainder
Let’s explain the income tax calculation with an example for an e-commerce business:
- Gross income: 200,000 TL
- Expenses: 100,000 TL
- Net profit: 200,000 TL – 100,000 TL = 100,000 TL
Income tax calculation based on the tax rates:
- First 32,000 TL: 32,000 TL * 15% = 4,800 TL
- For the remainder up to 70,000 TL: (70,000 TL – 32,000 TL) * 20% = 7,600 TL
- Remaining 30,000 TL taxed at 27%: 30,000 TL * 27% = 8,100 TL
Total income tax:
4,800 TL + 7,600 TL + 8,100 TL = 20,500 TL
6. Corporate Tax
In e-commerce, corporate tax is a type of tax paid by commercial enterprises on the income they earn in Turkey. This tax is applied to the profits of companies or commercial businesses. If your e-commerce site operates as a capital company or legal entity, you are required to pay corporate tax.
Corporate tax applies to legal entities, institutions, and business partnerships engaged in commercial, agricultural, or self-employment activities. In Turkey, corporate taxpayers are classified as follows:
- Commercial enterprises: Joint-stock companies (A.Ş.), limited liability companies (Ltd. Şti.), partnerships limited by shares (S.P.K.S.), and cooperatives are subject to corporate tax.
- Foreign companies: Foreign companies operating in Turkey and conducting commercial activities are also subject to corporate tax. These companies must pay tax on their income generated in Turkey.
- Public institutions and enterprises: Various government institutions, municipalities, and special provincial administrations are subject to corporate tax.
- Associations and foundations: Associations and foundations engaged in commercial activities may also be subject to corporate tax. Their commercial income is evaluated for taxation purposes.
- Public economic enterprises: Public economic enterprises are subject to corporate tax due to their commercial activities.
- Partnership companies: Partnerships, limited partnerships, and partnerships limited by shares may also be subject to corporate tax, but this differs from capital companies.
As of 2024, the corporate tax rate in Turkey is fixed at 25%. This rate is applied to the commercial profit earned by the business. Corporate taxpayers must submit their tax returns by the 25th day of the 4th month following the end of the fiscal year.
7. Customs Duty
In e-commerce, customs duty is the tax imposed by customs authorities on goods imported or exported between countries. This tax is collected during the import or export process and is typically determined based on the value of the goods. Customs duty in e-commerce is applied to regulate and tax the flow of trade between countries in international commerce.
Customs duty is usually calculated based on the value of the imported or exported goods. A customs tariff schedule specifies a tax rate or a fixed amount for each type of good. These rates can vary depending on the country and the type of goods.
