Withholding Tax Application for Payments Made via Electronic Commerce

Payments and Parties within the Application

Within the scope of the application as of 1/1/2025 withholding tax will be applied on payments to be made to

1. Person and legal entities engaged in electronic commerce activities (service providers)
2. Intermediary service providers that allow electronic commerce service providers to make contracts or place orders for the supply of goods or services of electronic commerce service providers in the electronic commerce marketplace

due to the activities falling within the scope of Law No. 6563.

The withholding obligation has been brought to:

1. Intermediary service providers (real and legal persons who provide the electronic commerce environment for the performance of economic and commercial activities belonging to others)
2. Electronic commerce intermediary service providers.

Therefore, intermediaries, liable for withholding tax, withhold tax on the payments they intermediate and pay it to the tax office. Thus, for example, marketplace sites are liable to pay withholding tax on the products sold through them. However, the taxpayer of this tax deduction is those who realize their sales through the marketplace sites. 

Applicable Withholding Tax Rate

Through Presidential Decree No. 9284, the rate of withholding tax to be withheld by intermediary service providers and electronic commerce intermediary service providers on the payments they make to service providers and electronic commerce service providers due to their activities falling within the scope of the Law No. 6563 was determined as 1%.

Purpose and Possible Consequences of the Regulation

With this regulation, the Ministry of Treasury and Finance aims to tax revenues from electronic commerce activities more effectively and contribute to the prevention of tax losses and evasion. Thus, it is aimed at preventing tax losses that may occur in a trade that is concentrated on online platforms and creating a transparent and fair tax system. The justification of the provision is stated to ensure tax security, reduce informality, and increase fairness and efficiency in taxation. Moreover, with this implementation, interface providers will become more active tax actors, facilitating the audit of high-volume transactions in electronic commerce.

Law No. 7524 introduces a new withholding tax obligation, which entails significant adaptation processes for interface providers operating in the electronic commerce ecosystem. Intermediary service providers need to adapt their systems to this new withholding tax obligation and redesign their declaration and payment processes

For service providers, withholding tax may affect their net income. Withholding tax may be seen as a comprehensive practice that may affect sellers and consumers, albeit indirectly. Moreover, it may result in company owners preferring their own websites for sales rather than virtual marketplace platforms. 

Conclusion

With the e-commerce withholding tax regulation entered into force with Law No. 7524, it is aimed that those who sell products and services over the Internet pay a 1% tax on the price of the product/service they sell if they use an intermediary platform, and this tax is collected by the intermediary platform through tax deduction and paid to the relevant tax office. 

It is considered that the e-commerce withholding tax is an important development for regulating the digital economy, reducing unregistered income and establishing a fair economic system.