Taxation of services delivered electronically is one of the big issues of tax law, especially if the service provider is not located in the jurisdiction where the service is delivered.
Starting from June 2017, the Turkish Government officials started to point out this issue stating that companies which do not have a registered office in Turkey but provide electronically delivered services to Turkey should be paying taxes in Turkey.
After several statements that was published in the media during 2017, the first official step to apply tax came in December 2017 with The Draft Communique Regarding Amending VAT Application w. no 17 (“Communique”). The Communique stipulated VAT liabilities of companies that do not have a registered office in Turkey but provide electronically delivered services to Turkey.
On January 31, 2018 the Communique was published in the Official Gazette and is deemed as in force as of January 1, 2018.
Who Will Be Affected and Why Is This Important?
Companies that provide electronically delivered services to individuals who are not VAT tax payers in Turkey (consumers) will be affected. This is important as Turkey is a large market for e-commerce service providers with a population of almost 80.000.000, internet penetration of 65% and more than 76.000.000 GSM subscribers.
The scope of the Communique is limited to services that is provided electronically, therefore goods that are sold are not within the scope of the Communique. While the Draft Communique explicitly specified in-scope services, the Communique that was published in the Official Gazette does not specifically state any services and covers all services that are provided electronically. Therefore, any service that is provided electronically such as gaming, music streaming, video on demand, training, web-hosting, software subscriptions etc. are within the scope of the Communique.
What Are The Requirements?
Applicable as of January 1, 2018, all service providers that do not have a registered office in Turkey but provide electronically delivered services to consumers in Turkey must establish a VAT Obligation Specific to Electronic Service Providers and declare VAT via VAT Return Number 3 until 24th of each month for the previous month.
Having said the above, service providers can declare VAT for January, February and March altogether until April 24, 2018 via VAT Return Number 3 document. Non-compliance with the requirements may lead to consequences in the Tax Procedural Law such as tax evasion.
What You Should Do Next If You Are Within Scope
You should check whether you are providing any services to consumers in Turkey. If you are, you should register your company information at www.digitalservice.gib.gov.tr (not active yet, estimated activation time is mid-April 2018). The Revenue Administration will than provide you with a username and password for your log-in to the system. The VAT payments can be made electronically using payment processors or banks.