The number of people selling from home has increased, especially due to the pandemic. Under Law No. 7256 on the restructuring of certain receivables, which entered into force last November, a tax exemption opportunity has been provided for those who sell from home.
Tax Advantage for Home-Based Sales
The coronavirus pandemic affected many sectors worldwide and made earning income more difficult for many people. With longer periods spent at home, online sales have risen sharply. Internet shopping increased more than ever before. In Turkey, online sales have often been unregistered, and recent regulations aim to bring these activities into the formal economy.
Article 9 of the Income Tax Law regulates internet sales and provides a significant advantage. With the addition of subparagraph 10 to this article, those who manufacture goods at home without opening a separate workplace and without using industrial or mass-production machines, and sell those goods on the internet or similar platforms, are exempt from income tax. Accordingly, people producing items such as socks, towels, rugs, knitting, lace, embroidery, tourist souvenirs, wicker baskets, artificial flowers, beadwork, crochet, tarhana, noodles, dumplings, tomato paste, and similar home-made products are exempt from income tax and are not required to pay those taxes.
Obtaining a Tradesperson Tax Exemption Certificate Is Required
To benefit from the income tax exemption, individuals must not be subject to real-method income tax because of agricultural, commercial, or professional earnings, nor carry out activities that would make them liable to income or corporate taxpayers. Under the new rule, it is mandatory to obtain a Tradesperson Tax Exemption Certificate to qualify for the craftsman exemption. In addition, opening a commercial account at a bank operating in Turkey and depositing and collecting all income through that account is required.
Banks are obligated to withhold income tax at a rate of 4% on amounts transferred into these commercial accounts, based on the transfer date. If the business employs at least one worker, this rate is reduced to 2%. To qualify for the employment-based reduction, the worker must have been employed for at least ten days during the relevant month. No additional collections are made from the gross income under Article 94.
Tax Applies If Annual Income Exceeds 220,000 TRY
An important condition for the tax exemption is that annual income must not exceed 220,000 Turkish Lira. Initially, with Law No. 7162 in early 2019, people producing the listed goods at home and selling them online were allowed to benefit from the craftsman exemption. Last year, the exemption limit had been set at 35,000 TRY annually, meaning sales up to that amount were not taxed.
The recent amendment raised that threshold from 35,000 TRY to 220,000 TRY, significantly increasing the allowable annual turnover and providing a substantial advantage to those selling from home. Individuals earning income under this scope are not required to pay separate taxes beyond the income tax schedule. However, if conditions other than the turnover requirement are violated, the tax exemption will not apply, and unpaid taxes will be subject to statutory interest.