Digital Services VAT, VAT

Digital Services VAT Communiqué has been Published

January 31, 2017

Final version of the Communiqué has been published on the Official Gazette on 31th of January.

Important Updates

  1. New version of the communiqué allows (full or proportional) deduction of VAT on purchases directly related with the supplied digital service.
  2. Due to transition period, VAT declarations of January, February and March 2018 will be submitted between April 1 to 24th.
  3. Detailed explanation of services in the scope has been removed. So all digitally supplied services to non-taxpayer real persons in Turkey is considered in the scope.

Scope

In the draft version of the communiqué electronically supplied services were explained with below articles;

  1. Webpage operations related services (domain, hosting, and all other related services)
  2. Software and hardware distant maintenance, distant system management and online data storage services
  3. Sales of all kinds of softwares and digital products (firewalls, device drivers, antivirus softwares etc.) including access to them, download and update.
  4. Any kind of digital content providing services (e.g. financial/legal content service, online newspaper and publishings, blogs, web statistics services, search engine and indexing services etc.).
  5. All kind of service provided through applications or similar tools on computer or mobile devices such as online/offline game memberships, app download, music service provider app memberships, on-line broadcasting services etc.
  6. Distant education services with limited human involvement
  7. Radio and Television broadcast services,
  8. Other services that is similar to above and supplied through all electronic digital means.

In the published version, above service explanations have been removed. Therefore all digital services supplied to non-taxpayer real persons should be considered in the scope.

Platform Operator’s Responsibility

One of the most important explanation in the communiqué is that platform operators held responsible of the payment of Turkish digital service VAT in case the original service provider is explicitly disclosed on the platform or on the service engagement or on the billing information of the service. Continue reading “Digital Services VAT Communiqué has been Published”

Digital Services VAT, VAT

Withholding VAT Mechanism in Turkey

According to VAT Law Article 8, VAT liability is originally on;

  • seller of the product or provider of the service
  • importer of goods or services
  • carrying or customs responsible of the transit trade
  • and some specially determined parties in the law (i.e. postage service provider, TV radio broadcaster etc.)

Accordingly, in sales transactions that take place in Turkey, seller of the service or product is liable with collecting and declaring the VAT on the transaction.

However, Article 9 of the same law defines Tax Responsibility as;

“In case the liable taxpayer does not have a legal or business center or workplace in Turkey and in other cases which Ministry of Finance finds necessary, other parties that are also involved in the transaction may be held responsible with the payment of the tax.”

With this power provided by the law, MoF determined different type of Withholding VAT mechanisms in Turkey. There are not voluntary basis application. Thus if a transaction falls under one of the below scope of services or deliveries, the withholding VAT application becomes mandatory. Continue reading “Withholding VAT Mechanism in Turkey”

VAT

VAT Rates in Turkey

Applicable VAT Rates in Turkey

Delivery of goods and services in Turkey is subject to VAT at the standard rate of 18%.

On the other hand, certain type of goods and services are subject to reduced VAT rates which are determined as 8% and 1%.

18%

In the legislation, deliveries of goods and supply of services that fall under each reduced rate category is determined and could be updated by a Council of Ministers Decree. All other goods and services that are not defined as reduced rate fall under the general rate of 18%.

You may find below some examples to reduced VAT rates;

8%

Continue reading “VAT Rates in Turkey”

Digital Services VAT, VAT

Digital Services VAT in Turkey Compared to EU

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. Continue reading “Digital Services VAT in Turkey Compared to EU”

VAT, VAT Reform

“English Model VAT System” says Minister Ağbal

News on July 6 says that Minister of Finance Naci Ağbal states the new VAT Law will be similar to the English VAT system.

What is current VAT system in Turkey ?

In general, current VAT system in Turkey allows taxpayers to deduct the input VAT paid on purchases from the calculated VAT on sales. When the difference of this offset is positive, the difference is paid to the tax office. However, when the difference is negative, tax office does not refund the negative balance but this balance is carried forward to be offset in the future.

The negative difference can only be refunded if the output VAT of the company is limited by VAT legislation. For example, if sales of the company is;

  • VAT exempt (exemption with deduction right) or,
  • Sales of the company is subject to VAT withholding (which limits the VAT collection) or,
  • Sales of the company is subject to reduced rate VAT.

Continue reading ““English Model VAT System” says Minister Ağbal”

Digital Services VAT, VAT

Digital Services in VAT Law

December 5, 2017

VAT Law Article 9 which determines the “tax responsibles” has been amended on December 5, 2017 and digital service providers are held responsible for the VAT on the service that they provide to Turkish non-taxpayers.

Inserted sentence to the Law is translated as below;

“To the extent that, VAT related to the services supplied in electronic means to non taxpayer natural persons by suppliers that are neither resident in Turkey, nor have a workplace or business place in Turkey shall be declared and paid by the suppliers of this services. Ministry of Finance is empowered to determine the scope of these services and principles of the procedural applications.”

Communiqué published on electronically supplied services explain the scope and procedures in detail.