In terms of Digital Services Scope
Digital services are defined as;
- Radio and Television Broadcasting Services
- Telecommunications Services and
- Electronically Supplied Services
in EU legislation. The first 2 services are defined similarly in Turkey as well. However, the last “Electronically Supplied Services” definition is explained under 3 different sub-headings with explanations and examples in detail in the draft communiqué. We believe the main concept reflects the same idea but some services (such as distant education services) might be regarded different in EU and Turkey.
Please note that this idea is just a prediction at this very early stage but the rulings shall be followed in practice when the rules become applicable in Turkey on 1/1/2018.
In terms of Taxpayer Liabilities
In EU, companies that provide digital services to another EU jurisdiction may either,
- register for VAT purpose in the service recipient country or,
- register for Mini One Stop Shop (MOSS) mechanism.
Shortly, MOSS mechanism allows a digital service provider declare VAT of all EU countries to its home country’s tax office. In the background, tax administrations of EU countries offset and/or transfer the difference between each other’s behalf VAT collection.
However, in Turkey, only the first option will be applicable which require all service providers to register for VAT purposes in Turkey by themselves. For multinationals, which do not have any presence in Turkey, operability of this option in practice might be debatable. Alternatively, below routes could be followed and authority may either;
- try becoming a party to MOSS mechanism together with all other EU countries (which will require further progress in EU negotiations)
- take a further step to withhold the tax on the collection moment at the banks.
For the moment, let’s wait and see the success rate of VAT collection from digital services and next steps to be taken by the authorities.