New Legislation on Digital Services Tax Implemented in Turkey
Law No: 7194 (the Law) on Digital Services Tax and amendment of some laws and amendment of the Decree No: 375 was published at the Turkish Official Gazette on 07.12.2019. The legislation includes numerous major tax measures including but not limited to tax on digital services, tax on hotel accommodations and property tax. Initially thought to tax all services offered via the internet, the legislation was amended before implementation to tax certain and specific service (not all) to are provided online.
Digital Services Tax Definitions and Applicability
With the publication of this law, Turkey aims to tax the digital services. Digital services tax is determined as an indirect tax and is deductible from income/corporate tax bases.
According to Article 52 of the Law, digital services tax duty will start to be applied from the beginning of the third month following the enactment of the law.
Following digital service providers in Turkey will be affected from the Law:
a) All types of digital advertisement services. Including advertisement monitoring and performance measurement as well as transmission and management of user data and technical services for advertising.
b) All types of sale of any audio, video or digital content in the digital environment and all types of services provided in digital environment for listening, viewing, watching and playing of these content or downloading of the content to the electronic devices or using of the content in these devices.
c) Assurance and operation of a digital interface which allows users to interact with each other, including for the sale of goods or services that make the sale of good and services easier between users.
d)All types of revenue borne from faciliating intermediary services for the services mentioned above.
For a service to be deemed as performed in Turkey, one of the following conditions shall be met:
a) the service is benefited from in Turkey,
b) the service is rendered for the persons that are present in Turkey
c) the services are accounted for in Turkey (Online services that are performed aiming at persons located outside of Turkey are excluded from this provision.)
The Turkish lawmaker has aimed to exclude start-ups and small/middle sized companies from this Law by setting some high amounts of thresholds for this Law to be applied. Companies with annual worldwide revenue of €750 million or more in the previous fiscal year and companies that have obtained exceeding a total of TRY 20 million in Turkey from the digital services mentioned above will be subject to Digital Services Tax. (The President of Turkey is authorized to reduce the rate down to 0% or increase by three folds for each type of digital services mentioned above.)
Pursuant to Article 5 of the Law, the rate of the Digital Services Tax will be a flat rate of 7.5% of the revenue generated from the above-mentioned services within the fiscal year. The Tax shall be declared and paid monthly. (The President of Turkey is authorized to reduce the rate down to 1% or increase by twofold for each type of digital services mentioned above.)
A warning shall be submitted to the digital service providers who do not meet their obligations under this Law and will be issued a warning by the Ministry of Treasure and Finance (the Ministry) and will be given 30 days to comply. If within the given time period no action is taken, the Ministry may order block of access to the respective services of these digital service providers, until the relevant digital services tax duties are paid in full.
