Simple Method and Ledger Declaration System

There is a specific taxation method for small-scale tradesmen and craftsmen: the simplified procedure. The goal is to ease the burden of bookkeeping and filing returns.

However, being "simple" doesn't mean you won't keep records.

Who qualifies for the simplified procedure?

To benefit from the simplified procedure, general and special conditions must be met simultaneously.

General conditions: Managing the business independently or personally, ensuring the workplace rent does not exceed the specified threshold, and not earning income from another commercial activity under the standard (actual) procedure.

Special conditions: Annual purchase, sale, or revenue amounts must not exceed the specified thresholds. These thresholds differ for trading businesses versus service businesses.

Additionally, certain activities are directly excluded: jewelry, construction, advertising, and specific activities in metropolitan cities, for example.

Thresholds are re-evaluated every year. Always confirm your status with your financial advisor.

Advantages of the simplified procedure

The best-known advantage is the earnings exemption: commercial earnings determined under the simplified procedure are exempt from income tax. Even though an annual tax return is filed, no tax is generated on these earnings.

Other advantages include: no bookkeeping obligation, no VAT liability, and no requirement for provisional tax returns.

Not being a VAT taxpayer works both ways: you do not calculate VAT on your sales, but you also cannot deduct VAT on your purchases. This means purchasing goods at a VAT-inclusive cost.

Ledger Declaration System (Defter Beyan Sistemi)

Taxpayers subject to the simplified procedure, those keeping books on a balance-sheet or operating-account basis, and self-employed professionals keep their records through the Revenue Administration's Ledger Declaration System.

This means instead of paper ledgers, records are entered directly into the administration's system. Purchase and sales documents, expenses, and fixed assets are processed here.

There are strict deadlines for data entry, and once missed, corrections are not always possible. Therefore, avoiding backlogs of documents is even more critical under the simplified procedure.

In practice, most tradesmen have these entries handled by their financial advisor.

Why is pre-accounting necessary?

The simplified procedure makes tax calculations easier, but your need to manage your business remains the same.

How much do you owe whom, who owes you, how much profit does each product generate, does your cash register actually balance? The Ledger Declaration System answers none of these questions — it is a reporting tool, not a management tool.

You also need a place to track the thresholds. If you don't realize you've exceeded the threshold during the year, you'll be caught off guard when switching to the standard procedure the following year.

Our articles on free pre-accounting and the pre-accounting guide for non-accountants explain how to set up this routine.

Transition to the standard procedure

When you exceed the thresholds, you transition to the standard procedure starting from the beginning of the following year. This means multiple obligations begin simultaneously: bookkeeping, VAT reporting, and provisional tax.

If your turnover continues to grow, e-invoicing also comes into play; check out the article on e-invoicing thresholds.

The way to ensure the transition is never a surprise is to keep your turnover visible throughout the year.

Frequently asked questions

Do I issue invoices under the simplified procedure?

Yes, the obligation to issue documents continues. VAT is not calculated, but documents are still issued.

Has the simplified procedure been abolished?

With the introduction of the earnings exemption, a perception arose that it was abolished; the procedure continues, but the tax burden has changed significantly due to the exemption. Verify your current status with your financial advisor.

Can I engage in e-commerce under the simplified procedure?

Online sales may affect the conditions of the simplified procedure depending on the nature of the activity. Make sure to consult about this in advance.

Can I voluntarily switch to the standard procedure?

Yes. It can be preferred, especially for businesses where the VAT deduction advantage is substantial.

The simplified procedure lightens the tax side, not the responsibility of running the business. When you separate the two, both your tax reporting and your business run smoothly.

Open a free account on Qolay.App and set up your tracking for sales, expenses, and current accounts.