As technology evolves, people are increasingly opting to earn money online. One of the most common questions among freelancers, who work independently of any company or time frame, revolves around tax obligations. So, is it mandatory to pay taxes when working freelance? What happens if no taxation is applied?

Are Freelancers Obliged to Pay Taxes?

There are myriad freelance jobs available online. Particularly prominent fields include social media expertise, content editing, SEO consulting, copywriting, translation, graphic design, software development, and programming. To receive payment for services provided to individuals or institutions when working freelance, you need to issue an invoice, which is synonymous with tax payment.

As a freelancer, you need to document your earnings through a professional service receipt. This receipt includes VAT on top of the withholding tax on the gross amount. In the taxation process, the customer issuing the professional service receipt needs to pay the withholding tax, while freelancers are obliged to pay the VAT. Additionally, professional service providers have a tax payment obligation declared through the Annual Income Tax Return, Provisional Tax Return, and Value Added Tax Return.

What is the Tax Law Definition of Your Freelance Earnings?

According to the Income Tax Law, activities that rely more on personal effort, scientific or professional knowledge, or expertise, not of a commercial nature, conducted independently without an employer, under personal responsibility, and for one’s own account, are considered freelance activities. The income from these activities is defined as “professional income”. When earning as a freelance worker, there are two types of income that your provided service could be included in. These are:

  • Professional Income
  • Incidental Earnings (Earnings without Continuity)

If the service you provide has continuity, it is professional income, and you will be subject to taxation in this context. For example, if you provided a freelance service only once and it won’t be continuous, this earning is characterized as incidental. Moreover, if the income from this service is below 55,000 TL, you do not have to pay any tax. Only the customer you provide the service for issues a cost bill on your behalf and pays the calculated withholding tax to the state.

What is the tax Rate for Freelancers in Turkey?

Taxpayers who earn income from freelance professions pay provisional tax at a rate of 15% on the profits to be determined in quarterly periods of the current taxation period, to be offset against income tax. It is calculated as quarterly periods from the start date of the special accounting period.

What Happens if No Taxation is Applied?

There are two ways to address the issue of non-taxation: non-issuance of a document for the service and failure to fulfill declaration obligations.

Non-Issuance of Document for the Service

As a freelancer, if you do not issue a professional service receipt or if you issue it insufficiently for the service you provide, you will be obliged to pay a special irregularity penalty amounting to 10% of the service fee. These amounts are announced by GIB each year and published in the Official Gazette. The special irregularity penalty to be imposed for each document has been set at a minimum of 2,200 TL for 2023. In addition, the total penalty amount for a calendar year is capped at 500,000 TL.

Failure to Fulfill Declaration Obligations

In addition to the penalties for non-issuance of documents, there are also penalties related to declarations (Annual income tax return, provisional tax return, value added tax return). Even if there is no tax to be paid, it is a legal obligation to issue a declaration.

Penalties can be applied according to the situation. These amounts are announced by GIB each year and published in the Official Gazette. If a declaration is not issued or even if issued, is not declared on time; irregularity, special irregularity, and tax evasion penalties are applied. Different penalty amounts are applied in cases such as declaring after a certain period, declaring under repentance and correction, and declaring with a correction request.