Republic of Türkiye
Ministry of Finance
Kocaeli Tax Office
Directorate of Income Laws
Date: April 27, 2022
Number: E-93767041-120-56003
Subject: Income tax withholding on payments made by those who purchase products produced by exempt tradespeople in their homes for commercial purposes
In the special exemption request form registered in the file; it is requested to obtain the opinion of our Directorate regarding whether the situation where you wish to buy and sell products produced in their homes by individuals with a tradesperson exemption certificate, without a dependency contract between you, will affect the exemptions of those selling their products with the tradesperson exemption certificate, and the withholding tax rate you should apply for the products obtained with the tradesperson exemption certificate.
In the 9th article of the Income Tax Law No. 193 titled “Exempt Tradespeople,” it states that “Those who operate in the following manner and form are exempt from income tax.”
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- Except for sewing, embroidery, kitchen robot, iron, and similar machines and tools used in homes, provided that they do not use mechanical power and do not employ external workers; those who produce towels, covers, sheets, socks, carpets, rugs, textile products, products made from scrap leather, knitting, lace, any embroidery works, and tourist items, as well as straw, baskets, brooms, mats, brushes, artificial flowers, sequins, beads, crocheted items, ropes and cords, tarhana, noodles, and dumplings in their homes without opening a workplace or selling on the internet and similar electronic platforms, as long as the total sales amount during the year does not exceed the annual gross amount of the minimum wage applicable for that year. Selling these products through market monitoring does not prevent benefiting from the exemption unless organized by those subject to income and corporate taxes for their commercial, agricultural, or professional activities.
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Those who are subject to real income tax due to their commercial, agricultural, or professional gains and those who conduct the aforementioned activities in a way that indicates dependency on income and corporate tax payers cannot benefit from tradesperson exemption.
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To those who meet the conditions regarding the tradesperson exemption, a Tradesperson Tax Exemption Certificate is issued by the tax office upon request. The Ministry of Finance is authorized to determine and establish the form and content of this certificate, as well as the procedures and principles regarding its cancellation and application.
This exemption does not apply to the tax deducted at source as per the provisions of Article 94 of the Income Tax Law.
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The first paragraph of Article 94 of the same Law specifies those required to withhold taxes and the payments subject to withholding, and the (13) clause of the same paragraph includes payments made to exempt tradespeople within the scope of withholding. The withholding rate on the values of commodities or service fees paid in the production of these commodities, as stated in clause (6) of the first paragraph of Article 9, was determined as 2% by the Council of Ministers Decision No. 2012/3322 dated June 6, 2012.
According to these provisions, if individuals who meet the conditions regarding the exempt tradespeople sell products they have produced in their homes to your company in a way that does not indicate dependency, they may benefit from the tradesperson exemption within the scope of clause (6) of the first paragraph of Article 9 of the Income Tax Law. On the other hand, it is necessary for your company to withhold 2% income tax on payments made for the products purchased from these individuals benefiting from the tradesperson exemption, as per Article 94/13 of the Income Tax Law.
Source: Revenue Administration
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