Turkey Introduces Digital Services Tax (DST) Through Law No. 7194
Digital Service Tax has been introduced by the Law Numbered. 7194 published in the Official Gazette dated 07.12.2019. The law enforces a new tax liability as a Digital Services Tax. (DST)
The new tax law intends to have a narrow target. It only applies to digital services companies whose revenue are over EUR 750 million and local revenue of TRY 20 million. It will be applied at a rate of 7.5% tax. The new tax will be applied from 1 March 2020.
According to the new regulations implemented under Law No. 7194, revenue generated from the following services provided in Turkey is subject to the Digital Service Tax:
- 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).
- Services regarding the sale of all types of auditory, visual, or digital content on digital platforms (including computer programs, applications, music, videos, games, in-game applications, and counterparts), and listening to, watching, playing, recording, or using such content via electronic appliances)
- 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)
- Intermediary services provided in the digital environment for the above services are also subject to Digital Service Tax.
Exemption of Digital Service Tax (DST) is possible if the revenue is less than TRY 20 million or generated from digital services worldwide amounting to EUR 750 million.
The tax base for the Digital Service Tax (DST) 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.
The tax rate is 7.5% of the gross revenue from Turkish sales. However, the President is authorized to reduce this rate downward to 1% and to increase the rate of up to two times the applicable rate of 7.5%. These changes can be made for all services or to only certain service types.
The taxation periods of Digital Service Tax (DST) consists of one month periods throughout the calendar year. However, the Ministry of Treasury and Finance would be authorized to determine a quarterly tax period instead of a one-month taxation period according to the types of services and the taxpayer’s volume.
According to the Turkish Ministry of Finance, the aim is to control the revenue of International or Domestic digital services companies which are generated income without any commercial address.
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.