Digital Service Tax has been introduced to the Turkish tax legislation with Law No. 7194 published in the Official Gazette dated 07.12.2019 and numbered 30971.
According to the regulations implemented under Law No. 7194, revenue generated from the following services provided in Turkey are subject to the Digital Service Tax:
a) All types of advertisement services provided through digital platforms (including advertisement control and performance measurement services, data transmission and management services concerning users, and technical services such as presenting advertisements)
b) Services regarding the sale of all types of auditory, visual, or digital content on digital platforms (including computer programs, applications, music, videos, games, ingame applications, and counterparts), and listening to, watching, playing, recording, or using such content via electronic appliances, and
c) Services related to the provision and management of digital platforms for user interactions (including providing or easing services for the sale of products or services among users)
The revenue generated from the above-mentioned services by brokerage services of digital service providers on digital platforms are also subject to the Digital Service Tax.
The Digital Service Tax applies to service providers. The Law states that a service providers’ status as a full or limited taxpayer as per the Income Tax Law No. 193 and the Corporate Income Tax Law No. 5520 through offices or permanent establishments located in Turkey has no effect on their liability for paying the Digital Service Tax.
In order to secure tax revenue, the Ministry of Treasury and Finance has the authority to hold all parties to the taxable transactions and intermediaries to the transaction or payment responsible for paying the tax if the taxpayer lacks domicile, an office, a registered office, or a headquarters in Turkey or when the Ministry considers such necessary.
Companies with revenue generated from digital services in Turkey amounting to less than TRY 20 million or generated from digital services worldwide amounting to EUR 750 million (or its TRY equivalent) in the previous accounting period are exempt from the Digital Service Tax. If the taxpayer is a member of a consolidated group with regard to financial accounting, the total revenue generated by the group for services falling within the scope of the Digital Service Tax will be taken into consideration.
Revenue generated through the below-mentioned services provided on digital platforms are exempt from the digital services tax and are not taken into consideration when determining the above-mentioned measures:
a) Services through which the Treasury share is paid under Law No. 406 on Telegrams and Telephones dated 04.02.1924
b) Services through which special communication tax is collected under Law No. 6802 on Expenditure Taxes dated 13.07.1956
c) Services that fall within the scope of Article 4 of Law No. 6802 on Banking dated 19.10.2005, and
d) The sale of R&D products produced in research and development centers pursuant to R&D operations as defined in Article 2 of Law No. 5746 dated 28/2/2008 on Supporting Research, Development, and Designing Operations as well as services provided solely from such products
The tax base for the Digital Service Tax is the revenue generated during the relevant fiscal period from services falling within the scope of the activity subject to the tax. If the revenue is in foreign currency, that currency will be converted to TRY at the rate applicable on the date the revenue was earned by using the buying rate of exchange of the Turkish Central Bank.
No deductions for expenses, costs, or tax will be made from the tax base. Digital Service Tax cannot be presented separately on invoices or invoice substitutes.
The digital services tax rate has been set to 7.5%. The President has the discretion to lower this rate to 1% or to increase it by twofold.
Digital Service Tax is calculated by applying the rate to the tax base. No deduction is made from tax calculated in this manner.
The taxation periods for the Digital Service Tax consists of one-month periods throughout the calendar year.
Taxpayers and tax withholders are responsible for submitting Digital Service Tax declarations to the related tax offices before the end of the month following the taxation period and for making payments within the same period.
The Digital Service Tax is levied by tax offices for service providers responsible for value-added tax (VAT) and by tax offices determined by the Ministry of Treasury for service providers who do not have such VAT obligation.
Digital Service Tax is tax deductible from the taxpayer’s taxable income with respect to personal income and corporate income taxes.
Taxpayers or their representatives in Turkey falling within the scope of this Law who do not submit declarations or make payments in accordance with Tax Procedural Law No. 213 may be issued a notice from the tax office responsible for the Digital Service Tax assessment urging them to fulfil these obligations. This notice will be served based on information obtained through the communication instruments listed on their websites, domain names, IP addresses, and information obtained from similar sources through the notification methods listed under Law No. 213, electronic mail, or any other communication instruments. This will also be announced on the Revenue Administration’s website.
If the declaration and payment obligations are not fulfilled within thirty days following the announcement, the Ministry of Treasury and Finance may block access to the services provided by these service providers until the obligations are fulfilled. This decision will be sent to the Information and Communication Technologies Authority in order to notify the access providers. Decisions to block will be executed twentyfour hours after the notification has been given to the access providers.