Self-employment income: receipts, withholding, VAT and e-SMM
What self-employed professionals such as lawyers, engineers, consultants and doctors need to know when issuing receipts: gross-to-net calculation, withholding, VAT and the e-Self-Employment Receipt.
Self-employment income is income from professional activity carried on in your own name without being tied to an employer: law, engineering, architecture, accountancy, private medical practice, consulting, translation and so on. The document for this activity is not an invoice but a self-employment receipt (serbest meslek makbuzu, SMM).
Three figures on the receipt
Suppose you agree a net TRY 40,000 with a client for a consulting service. If the client is a company, the receipt looks like this:
| Item | Amount |
|---|---|
| Gross fee | TRY 50,000 |
| Income tax withholding (20%) | −TRY 10,000 |
| Net fee | TRY 40,000 |
| VAT (20%, on the gross) | TRY 10,000 |
| To be collected | TRY 50,000 |
To go from net to gross, the net amount is divided by 0.80; adding 20% leads to under-withholding. For the calculation: Self-employment receipt calculator
When is tax withheld?
If the receipt is issued to a company, business or public body, the paying party withholds 20% on the gross fee and pays it to the tax office with the withholding return. If the receipt is issued to an individual client (a consumer), there is no withholding; the full fee is collected and the tax is calculated on the annual return.
VAT
Self-employment services are subject to VAT at the general rate of 20%. VAT is calculated on the gross fee. If the buyer is among the designated buyers and the service is one of the types listed in the communiqué, VAT withholding may also apply: VAT withholding
e-Self-Employment Receipt (e-SMM)
A large share of self-employed professionals issue their receipts electronically. The e-SMM is issued through the GİB portal or a private integrator and sent to the client by e-mail or as a paper printout. Who is required to use it and how to switch: e-SMM and e-Producer receipt
Provisional tax and the annual return
Self-employed professionals pay provisional tax in quarterly periods and file an annual income tax return at the end of the year. The withholding deducted by clients is not lost: it is credited first against provisional tax and any excess against annual income tax; if there is still an excess, it can be refunded.
- Provisional tax calculation: Provisional tax
- Annual return guide: Annual income tax return
Books and expenses
Self-employed professionals keep a self-employment income book. Income is determined on a cash basis: the amount for which a receipt is issued and which is collected is income of that year. Expenses such as office rent, staff, stationery, professional publications and professional training can be deducted as long as they are documented. Which spending counts as an expense: Which expenses are deductible?
Common mistakes
- Finding the gross by adding 20% to the net. Withholding is under-calculated; the difference is claimed from the paying party.
- Issuing a receipt with withholding to an individual client. The client will not pay the withholding over, so the records do not match.
- Taking an advance without a receipt. Because of the cash basis, an advance received also requires a receipt.
Legal basis: Income Tax Law No. 193 arts. 65–68, 94/2-b; Tax Procedure Law No. 213 art. 236.