Income Tax of Those Who Earn Income on Social Media

STATUS AND OBLIGATIONS OF THOSE WHO EARN INCOME ON SOCIAL MEDIA IN TERMS OF INCOME TAX

Technological developments in recent years have been dizzying. Social media platforms are one of the sectors that have received the biggest share of these developments. The widespread use of the internet, especially the fact that mobile phones have become very convenient for social media use, has led billions of people, from young to old, to use social media with the effect of the pandemic. According to research, over 4 billion people used social media in 2022. As such, the number of those who earn income through subscriptions, advertisements, sponsorships, donations, etc. on these platforms has increased considerably. Many people earn income in these ways, even make a living in this way, and even have considerable wealth in this way. But is it necessary to pay income tax, register with the tax office, keep books, issue invoices for the services provided, and submit declarations for these earnings? This article is designed to explain in simple language the situation of those who earn income through social network providers in the face of income tax. This is because obligations that are not fulfilled on time may lead to high tax penalties years later.

Even if your earnings are not very high, there are obligations that you have to fulfill. If you are earning more or less through social media platforms, be sure to read our article.

I earn income through social media platforms. Will I pay income tax?

If you carry out this activity continuously, your earnings are considered as commercial earnings according to the Income Tax Law. Regardless of the amount of your earnings, you are obliged to register with the tax office. You will see how continuity is determined in the following questions.

If your earnings are above TL 1,900,000.00 for 2023, you must keep books, issue invoices for the services you provide, submit a declaration and pay tax on your net income after deducting your expenses from the income you have earned in a year.

If your earnings are below 1.900.000,00 TL, you have two ways.

If you fulfill the exemption conditions, you do not keep books, do not issue invoices, do not file income tax returns and do not pay income tax. The bank will only deduct a certain amount from your income.

If you do not fulfill the exemption conditions, you still need to keep books, issue invoices for the services you provide, submit a declaration and pay tax on your net income after deducting your expenses from the income you have earned within a year.

In other words, if you do not fulfill the exemption conditions, there is no difference between 10 thousand TL and 10 million TL in terms of your obligations.

Will my one-off income also be included in commercial income?

The activities you carry out continuously are included in commercial income. According to the income tax legislation, one-off income is not considered as commercial income, but if you have made transactions more than once in a calendar year and made a profit, or if you have made a profit in consecutive years, even if it is once a year, you are now considered to be continuously engaged in this activity and you will be a commercial income taxpayer. For example, if you have earned twice in one year, you are now a commercial income taxpayer. In this respect, the amount of your earnings is not important.

I earned 500 TL in 2023, will I open a taxpayer registration at the tax office?

What is important is whether you carry out this activity continuously. In the previous question, we explained how continuous activity is determined. If your activity is continuous, the amount of money you earn does not matter in terms of registering with the tax office. You will register, and if you do not comply with the exemption conditions, you will fulfill the book, invoice and declaration obligations.

When do I need to file a tax return with the tax office?

If you do not benefit from the exemption, you need to file a notice of commencement of business with the tax office within 10 days from the date you start your activity. If you are benefiting from the exemption, you will need to obtain an exemption certificate from the tax office and the tax office will open the registration when you go to get the certificate.

What is the exception?

With Article 20/B added to the Income Tax Law, an exemption has been introduced to be applied as of 1/1/2022 for the earnings of social content producers who share content such as text, images, audio and video via social network providers on the internet. The exemption is valid for earnings up to 1.900.000,00 TL for 2023. In other words, if your earnings in a year are below the exemption amount, you can benefit from the exemption if you meet the other conditions. If your annual earnings exceed this amount, you must declare all your earnings and pay income tax on them.

My annual income is below the specified amount. What are the other conditions for the exemption?

First of all, you should obtain an exemption certificate from the tax office where your residence is located. With this exemption certificate, you should go to a bank established in Turkey, open an account and collect all your social media revenues through that account. It is not mandatory to open a new account, you can also use an existing account, but that account will now only be used for these collections.

In addition, if a new account is opened, you must notify the tax office in writing of the information regarding the bank accounts (bank name, bank branch, iban number) within one month from the date of account opening, and if the existing account will be used, you must notify the tax office in writing within one month from the date of submission of the exemption certificate to the bank that the existing account will be used for this purpose.

If you do not receive an exemption certificate, do not open an account with the bank, or if you collect the smallest collection in a way other than the specified account, for example by hand, or if you do not report the account information to the tax office, you cannot benefit from the exemption.

How much will the bank deduct from my collections if I benefit from the exemption?

Banks will withhold income tax at the rate of 15% on the amount of revenue transferred to the opened accounts as of the date of transfer.

What is the point of having an exemption if the bank will withhold tax?

Regardless of the amount of your revenue, the rate of tax withheld by the bank is 15%, i.e. fixed. However, if you do not benefit from the exemption and have to file a declaration, you will have to pay tax at rates starting from 15% and rising up to 40% depending on the amount of your income. Based on 2023, the tax rate is 15% for earnings up to 70.000,00 TL, and the rates increase to 20%, 27%, 35%, 40% when you exceed this amount.

For example, if a person who earns 500.000 TL in 2023 and does not have any expenses benefits from the exemption, he/she will pay 75.000,00 TL tax through the deduction made by the bank (500.000,00 x 0,15=). If he/she does not benefit from the exemption and has to submit a declaration, the tax to be paid is 131.400,00 TL.

In addition, when you benefit from the exemption, you do not keep books, do not submit declarations, and do not have to issue invoices for every service you provide. If you do not benefit from the exemption, you have to do all of these.

If I do not benefit from the exemption but submit a declaration, will the bank still deduct my revenue?

No, the bank will not. If you do not benefit from the exemption, the bank will not deduct your income. You will already declare your income to the tax office and pay your tax.

Which of my income is covered by the exemption?

Within the scope of social content production activity, revenues such as advertising revenues, sponsorship revenues, donations, gifts, gifts, tips, paid subscription revenues obtained through social network providers will be considered within the scope of the exemption.

I have a tax liability for another activity, can I still benefit from the exemption?

Taxpayers who have a tax liability for another activity and at the same time earn income from social content production do not prevent them from benefiting from the exemption. The earnings of the taxpayers who meet the exemption conditions will not be included in the declaration they submit due to their other income.

What happens if I collect my income from social content generation in real right?

If the income related to the exempted activities is collected in kind, i.e. in the form of goods or services, for example, you received a mobile phone in return for the advertisement you made, the market value of the goods or services subject to collection on the date of collection within the month in which the income is obtained; If the income collected in kind is obtained within the last seven days of the current month, the exemption conditions will not be violated if it is deposited into the bank account until the end of the second business day of the following month at the latest. If you delay in making this transaction, you will not be able to benefit from the exemption.

Are the earnings from platforms such as my personal website, electronic commerce websites, news websites covered by the exemption?

Earnings of persons operating on platforms such as personal websites, electronic commerce websites, news websites, which are not considered as social network providers, where content for interaction purposes is provided as secondary and ancillary services are not covered by the exemption. Earnings derived from real or legal persons who enable users to create, view or share content such as text, image, audio, video, etc. on the internet for social interaction purposes are within the scope of the exemption.

What happens if I lose the exemption conditions during the year?

Those who subsequently lose the exemption conditions in the relevant calendar year and those who violate these conditions will not be able to benefit from the said exemption for the year in which the condition is lost or violated, and all of the earnings obtained within this scope will be declared with the annual income tax return. In this case, the taxes withheld by the bank will be deducted from the income tax calculated on the declaration and the difference will be paid. Failure to benefit from the exemption for any reason in the relevant calendar year will not constitute an obstacle to benefit from the exemption in the following years.

If I lose the exemption conditions, can I deduct my expenses from my income?

In case of filing an annual declaration due to the violation of the exemption conditions, you can deduct your expenses from the declared income. In order for such expenses to be deducted, they must be certified with the documents specified in Law No. 213. While benefiting from the exemption, there is no chance of deducting expenses from income, because the bank will make the deduction on the revenue, that is, the money collected.

I benefit from the exemption, do I have to keep the documents issued in my name regarding my activity?

Although there is no obligation to issue documents, those who benefit from the exemption are required to keep the documents issued on their behalf regarding their activities and the documents regarding the expenses they have incurred and the goods and services they have purchased for five years starting from the calendar year following the year to which the document relates.

What happens if it is later determined that I benefited from the exemption even though I do not meet the exemption conditions?

Taxpayers who have not opened an account in banks established in Turkey, have not deposited all of their revenues into the bank account opened or have not deposited them in full or have not deposited them in full, or have benefited from the exemption although they do not meet the conditions for the exemption, the tax that has been under-accrued in relation to the earnings in question is collected by the tax office in the place where the taxpayer is affiliated, together with the default interest by imposing a tax loss penalty. In other words, the tax that is not paid on time is collected together with a one-fold tax loss penalty and the delay interest to be calculated. Taking such an action for a year in which it is understood that the conditions for exemption are not met will not prevent the benefit from the exemption in the years in which the conditions are met.

What happens if I do not take any action regarding income tax even though I have earned income?

If the Ministry of Treasury and Finance determines that you have not fulfilled the above-mentioned obligations even though you have earned income within the scope of commercial income, a tax inspection will be carried out on you, your earnings that you have not declared on time and the tax you have not paid will be determined and collected from you with default interest. In addition, a tax loss penalty of one times the calculated tax will be imposed. You will also be subject to irregularity and special irregularity penalties for not fulfilling obligations such as opening a taxpayer and submitting declarations. If you have made collections by hand, a special irregularity penalty will be imposed for each collection amount exceeding 7.000,00 TL.

I had earnings in previous years but I did not take any action for income tax, what should I do?

Technological developments not only made it easier for you to earn income, but also made it easier for the Ministry to detect your income. If you take some initiatives before the Ministry starts to determine and take action, it reduces the amount of penalty to be paid. This is because it is not possible to benefit from these opportunities after the tax inspection has started. If the tax inspection has already started, there are some applications in your favor for the penalties to be imposed on your behalf. If you have made a profit in previous years but have not taken any initiative, you should contact the experts of the subject as soon as possible. They will guide you in the most accurate way.