February 2, 2018
Tax News No: 2018/2
Subject: The Sole VAT Registration Requirement for the Non-resident E-service Providers in Turkey .
The Law No. 7061 Regarding Amendments on Certain Tax Laws and Other Laws was published in the Official Gazette on 5 December 2017.
The Said Law made a significant amendment in the Value Added Tax Code (VAT Code) by adding that the VAT on services that are provided electronically (digital services) by those e-service providers who are lacking a residence, a workplace, a legal headquarter and a business centre in Turkey (non-resident e-service providers) to those real persons who are not VAT taxpayers will be declared and paid by those qualifying non-resident e-service providers to the Turkish Tax Offices. The said amendment in Article 9 of VAT Code would be in effect as from 1 January, 2018. The MoF was granted the authority to determine the scope of the e-services and the VAT application. In this respect, VAT Communique No. 17 was published on 31 January 2018 and Articles of the said communique relating to the VAT liability of the non-resident e-service providers entered into force on 31 January 2018 to take into effect as from 1 January 2018.
What is the scope of e-services?
It is understood that the Turkish Tax Authority holds a wide interpretation for the definition of e-services. Any limitations are not mentioned in the said communique.
Who are liable for sole VAT registration in Turkey?
The e-service providers without a residence, a workplace, a legal headquarter and a business center in Turkey (non-resident e-service providers) and who are providing services electronically in return for a service fee to those real persons who are not VAT taxpayers in Turkey, are required to submit a VAT return (referred to as VAT Return No. 3) and pay the due VAT to the Turkish Tax Office as from 1 January,2018.
The e-services that are received by VAT taxpayers in Turkey will not be included in VAT Return No. 3. Accordingly, those service recipients are obliged to declare and pay the VAT through reverse charge mechanism in Turkey.
If the provision of such services in Turkey constitute a PE in Turkey, then it would normally be expected that a Permanent Establishment (PE) is registered by the non-resident e-service provider in Turkey and ordinary monthly VAT declarations will be filed by the said PE in Turkey.
In cases where the e-service providers are not explicitly mentioned and this is not reflected in the service contracts, where the information relating to the scope of the services and the e-service providers is not explicitly mentioned on the invoices and the similar documents, the VAT over such services will be declared and paid by the intermediaries of the e-services provided.
It is also stated that those who hold the authority to ask for a fee in return for the services or to determine the general conditions of the services provided or those who are liable to perform the services will be deemed as e-service providers.
What are the Procedures to be followed by the qualifying e-service providers in Turkey for the VAT registration ?
A standard form that can be reached through the link www.digitalservice.gib.gov.tr must be filled out by the non-resident e-service provider.
Upon the approval of the said form electronically, the VIP Tax Office will register the non-resident e-service provider as a “Special VAT Registration for Electronic Service Providers”
Following the VAT registration, a username, a code and a password will be granted to the non-resident service providers to enable their submission of VAT return and payment of due taxes to the e-tax Office.
The VAT filing will be realized on monthly basis, whereby a VAT return of the relevant monthly will be declared by the 24th of the following month and the due taxes will be paid by 26th of the same month in which the tax return is submitted.
Specific to the introduction of this new VAT filing by the non-resident e-service providers in the year 2018, it is stated that the non-residents will declare their transactions that fall within the scope and are conducted between 1 January and 31 March, 2018 until 24th of April, 2018 and pay the tax due by 26th of April, 2018. Similarly, null return is not required to be submitted provided that no transactions are conducted in the 1Q of 2018.
The VAT return to be submitted by the non-resident e-service providers is named as VAT Return No. 3, which is required to be filled out in Turkish Lira.
VAT Return No. 3 is not required to be submitted for the months in which no such transactions are conducted. (There is no requirement for the null returns to be declared.)
VAT Return No. 3 is not required to be signed by the CPAs in Turkey, in the meaning that the said returns can be directly submitted by the non-resident e-service providers themselves.
Where to pay the due VAT?
The non-resident e-service provider can pay the due VAT to the tax offices and to the banks who are authorized for the collection of taxes. Alternatively, the payment can be made through the bank cards or credit cards of the authorized banks via the website www.gib.gov.tr.
What currency shall be used to declare the VAT Return No. 3?
Provided that the services fees are determined in Turkish Lira, the Turkish Lira amounts will be considered in the VAT declaration. However, if the service fees are determined in foreign currencies other than Turkish Lira, then the foreign exchange buying rate announced by the Turkish Central Bank applicable for the day in which the VAT able transaction has occurred will be taken into account to convert the amount into Turkish Lira. Accordingly, the VAT Return No.3 is required to be submitted and paid in Turkish Lira.
What is the VAT rate applicable on such services?
The VAT rate that is applicable on such services as per the VAT Code in Turkey will similarly apply.
Are there any compliance requirements for the non-resident e-service provider in Turkey ?
The non-resident e-service providers are not required to keep statutory books in Turkey. However, if the non-resident service provider takes into consideration the input VAT incurred in Turkey in relation to the services that fall within the scope of VAT Return No. 3, then the invoices and the relevant documentation received in relation to such input VAT is required to be filed and kept as per the Turkish Tax Procedures Code.
Can the input VAT incurred in Turkey by the non-resident e-service providers be offset against output VAT on such service provisions ?
Provided that the input VAT has been incurred by the non-resident e-service provider in relation to the provision of the services that will be declared in VAT Return No.3, only the amount of the input VAT that corresponds to the transactions to be declared can be offset against the output VAT on sale of qualifying e-services in Turkey. In order to deduct such input VAT, the input VAT is required to be shown on the invoices and similar documents to be issued by those VAT payers in Turkey from whom the services are received or goods are purchased. The supporting documents is required to be filed and kept as per the Turkish Tax Procedures Code.
What are the penalties if the non-resident service provider is not registered for VAT in Turkey ?
It is mentioned that the penalties mentioned in the Tax Procedures Code shall apply. Accordingly, the tax penalties for late filings and special irregularity fine for non-compliance can be charged. The potential penalties should be analyzed based on the merits of each case.
Arzu Akçura – Tax Director
adeger@deloitte.com
Yours sincerely,
Deloitte Turkey
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