Law No. 7194 on the Digital Service Tax and the Amendment of Certain Laws and Law Decree No. 375, (“Law”) published in the Official Gazette dated 07.12.2019 and No. 30971, introduced new taxes to the Turkish tax legislation and implemented several amendments to various tax laws. The new taxes introduced by the law are as follows:
1- Digital Service Tax: The Digital Service Tax applies to all kinds of advertising services offered in the digital environment; the sale of content; services provided in digital media for viewing, listening, playing, or recording; any services that provide for or operate in a way in which users can interact with each other; and digital intermediary services. The tax base is the “gross revenue” earned and must be declared and paid monthly at a rate of 7.5%. In order to fall within the scope of this tax, the revenue derived from digital services must amount to more than TRY 20 million if generated in Turkey or 750 million Euros or the TRY equivalent if generated globally.
2- Accommodation Tax: Accommodation services provided by hotels, motels, holiday villages, hostels, apart hotels, guesthouses, and camping sites, as well as all other services provided in those accommodation facilities such as eating, drinking, activities, entertainment services, and the use of pools, beaches, thermal pools, and similar areas will be subject to the Accommodation Tax. The rate of the accommodation tax is 2% (1% until 31.12.2020) of the total value received in consideration for the above-mentioned services (excluding VAT) and must be declared and paid on a monthly basis.
3- Valuable House Tax: Valuable House Tax will now be applied to residential immovable properties (houses) located within the borders of Turkey with a value exceeding TRY 5 million based on the building tax value or the value determined by the General Directorate of Land Registry and Cadastre at a rate of 0.3%, 0.6 %, or 1 % per thousand, which must be declared annually and paid in two installments. Individuals who own a single house and have no other income or individuals whose income consists of a monthly pension will be exempt from this tax. In addition to the real estate tax paid to the municipalities each year, the Valuable House Tax will also be due. However, the revenue of the tax will be transferred to the government’s general budget rather than to the municipalities of the district in which the houses are located.
Apart from these new taxes introduced by the law, other new tax regulations can be summarized as follows:
- The Bank Insurance Transaction Tax (“BITT”) ratio in foreign exchange transactions has been increased from 0.1% to 0.2%.
- The tax rate for individuals who earn more than TRY 500,000 has been increased from 35% to 40%.
- Exemptions for self-employment earnings for individuals who earn more than TRY 500,000 from copyright have been abolished.
- The daily amount of TRY 10 used for transportation assistance provided for employees' access to the workplace is now exempt from income tax.
- TRY 5,500 of the monthly rental expenses for rented passenger cars and 70% of the expenses of owned passenger cars will now be considered tax-deductible expenditures.
- Taking into account private consumption tax (“PCT”) and VAT up to TRY 115,000 as a tax-deductible expense for the acquisition of passenger cars, the depreciation calculated over TRY 135,000 of passenger cars (TRY 250,000 if PCT and VAT are added to the cost) will be considered tax-deductible expenditures.
- If the salary received from a single employer is over TRY 500,000, an income tax return must be submitted.
- The withholding tax rate deducted from the wages of athletes has been increased to 20% and it is envisaged that the submission of an income tax return for athletes’ wages over TRY 500,000 is required. In addition, the income tax exception for fees for sports referees has been restricted to amateur sports.
- The erasure of tax registrations for those found to be at high risk of counterfeiting documents as a result of analysis and evaluation.
- Amendments have been made in favor of taxpayers regarding the invitation to explanation.
- Regarding tax cases, if the right to appeal has been waived, a reduction in the tax principal and tax penalties is foreseen depending on the decision of the first instance court.