Draft Law on Digital Services Tax has been approved by Planning and Budget Commission of Turkish Parliament

Yayınlanma Tarihi: 05 Kasım 2019

A Draft Law introducing digital service tax at the rate of 7,5% on Turkish revenues has been introduced by Turkish government.


As of October 31, 2019, the Planning and Budget Commission of Turkish Parliament ("Commission") is approved the provisions of Draft Law by making minor amendments. Approved version of the Draft Law will be presented to General Assembly of Turkish Parliament for their discussion and voting.


If Turkish Parliament approves the Draft Law, the Draft Law will be presented to Turkish President to sign, then it will be published the Law in Official Gazette and enter into force.


Which services are in the scope of Turkish DST?

Pursuant to the Draft Law, the subject of Turkish DST is the revenue resulting from below mentioned services:


·          All kinds of digital advertising services (including advertising control and performance measurement services, services such as data transmission and management related to users, and technical services for the presentation of advertising),


·          Sale of any audible, visual or digital content (including computer programs, applications, music, video, games, in-game applications, etc.) in digital platform and services provided for listening, watching, playing or recording or using of such content in electronic devices,


·          Services for the provision and operation of digital platform in which users may interact with each other (including services to sell or facilitate the sale of a good or service among users).


Intermediary services provided in the digital platform to "the digital service providers" for the services mentioned in the above are also subject to Turkish DST.


Who are the taxpayers of Turkish DST?


In accordance with the Draft Law, taxable persons are who individually or group-wide, meet both of the following conditions, in the calendar year before the one in which the taxable revenues are obtained:


·          total worldwide revenues of not less than EUR750 million or equivalent ;


·          revenues of not less than TRY 20 million, obtained in Turkey from the digital services defined above.


Draft Law regulates that taxpayers of DST are digital service providers. For the purposes of digital service tax liability, it is not relevant whether these providers have full taxpayer status (as regulated under Income Tax Code dated 31/12/1960 and No. 193 and Corporate Tax Code dated 06.13.2006 and No.5520) or in terms of limited liability, they perform such activates through a registered office or permanent establishment in Turkey.


Is there any tax responsible in terms of Turkish DST?


In cases of absence of the taxpayer's residence, permanent establishment, registered head office or and business center in Turkey and other cases deemed necessary, the Ministry of Treasury and Finance can hold responsible the ones who are the parties to taxable transaction and/or the ones who are the intermediaries to payment and transaction.


What is the tax base and rate of Turkish DST?


The tax base of Turkish DST is the revenue obtained from the digital services during the relevant taxation period. No deduction is available to be made from the tax base under the name of expense, cost and tax.


The rate of Turkish DST is 7,5%.


The President is authorized to reduce this rate down to 1% separately or together in terms of service types and to increase the rate up to two-folds of the applicable rate of 7,5%.


Which companies are exempt from Turkish DST?


In general sense, the taxpayers who do not exceed one of the aforementioned thresholds are exempt from Turkish DST.


Draft Law also stipulates some specific exemptions for the specific taxpayers indicated below:


·          Services for which treasury shares are paid in accordance with Article 37 of the Telegram and Telephone Law dated 4/2/1924 and No. 406,


·          Services for which special communication tax is charged over Article 39 of the Expense Tax Law dated 13/7/1956 and No.6802,


·          Services within the scope of Article 4 of Banking Law dated 19/10/2005 and No. 5411,


·          Sale of products created as a result of R&D activities in R&D centres defined in Article 2 of the Law on Supporting Research, Development and Design Activities dated 28/2/2008 and No. 5746, and services provided exclusively on these products,


·          Payment services within the scope of Article 12 of the Law on Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions dated 20/6/2013 and No. 6493.


What are the taxation and payment periods?


Turkish DST shall be levied upon the declaration of the taxpayer or tax responsible.


The taxation period of DST is one-month periods of the calendar year.


However, the Ministry of Treasury and Finance is authorized to determine a quarterly taxation period instead of a one-month taxation period according to the types of services and the volume of the taxpayers.


Taxpayers and tax responsible are obliged to submit their digital service tax returns to the relevant tax office by the end of the month following the taxation period and pay within the same period.


Is there any non-monetary sanction to be applied in case of non-performance of the provision of this Law?


Pursuant to the Draft Law, in case of non-performance, the authorized tax office will inform the digital service provider or its "authorized representative" and this will be announced in the official web site of Revenue Administration.


In the event that non-performed obligations are not fulfilled within thirty days as of the announcement of the notice on Revenue Administration web site, the Ministry of Treasury and Finance shall decide to block the web site of digital service provider until such obligations are fulfilled and this decision shall be sent to the Information Technologies and Communication Authority for notification to access providers.

Blocking decisions are applied by access providers within twenty-four hours as of notification.


Please be informed that there was a hot debate on the above mentioned sanction during the discussions of Commission and the deputies proposing the Draft Law indicated on the Commission meeting that they will work on this provision to make some amendments (i.e. decelerating the web site rather than blocking the web site) in order to discuss in the General Assembly of Turkish Parliament.


KPMG observation


Taxpayers may challenge the paid DST before the Turkish Tax Court on the ground of provisions of double tax treaties being in force and Turkish Constitution, as well.


For more information, contact tax lawyers within KPLaw in Turkey:


Att. Yusuf Gokhan Penezoglu | ypenezoglu@kphukuk.com


Att. Senem Ozbilen | sozbilen@kphukuk.com

Att. Zeynep Kılavuz | zkilavuz@kphukuk.com

Att. Ece Sara    | esara@kphukuk.com