On 31st January 2018, General Communique No. 17 on the Value Added Tax Law (Law 3065), was published in the Official Gazette, extending the scope of the Turkish VAT regime to include foreign digital service providers who do not have a permanent establishment in Turkey.
The amendments stipulated that as of 1st January 2018, non-resident providers of electronically supplied services to private consumers in Turkey (i.e. B2C sales) are liable to account for Turkish VAT on those supplies. What this means is that foreign suppliers are required to register for VAT, and must levy, collect and remit the VAT due on those supplies.
Business-to business transactions (B2B) are not subject to these new rules. Rather, the existing reverse charge mechanism continues to apply.
Scope of the Electronically Supplied Services
Although the published Communique does not specify the impacted digital services, the draft legislation provides that the main services affected include: radio and TV broadcasting services, telecommunication services, web-hosting services, access to e-books and electronic publications, gaming, streaming and music/video downloads.
The rate of VAT to apply depends on the type of electronically supplied service. For example, in Turkey, books are subject to the reduced 8% rate and therefore e-books are also taxed at that rate of VAT. The Turkish standard VAT rate stands at 18% whereas reduced rates are 8% and 1%.
Registration and Returns
There is no VAT registration threshold in respect of cross-border supplies of electronic services. This means that making just one supply creates a need to be registered, as is the case with the rules within the EU.
VAT returns are not required to be filed for the reporting periods in which no transactions have occurred. Foreign enterprises registered under this mechanism are not under any obligation to keep VAT records. However, if they wish to deduct any Turkish input VAT related to the provision of the digital services, they must retain the invoices received from their Turkish suppliers.
Electronic Distribution Platforms
When electronically supplied services are rendered through electronic distribution platforms (EDPs), the VAT liability is shifted to the EDP operators if they either request customer payment for the service, or set the general conditions of the service.