Who pays?
A freelance receipt (SMM) carries two different taxes, paid over by different parties:
| Tax | Rate | Who bears it? | Who pays it over? |
|---|---|---|---|
| Income tax withholding | 20% (if the client is a business) | The professional | Client (withholding return) |
| VAT | 20% (10% for some professions) | Client | Professional (VAT return) |
| VAT withholding (if any) | e.g. 9/10 of the VAT | Client | Client (VAT return No. 2) |
If the client is an individual (not a business), there is no withholding; VAT is still added.
Three amounts, three questions
- Gross: the fee before taxes; income and expenses are recorded on this basis.
- Net: gross − withholding; what remains after part of the professional's tax is prepaid.
- To collect: gross − withholding + VAT (− VAT withheld); the amount that reaches the bank account.
Example: TRY 20,000 gross to a company
| Item | Amount |
|---|---|
| Gross fee | TRY 20,000 |
| Withholding 20% (client deducts) | − TRY 4,000 |
| Net fee | TRY 16,000 |
| VAT 20% | + TRY 4,000 |
| To collect | TRY 20,000 |
| Client's total outflow | TRY 24,000 (20,000 to the professional, 4,000 to the tax office) |
With 20% withholding and 20% VAT, gross equals the amount collected — the two offset each other.
When does VAT withholding apply?
Only for services such as consultancy, audit and design supplied to designated buyers (public bodies, banks, listed companies etc.), usually 9/10. Not for ordinary services to private companies. VAT withholding rates.
e-SMM
Professionals above certain thresholds, and those who opt in, issue receipts as e-SMM and cannot use paper receipts.
Legal basis
Income Tax Law art. 65 (professional income), art. 94/2-b (withholding); VAT Law art. 9 and VAT General Communiqué I/C-2.1.3; Tax Procedure Law art. 236 (freelance receipt).