New Withholding Tax Liability On Advertising Services Provided Online

Contributor

Esin Attorney Partnership, a member firm of Baker & McKenzie International, has long been a leading provider of legal services in the Turkish market. We have a total of nearly 140 staff, including over 90 lawyers, serving some of the largest Turkish and multinational corporations. Our clients benefit from on-the-ground assistance that reflects a deep understanding of the country's legal, regulatory and commercial practices, while also having access to the full-service, international and foreign law advice of the world's leading global law firm. We help our clients capture and optimize opportunities in Turkey's dynamic market, including the key growth areas of mergers and acquisitions, infrastructure development, private equity and real estate. In addition, we are one of the few firms that can offer services in areas such as compliance, tax, employment, and competition law — vital for companies doing business in Turkey.

Explore Firm Details

According to the Presidential Decree No. 476 published on the Official Gazette dated 19 December 2018, payments made for advertising services provided through the Internet to the providers of this service ...

Turkey Tax

Recent Development

According to the Presidential Decree No. 476 published on the Official Gazette dated 19 December 2018 ("Presidential Decree"), payments made for advertising services provided through the Internet to the providers of this service or to those who act as an intermediary for the provision of this service will fall within the scope of the withholding tax liability, regardless of whether the payee is a taxpayer.

The Presidential Decree enters into force on its publication date to be applicable to payments made as of 1 January 2019.

What Does the Presidential Decree Say?

Law No. 6745, published on 7 September 2016, amended Article 11 of the Tax Procedure Code, wherein the President was authorized to hold liable the parties to the taxable transaction and the intermediaries to the transaction to withhold taxes as well as determine different tax rates for business classes, business types, sectors and commodity groups, regardless of whether (i) the payee is a Turkish taxpayer; (ii) the payer or the intermediary to the payment is obliged to withhold taxes under tax laws; (iii) the payment is related to the sale of goods and services; (iv) the sale of goods and services are carried out electronically; or (v) the amount paid can be deducted when determining the tax base.

Based on Article 11 of the Tax Procedure Code, the Presidential Decree determined the withholding tax rates applicable to payments made for advertising services provided through the Internet to the providers of this service or to those who act as an intermediary for the provision of this service as follows:

15% for payments made to real persons within the scope of Article 94 of the Income Tax Law,
15% for payments made to nonresident entities in Turkey within the scope of Article 30 of the Corporate Income Tax Law,
0% for payments made to corporate taxpayers resident in Turkey within the scope of Article 15 of the Corporate Income Tax Law.

Conclusion

Considering the business profits and permanent establishment provisions of the Double Tax Treaties to which Turkey is a party and the Organization for Economic Co-operation and Development's commentaries on the taxation of income derived through the Internet, we believe the Decree will lead to new discussions and disputes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.