SUMMARY

Technological developments accelerating with the COVID-19 outbreak and changing business models and the new economic life influenced by the digital economy have led to the emergence of different workplace formations and made it inevitable for us to rethink the traditional concept of the workplace. In this article, the process of defining the workplace, which is also on the agenda of OECD, has been addressed within the scope of domestic and international legislation and the issue of evaluating the virtual office and home-office concepts as a workplace has been discussed.

Keywords: Workplace, OECD, Virtual Office, Home Office

INTRODUCTION

Business models and ways of doing business have been reshaped with technological developments. With the new world order experienced due to both this technological revolution and Covid-19, there have been radical changes in the business world. These changes lead us to the need to reconsider the concept of the workplace today and bring along both economic and legal discussions. In this article, after examining the concept of workplace within the scope of both local and international legislation, the new workplace concepts such as home-office and virtual office and tax regulations, along with the new regulations introduced by the OECD will be discussed.

A. THE CONCEPT OF WORKPLACE

i. Domestic Law

The concept of "workplace" is significant in terms of taxation in both domestic and international law regulations. In Turkish Tax Law, Income Tax Law ("ITL") and Corporate Tax Law ("CTL") regulate the concepts of full tax liability and limited tax liability. According to these legislations, non-resident taxpayers are subject to limited tax liability. A company is resident in Turkey, if it has either, or both a suitable workplace according to the Tax Procedure Law ("TPL") or a permanent representative in Turkey. In other words, the existence of taxation authority shall be determined according to the taxpayer's place of business or a permanent representative to be present in Turkey.

The concept of the workplace is defined as a place allocated to the performance of commercial and professional activity or used in these activities in Article 156 of TPL. In TPL Internal Circular dated 23.09.2003 and numbered 2002/3, "For a place to be named as a workplace, it must be "allocated for the performance of the activity" or it must be the "place" where the activity is performed. However, the field of activity does not require a separate business, such as consultancy, brokerage, etc. the residence address can be accepted as a workplace." is explained for workplaces and while determining the workplace in the specifications of the Revenue Administration, it evaluates according to the conditions specified in the Internal Circular.

Doctrine and the Revenue Administration tend to keep the scope of the concept of "workplace" broad because of the "like" expression of the article. However, creating taxation power through interpretation, which would be considered as a violation of the property right. It should be emphasized that we believe that the will and purpose of the Lawmaker at the time of forming the law should be investigated by using the historical interpretation method. As a matter of fact, in the regulation made in 1961, the concept of the workplace in the will that the Lawmaker put forward with the expression "like" should not expand the concept of the workplace in today's conditions through interpretation.

Also, determining the workplace has great importance in terms of tax inspections according to Article 139 of TPL and there are various discussions on the subject in terms of the Council of State and doctrine.1

The recent discussions are focused on the inadequacy of the workplace definition in the TPL in digital environments brought by the technology age. In this regard, in the draft Tax Procedure Law (the "Draft"), these deficiencies have been tried to be eliminated. It is considered as an indication of that "workplace" in the current regulation does not include "workplace in an electronic environment". However, The Draft can only indicate the existence of studies in this direction, but it does not end the discussions.

ii. International Law

According to Article 7 of the Model Tax Convention (the "Convention"), it is regulated that profits of an enterprise of a contracting state shall be taxable only in that State unless the enterprise carries on business in the other contracting state through a permanent establishment situated therein. If the enterprise does not have a place of business in the other contracting state, only the contracting state of which the enterprise is a resident will have the authority to tax. So, determining the existence of a workplace is also important in international tax law and Article 5 of the Convention regulates the permanent establishment concept by defining it as a fixed place of business, through which the business of an enterprise is wholly or partly carried on. Also, it has some conditions which are explained in detail in the commentary part of the convention:

— the existence of a "place of business",

— this place of business must be "fixed",

— the carrying on of the business of the enterprise through this fixed place of business.

Although the definition of the workplace seems easy to determine theoretically, it is not always easy to determine in practice. Especially, the growth of e-commerce and the revenues from the internet make determination more difficult. In the Convention, a separate statement was made regarding electronic commerce in relation to the aforementioned discussions.2

Accordingly, in order to determine the taxation authority, it is extremely important to determine whether the workplace is established or not. Therefore, in electronic commerce, the distinction between the website and the server where the website is stored and used must be correctly determined. In order to make the mentioned distinction, serious technical knowledge and infrastructure are required in a practical sense.

B. INTERNATIONAL DEVELOPMENTS

BEPS Action 7 Preventing the Artificial Avoidance of Permanent Establishment ("PE") of OECD aimed to develop changes in the definition of the permanent workplace and work on these issues that address profit-related problems, and led to significant changes, especially the Convention in 2017. Most importantly, the taxation challenges brought about by digitalization have never dropped from the OECD agenda. In this context, following the BEPS Action Plans, various reports have been published by the OECD. 137 countries working with the Inclusive Framework worked on two-legged global solutions and one of the reports titled "Tax Challenges Arising from Digitalization - Economic Impact Assessment"3 has recently published by the OECD. However, these reports show that more inclusive work needs to be done to reach a consensus. It is emphasized in the report that at the point of implementation of the solutions, it would be potentially more efficient to make a multilateral agreement that includes all bilateral agreements.

As a result, developments in the world can only reveal potential solutions. It provides solutions to tax problems arising from such accelerated developments, slowdowns in the process of introducing international rules and the problem of inflexibility in rule-making increase the litigation load before local courts day by day. In this respect, it would not be wrong to say that the faster and more flexible one can be in the development of international politics, the more problems in the judgment can be solved.

ii. Working from Home

Working from home (home office), which has been applied by companies under the name of flexible working models for years, has caused a great change in business life, especially with the Covid-19 pandemic. Home offices have, of course, raised some concerns and controversy regarding workplace determination. Especially with the announcement that large-scale technology companies will leave the office environment completely and switch to home-office, which they consider less costly and health-safe, the discussions on "workplace" determination have already gained more significance.

OECD made explanations on the subject. According to these, the temporary and exceptional work of employees from their homes due to Covid-19 does not create a new workplace for enterprises, and the temporary interruption of the work for the same reason does not eliminate the existing workplace. The OECD made a separate explanation for the "home-office" application and evaluated why these places would not be considered as workplaces. Besides, OECD noted that during the Covid-19 crisis, employees staying remotely at home often did so as a result of government directives, they did not do so as a job requirement, and the situation constituted force majeure. Therefore, it is stated that, given the force majeure character of the crisis, working from home would not create a workplace for the enterprise.

In our domestic law, home offices are discussed from a different perspective. As an example, it is one of these discussions whether fixed-wage expenses in homes used as home offices can be written as expense or not.

When all these are taken into consideration, it is clear that regulations should be made regarding home-offices, including the tax legislation, which is not yet included in our legislation but has increased as a result of the requirements of the new life.

ii. Virtual Offices

Today, enterprises use virtual offices, which include all the opportunities provided by technology, as corporate headquarters, rather than opening a physical workplace. Especially self-employed people can continue their professional lives with home offices and/or virtual offices.

In the ruling of the Revenue, Administration dated 27.12.2018 and numbered 66813766-175.02 [mük44-2017-8] -536621, the virtual offices has been defined as a system and ruled that lessee or lessees should be deemed as taxpayer within the scope of environmental tax. However, the Revenue Administration, in the ruling dated 24.09.2020 and numbered 39044742-130 [ruling] -E.702055, makes a different assessment and defined virtual offices as a service and ruled that the lease agreement covers the lease of the dry-ownership of such immovables.

As a result, it is obvious that virtual offices will become increasingly widespread and will lead to discussions in terms of regulations and tax as long as such workplaces are not included in the legislation.

CONCLUSION

Since the definition of the workplace concept is important in terms of taxation, it is discussed in both domestic and international law. Especially with the Covid-19 pandemic, this change in the concepts of the workplace has brought the concepts of virtual office and home office into economic life. Although no statement has yet been made regarding whether these places will be considered as workplaces within the scope of the domestic law, the OECD did not see sustainability in terms of considering the home as a workplace, and it has not been included in the scope of the workplace since this situation is due to force majeure.

As a result, the workplace concept should be rethinked with the new business and technological developments, both domestically and internationally. Although the problems are discussed and studies are carried out globally, these studies should gain momentum with the support of countries and concrete solutions should be presented. On the other hand, efforts to put forward a solution domestically will not only be inconclusive due to the Double Taxation Treaties, unless radical changes are made, it will also increase the workload within the litigation processes.

Footnotes

1. TASKIRAN Tarik, Vergi Incelemesinin Yapilacagi Yer, Vergi Dünyasi Dergisi, Aralik/2020, s:471

2. OECD, Model Tax Convention on Income and on Capital: 2014 Commentary p.43.1

3. https://www.oecd.org/tax/beps/tax-challenges-arising-from-digitalisation-economic-impact-assessment-0e3cc2d4-en.htm

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