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Digital Service Tax in Turkey

Digital Service Tax in Turkey: Key Information & Rates

The rise of the digital economy has pushed many countries to implement taxation models that better reflect the nature of global digital transactions. In this context, Turkey introduced the Digital Service Tax (DST) as part of its efforts to tax digital service provided to Turkish users. This article provides a detailed guide on the Digital Service Tax in Turkey, its scope, application, and implications for businesses.

Table of Contents

What is the Digital Service Tax (DST) in Turkey?

The Digital Service Tax is a turnover-based tax applied to certain types of digital service provided in Turkey. It is levied on revenue, not profits, which means that it is based on the gross income generated from digital activities in the Turkish market. The tax targets companies that provide digital service like online advertising, data processing, social media platforms, and digital content distribution.

a digital image representing the DIGITAL SERVICES TAX, which aims to tax digital advertising and services in Turkey, provided by platforms such as Google, Netflix, Instagram, Tiktok and Facebook in Turkey.
Digital Service Tax in Turkey
Who is Subject to Digital Service Tax?

The tax is primarily aimed at large multinational digital companies like Google, Amazon, Netflix, Facebook, and other platforms that generate significant revenue from the Turkish market.

Smaller local businesses typically do not meet the revenue thresholds and are exempt from DST obligations.

The DST applies to companies or groups that meet the following criteria:

  • Global Revenue Threshold: The company or group must have global revenue from digital services exceeding €750 million in the previous financial year.
  • Local Revenue Threshold: The company must generate more than 20 million TRY in digital services revenue from Turkey during the same period.

Both local and foreign companies that meet these thresholds are subject to the Digital Service Tax.

Taxable Services under DST

The following types of digital services are subject to the Digital Service Tax in Turkey:

  • Online Advertising Services: Includes advertising on search engines, social media platforms, and other digital platforms.
  • Intermediary Services: Services provided by digital platforms that facilitate transactions between users, such as online marketplaces.
  • Digital Content Sales: The sale or rental of digital content (e.g., video, music, apps, games) or the provision of online services related to digital content.
  • Social Media Platforms: Services provided by social networks, including income from memberships, subscriptions, or user-generated content monetization.
  • Data Services: The sale of user data or the provision of digital services that involve the processing of data from users in Turkey.
Digital Service Tax Rate in Turkey

The Digital Service Tax rate is 7.5% of the revenue generated from the taxable digital services in Turkey. This is levied on the gross revenue, without deductions for expenses or costs.

For example, if a company generates 50 million TRY from digital advertising services in Turkey, the DST liability would be:

  • 7.5% of 50 million TRY = 3.75 million TRY.
Filing and Payment Deadlines
  • Filing Period: Companies subject to DST must submit a monthly tax return to the Turkish Revenue Administration (GİB).
  • Payment Deadline: The tax must be paid by the end of the month following the month in which the revenue was generated.
Exemptions from Digital Service Tax

Certain businesses and services are exempt from the Digital Service Tax, including:

  • Services not subject to VAT in Turkey.
  • Non-commercial or private transactions that are not intended for business purposes.
  • Small businesses that do not meet the revenue thresholds (either globally or within Turkey).
Penalties for Non-Compliance

Failure to comply with DST regulations can result in:

  • Fines for late filing or non-payment.
  • Interest charged on unpaid taxes.
  • Legal action: In severe cases, non-compliant companies may face legal proceedings, which could impact their ability to operate within Turkey.
Impact on Businesses and Consumers

  • The introduction of the Digital Service Tax has significant implications for businesses operating in the digital sector:

    • Increased Costs for Businesses: Multinational companies, especially tech giants, must adjust their pricing and business models to account for the 7.5% tax on their revenue.
    • Potential Price Increases for Consumers: Some companies may pass the cost of the tax onto consumers, increasing prices for digital services such as subscriptions, ads, or digital content.
    • Compliance Requirements: Businesses need to ensure they have robust systems in place for tracking revenue generated from Turkish users and for filing monthly tax returns.
Challenges & Criticisms of the Digital Service Tax in Turkey

  • Double Taxation: One of the key concerns about the DST is the risk of double taxation. Many companies subject to DST may also pay corporate income taxes in other jurisdictions, resulting in overlapping tax obligations.

  • High Tax Rate: Turkey’s DST rate of 7.5% is one of the highest globally, leading to potential increased costs for businesses, which might be passed on to consumers.

  • Impact on Smaller Players: While the DST is designed to target large multinational companies, there are concerns that it could inadvertently impact smaller digital businesses that operate in niche markets, as they may struggle to comply with complex tax filing requirements.

  • International Criticism: The DST has been criticized by some countries, including the United States, which views it as discriminatory against American tech companies. There have been ongoing negotiations and discussions at the international level (e.g., OECD) to create a unified approach to taxing the digital economy, but until such an agreement is reached, unilateral taxes like Turkey’s DST remain contentious.

Contact Us for Tax Consulting in Turkey

The Digital Service Tax in Turkey represents an effort to ensure that large digital companies pay taxes on revenue generated from Turkish users. With a 7.5% tax rate, the DST primarily affects large multinational corporations providing online advertising, digital content, social media, and intermediary services.Businesses must ensure compliance with the law to avoid penalties, while consumers may see slight price increases due to the tax.

Whether you operate in digital advertising or any other digital service, sectors, a well-managed tax strategy can enhance your business’s financial efficiency.

A&M Consulting Co. is a Turkish Accounting and Tax Consultancy company specialized in providing end-to-end Tax Services for especially global compnaies in Turkey market

We continue to offer cost-effective solutions for global companies that want to enter the Turkish market smoothly and quickly, achieve full compliance with local legislation and access tax exemptions and incentives.

DISCOVER OUR SERVICES:

You can reach out to our experienced consultans via email or by filling out the Contact Form on our website’s contact page.

FAQs about Digital Service Tax in Turkey

The Digital Service Tax (DST) in Turkey is a tax levied on revenues generated from certain digital services provided to users in Turkey, such as digital advertising, online marketplaces, and content streaming platforms.

Companies that provide digital services in Turkey and have worldwide revenue of at least €750 million and domestic revenue from digital services exceeding TRY 20 million are liable to pay the DST.

The Digital Service Tax rate in Turkey is 7.5% of the revenues generated from the taxable digital services provided to users in Turkey.

Taxable services include:

  • Digital advertising services
  • Online marketplaces that facilitate transactions between users
  • Streaming services such as audio, video, and gaming content
  • Social media platforms
  • Other intermediary services provided via digital platforms.

Yes, companies with worldwide revenues below €750 million or domestic revenues from digital services less than TRY 20 million are exempt from the DST.

The DST is calculated based on gross revenue from the provision of taxable digital services in Turkey, excluding VAT and other indirect taxes.

The DST is filed monthly, and the payment is due by the end of the following month after the relevant tax period.

Foreign and domestic companies that meet the threshold for DST must register with the Turkish Revenue Administration (GİB) and follow the necessary steps to comply with the tax.

Foreign companies providing digital services to users in Turkey are subject to the DST if they meet the revenue thresholds, even if they do not have a physical presence in Turkey.

Yes, DST can lead to double taxation as companies may already be taxed in other jurisdictions on their digital services revenues. Turkey has not yet entered into specific tax treaties regarding DST, which may result in companies being taxed in multiple countries.

Failure to comply with DST obligations, such as not filing or paying the tax on time, can result in penalties, including fines and interest on late payments.

Although the tax is levied on companies, the cost of DST may be passed on to consumers through higher prices for digital services such as streaming subscriptions, digital ads, and marketplace transactions.

No, the Digital Services Tax is not deductible from other taxes, such as income or corporate tax.

The DST aims to tax digital businesses that generate significant revenues from users in Turkey but do not have a physical presence, ensuring they contribute to the country’s tax system.

Turkey’s DST rate of 7.5% is higher than many other countries with digital services taxes, such as France (3%) and Italy (3%). However, the revenue thresholds and scope may vary.

Challenges include administrative complexity, potential double taxation, and increased operational costs due to compliance with local regulations.

No, only revenues related to certain specified digital services provided to users in Turkey are subject to DST.

Small businesses and startups are generally exempt if their global revenue or domestic revenue from digital services does not exceed the prescribed thresholds.

he DST complements Turkey’s efforts to modernize its tax system and adapt to the digital economy, ensuring that digital businesses contribute to national revenues.

DST returns must be filed monthly, with the deadline being the last day of the following month.

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