Turkey: Withholding Tax in Turkey

The legal framework for withholding tax in Turkey is defined by the Income Tax Law No. 193 ("ITL") and the Corporate Income Tax Law No. 5520 ("CITL"). Article 94 of the ITL stipulates that certain payments made to specific individuals and institutions are subject to deductions at specified rates, which are credited against income tax. 

Withholding tax is applicable to payments made in cash or on account. When calculating withholding, deductions are made on gross amounts, excluding wage payments.

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As of January 1, 2025, intermediary service providers and e-commerce intermediary service providers are obliged to withhold income tax and corporate tax, acting as responsible parties, on payments made to service providers and e-commerce service providers due to their activities under Law No. 6563. The withholding tax rate has been set at 1% by Presidential Decision No. 9284, dated December 21, 2024.

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The withholding tax base includes the price of goods and services, excluding value-added tax, as well as additional benefits such as bonuses and premiums. However, items such as shipping, service, and bank charges are not included in the withholding tax base. Since non-resident corporations are also subject to taxation in Turkey, corporate withholding tax will be applied to payments made to these taxpayers.

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E-commerce platforms and intermediary service providers responsible for withholding tax are required to clearly reflect the deductions in their accounting records. Additionally, the withheld taxes must be declared through the withholding tax return for the relevant month and paid to the respective tax office. On the other hand, information regarding each taxpayer subject to withholding tax will be reported to the Revenue Administration by the end of the month in which the related withholding tax and premium service declaration is submitted, using the data format and standard published through the Information Transfer System (BTRANS).

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If the recipient of the payment is not a taxpayer or if the payment is not subject to withholding tax, no withholding tax is applied. However, if the taxpayer status cannot be determined with certainty, withholding tax is applicable on the relevant amount, and the deducted tax is declared to the tax office. Subsequently, the person subject to withholding tax may apply to the tax office for a refund if withholding tax is not applicable by providing documentation proving that withholding tax should not have been applied. If the investigation reveals incorrect or unnecessary withholding tax, the overpaid tax will be refunded.

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Payments subject to withholding tax can be offset against provisional tax and annual income/corporate tax returns. If any amount remains uncredited in the annual returns, an application for refund of this amount can be requested in accordance with the principles set out in the Income Tax General Communiqué No. 252. This process allows taxpayers to recover any excess taxes paid.

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In our opinion, withholding tax is an important mechanism to secure tax collection and reduce informality in Turkey. The obligations imposed on e-commerce platforms aim to enhance tax supervision and transparency within the digital economy.

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Reference/ Citation

Income Tax General Communiqué No. 330, published in the Official Gazette No. 32768 (2nd Repetition), dated December 30, 2024.

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