Direct tax in e-commerce is a type of tax applied to the income and profits of businesses and is calculated based on financial status. In this guide, we provide detailed information on how e-commerce businesses can manage these taxes and comply with legal requirements. Here are the details:
What is Direct Tax?
In e-commerce, direct tax is a tax applied directly to a business’s income or profit. These taxes are calculated based on the financial status of the business and are typically paid on the income or profit earned by the business. Examples of direct taxes include income tax and corporate tax. Direct taxes are paid directly to the government by e-commerce businesses and are directly related to the financial performance of the business.
For instance, when an e-commerce company calculates its annual net profit, it determines the corporate tax to be paid on this profit and pays this tax directly to the relevant tax office. Direct taxes are a significant part of a business’s financial structure, and correctly managing tax obligations is crucial for complying with legal requirements and avoiding potential penalties.
E-commerce businesses must pay direct taxes in accordance with the tax laws and regulations of the country in which they operate. Additionally, these companies can utilize financial advisory services to accurately manage their tax obligations and maintain proper tax records.
What are the Types of Direct Tax in E-Commerce?
Direct taxes in e-commerce generally include taxes levied on income and wealth.
Taxes on Income
Income Tax
This tax is calculated on the earnings and income individuals, or natural persons, obtain over a certain period. It is usually applied with a progressive rate, taking into account the individual’s personal and family circumstances.
Corporate Tax
This tax is levied on the profits of corporations or legal entities. It taxes the income of companies and other organizations. This tax includes income types such as commercial profits, agricultural profits, wages, professional income, and income from movable and immovable capital.
Taxes on Wealth
This category refers to taxes levied on the wealth owned by individuals or corporations. Wealth tax is typically implemented to promote income equality and social justice. Although it can be challenging to calculate effectively in less developed countries, it plays a significant role in ensuring income equality.
In e-commerce, direct taxes are calculated on the income and profits earned by companies and individual sellers. Income from sales made through e-commerce platforms may be subject to these types of taxes. Additionally, institutions operating in the e-commerce sector are also subject to corporate tax. These taxes form a significant part of the general tax structure of the e-commerce sector and serve as a source of revenue for the state.
How is Taxation Done in E-Commerce?
In Turkey, taxation in e-commerce is carried out under both the Income Tax Law (1960) and the “Law on the Regulation of Electronic Commerce,” which came into effect on October 23, 2014. According to these laws, e-commerce activities are taxed as follows:
Official Documentation: Sales made through e-commerce must be officially documented, which facilitates transparency and tracking of transactions.
Payment Methods and Declaration: Sales are usually made through bank accounts, card payments, or wire transfers, and all these transactions should be recorded for tax declaration purposes.
Tax Registration and Liability: E-commerce operations generally begin with tax registration. A company’s tax liability, or its obligation to pay taxes, is determined based on the company’s size, the sector in which it operates, and the types of products sold.
Tax Payment Schedule: Once the tax liability is determined, the relevant taxes must be paid by the specified dates.
Tax Obligation and Exemption: E-commerce taxes are determined at the company’s inception. In some cases, businesses may benefit from tax exemptions, which apply if the company meets certain conditions.
In short, taxation in e-commerce requires that transactions be officially recorded, income be accurately declared, and tax obligations be fulfilled on time, in accordance with existing laws in Turkey. The tax liability is determined based on the characteristics and activities of the company, and tax exemptions may also apply in certain cases.
Differences Between Direct and Indirect Taxes
In e-commerce, direct and indirect taxes are applied and paid in different ways. Indirect taxes are taxes that consumers pay during online shopping; these are included in the price of the product or service and are collected by the seller and remitted to the government. For example, VAT applied to purchases from an online store falls into this category. Direct taxes, on the other hand, are taxes levied on the income earned by e-commerce businesses or individual sellers. This includes taxes like corporate tax paid on company profits or income tax on individual earnings. While indirect taxes directly affect consumers, direct taxes impact the net income of businesses or individuals. Both types of taxes are important elements that determine the financial structure of the e-commerce ecosystem.
