Scope
DST will apply on the revenues generated from services such as:
- all kinds of advertising services provided in the digital environment (including advertisement controlling and performance measurement services; services with respect to the data transmission and data management of the users together with technical services provided regarding the presentation of advertisement,
- the sale of any audio, visual or digital content (including software, applications, music, video, etc.) on a digital environment or any services provided in the digital environment that allows users to listen, watch, or play such contents in the digital environment or use such contents on electronic devices,
- providing services via a digital environment which allow user interaction (including the service provisions that allows or facilitates the sales of these kinds of goods or services among the users).
Intermediary services carried out in the digital environment regarding the aforementioned services are also subject to DST.
DST will be applicable for services which were provided in Turkey, meaning: services that were provided in Turkey, services that were benefitted in Turkey, services that were provided for the people in Turkey and services that were valued in Turkey.
Exemptions
Those who generated revenue from digital services in the previous accounting period of the related accounting period less than:
- TRY 20,000,000 generated in Turkey or
- EUR 750,000,000 or the Turkish lira equivalent generated from across the world
will be exempt from DST.
For consolidated groups (accounting view) the total revenues of the group being generated from those services will be taken into account.
With revenues increasing and exceeding the thresholds, the exemption will not be applicable and DST liability begins in the 4th taxation period following that related financial year.
For revenues diminishing below the thresholds, the exemption will be applicable as of the beginning of the following financial year after those two consecutive financial years.
Further exemptions apply to specific digital services:
- services that are subject to the treasury share payment under The Telegraph and Telephone Law No. 406;
- services that are subject to the Special Communication Tax under the Law No. 6802 on Expenditure Taxes;
- services which were delivered as part of banking activities under the Law No. 5411 on Banking;
- the sale of products created as a result of R&D activities which were conducted in R&D centres under the Law No. 5746 on Supporting Research, Development, and Designing Operations and service provisions which solely stems from these corresponding products;
- services regarding the payment services under the Law No. 6493.
DST Rate and Taxpayer
Effective DST rate to be applied is 7.5% on the revenues generated from the above-mentioned services.
DST will be applied to digital service providers regardless of their tax residency status, i.e. full taxpayers or non-residents performing activities in Turkey through a permanent establishment or permanent representative.
For taxpayers without a residence, workplace or a registered place of business in Turkey or if otherwise necessary, the below-mentioned parties may be held responsible for the payment of DST:
- the parties of the transactions which trigger DST liability,
- the parties who are the transaction intermediaries, or
- the parties who are payment responsible.
Declaration and Payments
The DST taxation periods are determined as a one-month period. Taxpayers and those who are held responsible shall submit DST declarations and make DST payments before the end of the month following the related taxation period.
The tax office which levies VAT will also be responsible for levying DST for digital service providers which do have a VAT obligation. If the digital service providers do not have a VAT obligation, the Ministry of Treasury will determine a tax office for tax levying purposes.
Other Important Issues
DST payments can be considered as tax deductible from the taxpayer’s taxable income regarding the personal income and corporate income taxes.
The tax office in charge for levying DST may issue a notice to the digital service providers or to their legal representatives who did not fulfill their obligations to submit a declaration and pay the respective taxes in due time. This will also be announced on the website of the Revenue Administration.
In the case of not fulfilling these declaration and payment obligations within 30 days after the notice, the Ministry of Treasury and Finance will notify the Information and Communication Technologies Authority to take necessary actions to block access to the services provided by these service providers until these obligations are fulfilled.
Interpretation of the DST Legislation
A 15% withholding tax was also introduced on cross-border online advertising services in accordance with the Presidential Decree No. 476, which became effective as of 1 January 2019, and the new DST will be applied to the online advertising services too.
The withholding tax on cross-border online advertising services can be considered within the scope of double tax treaties and can benefit from double tax treaty provisions in this respect. On the other hand, DST is an expenditure tax and, unlike cross-border online advertising services, it cannot be considered within the scope of double tax treaties and cannot benefit from double tax treaty provisions.
This situation creates a considerable tax burden for the companies which do provide cross-border online advertising services.
Furthermore, on 5 February 2020, the Ministry of Treasury and Finance announced a draft communique regarding Digital Services Tax which shall provide detailed explanations regarding the implementation of DST legislation and is envisaged to come into force simultaneously with Digital Services Tax as of 1 March 2020.
