Special VAT Liability for Electronic Service Providers

Special VAT liability for electronic service providers in Turkey is a taxation mechanism that aims to capture the revenue generated by digital services provided to Turkish customers. Companies that exceed the revenue threshold set by Turkish tax authorities are required to register for digital tax, obtain a tax identification number, and calculate their digital services revenue.

Table of Contents

This revenue calculation includes income from online advertising, digital content sales, and any other digital services provided to Turkish customers. Once the revenue is calculated, companies must report it to the tax authorities and pay the applicable digital tax rate.

Compliance with digital tax regulations is essential to avoid penalties and ensure a smooth operation in the Turkish market. Accounting firms like Finlexia play a crucial role in assisting foreign e-commerce companies in understanding their digital tax obligations, ensuring accurate reporting, and maintaining compliance with Turkish tax laws.

It is the beginning of a term In Turkey, where any foreign company that sells games, songs, applications, and domain names online will pay VAT. Our Turkish accountants are prepared to handle if your company is selling games songs apps domain names online in Turkey.

Special VAT Liability for Electronic Service Providers: What is it, How to Manage, and Responsibilities

Welcome to Finlexia Accounting Firm, a trusted name in Turkish accounting services. For foreign e-commerce companies operating in Turkey, understanding and managing digital tax obligations is crucial. This guide aims to provide clarity on digital tax requirements, compliance measures, and the role of accounting firms like Finlexia.

What is VAT for Foreign E-Commerce Companies?

Digital tax, also known as digital services tax or DST, is a tax imposed on revenues generated from digital services provided by foreign companies to customers in Turkey (Special VAT Liability for Electronic Service Providers). It aims to ensure that digital businesses contribute fairly to the tax revenues of the countries in which they operate.

How to Manage VAT Obligations

1. Determine Tax Liability: Foreign e-commerce companies must first determine if they meet the threshold for digital tax liability in Turkey.
2. Register with Tax Authorities: If liable, companies must register with the Turkish tax authorities and obtain a tax identification number.
3. Calculate and Report Revenue: Companies need to calculate their revenue from digital services provided to Turkish customers and report it to the tax authorities.
4. Pay Digital Tax: Based on the revenue calculation, companies must pay the applicable digital tax rate to the tax authorities.
5. Maintain Compliance: It’s essential to maintain compliance with Turkish tax laws, including timely reporting and payment of digital tax.

Responsibilities of Accounting Firms

1. Tax Consultation: Providing expert advice on digital tax obligations and compliance requirements.
2. Financial Reporting: Assisting in accurate financial reporting related to digital services revenue.
3. Tax Filings: Preparing and filing tax returns with the Turkish tax authorities on behalf of clients.
4. Compliance Monitoring: Monitoring changes in digital tax laws and ensuring ongoing compliance.

VAT for Foreign E-Commerce Companies

Selling games songs apps domain names online in Turkey is subject to VAT. Any company or persons residing out of Turkey including Youtubers that sells digital products such as games, music, songs, books, and domain names in Turkey has to be registered as a taxpayer and must pay VAT in Turkey.

As Finlexia tax professionals, we believe that we have a duty to engage in the discussion and debate surrounding Tax Transparency and Responsibility. As the tax strategies of multinationals and domestic companies continue to be examined by both tax authorities and the public alike, we work with our clients to develop tax strategies that are fit for purpose in the tax system of tomorrow.

It is the Beginning of a Term In Turkey, Where Any Foreign Company That Sells Games, Songs, Applications, Domain Names Online Will Pay VAT

Selling games songs apps domain names online in Turkey is subject to VAT. Any company/firm that sells digital products such as games, music, books, and domain names in Turkey has been taken into the scope as a taxpayer by the Revenue Administration.

According to the communiqué, banks notify the revenue office of any such transaction by bank or credit cards. In addition, tax assignment will be made ex officio to all companies and tax payment will become compulsory as of 01st January 2018, when the law comes into force.

Ministry of Finance will take the option of collecting the tax according to the provisions of the Law on Collection Procedures of Public Receivables, as exercised for other companies in Turkey.

The banks that act as an intermediary of the payment shall inform the Revenue Administration about this matter once every three months. Revenue Administration will take action based on such information. The penal sanction shall be imposed on any defaulter company.

Special VAT Registration For Non-Resident Electronic Service Providers

Accordingly; as of 1st January 2018, VAT rules have been amended for the sales of electronic services by electronic service providers that do not reside or do not have a workplace, legal business center, and business center in Turkey to registered persons out of VAT.

Non-resident electronic service providers have to declare and pay the VAT collected from electronic services to registered persons out of VAT.

The taxpayers who have been registered as “Special VAT Registry for Electronic Service Providers” have to declare any transactions made during January, February, and March in 2018 until 24th April 2018. Otherwise, the penal sanctions shall be imposed by the Revenue Administration.

Activities Within The Scope Of Special VAT Liability for Electronic Service Providers

• Radio and television broadcast services,
• Telecommunication services,
• Other services provided in the electronic environment,
• Music, film, game (including any games of chance, betting, and gambling), political, cultural, arts, sports, science, and entertainment purpose broadcasts and activities, and all the other applications and in-app purchasing provided by the computer, mobile phone, and similar gadgets.

Process Regarding Special Vat Registration And Vat Return

Any service provider in this scope is first required to fill in the form on the website of the Turkish Revenue Administration before submitting the No. 3 VAT Statement they are going to submit for the first time. Upon filling in and confirmation of this form in the electronic environment, “Special VAT Liability for Electronic Service Providers” shall be established for the service provider in the Major Taxpayers Tax Office.

Upon establishment of the taxpaying liability, the taxpayer shall be given a user code, password, and a code word to make transactions on the Internet tax office. Then the taxpayer will log in to the system and make a statement thereon.

Our Services

• Keeping up-to-date on legislation and informing the client about amendments
• Carrying out tax registration transactions
• Regular follow-up and notification of tax debts of the client
• Issuance of electronic statements and control of tax declarations
• Accounting audit and company establishment services

Reach us for Special VAT Liability for Electronic Service Providers in Turkey

Navigating digital tax obligations as a foreign e-commerce company in Turkey can be complex. With the expertise of Finlexia Accounting Firm, you can manage your digital tax responsibilities effectively, ensuring compliance and peace of mind. Contact us today to learn more about our services and how we can assist you.

You may reach our accountants and lawyers for special VAT liability for electronic service providers by visiting our Contact page.