What is Digital Taxation? Who Pays the Digital Services Tax?

 

From online advertising to digital content sales, intermediary platforms to interactive digital services, many digital services are reaching more users thanks to the opportunities provided by the internet. However, this expansion has also led governments to introduce new tax regulations. In Turkey, the Digital Services Tax (DST) was implemented on March 1, 2020, to tax revenues from digital services. This regulation establishes the tax obligations and responsibilities of digital platforms. So, what exactly is the Digital Services Tax, to whom does it apply, and how is it calculated? Find out the details on Papel Blog!

 

What is the Digital Services Tax?

 

 

The Digital Services Tax (DST) is a tax levied on the revenue generated from certain services provided in a digital environment. This tax came into effect in Turkey on March 1, 2020. Turkey's Digital Services Tax (DST) rate is generally 7.5%. The taxation period is usually one month per calendar year. However, the Ministry of Treasury and Finance may determine this period as quarterly based on the types of services and the scale of operations of the taxpayers. Even if taxpayers do not generate taxable income in a given taxation period, they must submit a tax declaration.

 

Which Services Are Subject to the Digital Services Tax?

 

 

The primary services covered by the Digital Services Tax can be listed as follows:

 

Online advertising services: All advertising services are provided in digital environments.

Digital content sales and services: All services related to the sale of digital content such as music, video, games, and applications, or the streaming, listening, watching, playing, or recording of such content in a digital environment.

Digital platforms enabling user interaction: Services that provide and operate digital environments where users can interact with each other.

Digital intermediary services: Intermediary services for specific digital services.

 

How Is the Digital Services Tax Calculated?

 

 

The Digital Services Tax (DST) is calculated based on the gross revenue earned from providing digital services. In Turkey, this tax is generally applied at a rate of 7.5%. This rate is applied to the total gross revenue generated from users in Turkey. To explain this more clearly, let's go through an example calculation:

Suppose a digital service provider earns a total gross revenue of 100,000 TL from users in Turkey in one month.

The tax amount can be calculated by multiplying this amount by the tax rate:

 

100,000 TL x 7.5% = 7,500 TL

 

This means that a digital service provider generating 100,000 TL in gross revenue in one month must pay 7,500 TL in DST for that month.

 

Key Considerations for Digital Service Providers

 

DST is usually declared every month, and the tax must be paid by the end of the following month. The Ministry of Treasury and Finance may sometimes set this period as quarterly. This tax is not listed separately on invoices, so this must be considered when declaring income.

 

 

Who Is Responsible for Paying the Digital Services Tax?

 

 

The Digital Services Tax (DST) is a tax levied on revenue earned from specific services provided in digital environments. The taxpayers of this tax are digital service providers. Regardless of whether they are based in Turkey or abroad, all digital service providers operating in Turkey are subject to this tax. However, companies are exempt from this tax if they meet the following criteria:

 

• If their annual revenue from Turkey is less than 20 million TL.
• If their global revenue is less than 750 million euros or its equivalent in foreign currency in Turkish lira.
• If both conditions are met, the company is not required to pay DST.

 

Exemptions from the Digital Services Tax

 

 

The Digital Services Tax (DST) exemption means that certain digital service providers who meet specific conditions are exempt from paying this tax. In Turkey, a company qualifies for DST exemption if:

 

Its annual revenue from Turkey is below 20 million TL. Its global revenue is below 750 million euros or its equivalent in foreign currency in Turkish lira. A digital service provider is exempt from DST only if both conditions are met. Meeting just one of these conditions does not qualify for an exemption. Additionally, there are certain exceptions to the Digital Services Tax application. For example:

Services are subject to a treasury share under Article 37 of the Telegraph and Telephone Law. Services covered under Article 39 of the Expenses Tax Law. These specific services are exempt from DST.

 

How Is the Digital Services Tax Paid?

 

 

The payment and declaration of the Digital Services Tax (DST) follow a set procedure. These procedures can be summarized as follows:

 

Submitting a Tax Declaration

 

Digital service providers must prepare a tax declaration for each taxation period. The taxation period is usually one month per calendar year. Tax declarations must be submitted online through the Revenue Administration (GIB) digital services website by the end of the following month after the taxation period.

 

Payment Process

 

DST payments can be made online using a credit card or bank transfer through the GIB's digital tax portal. Payments can also be made through tax offices and authorized banks.

 

Sources: 1.