Türkiye (Turkey) introduced VAT on digital services supplied by foreign companies to non-registered customers in Turkey (customers without a valid VAT number) in 2018. Foreign companies supplying digital services to Turkey are expected to register and charge VAT on sales of digital services to end consumers.

VAT Rate: 20% VAT is applied to the sale of affected digital services.

Digital Services in Scope

The Turkish VAT Act and related final communique do not define digital services. However, practically speaking, the following services should qualify as digital services in Turkey:

• Streaming video, music, or online gaming;
• E-books;
• Hosting websites;
• Services related to mail, telephone, telegrams, telex, radio, and television.

Exemptions:

• Roaming services received from abroad within the framework of international roaming agreements and the reflection of these services to customers in Turkey should be exempt from VAT.

Determining the Location of the Turkish Consumer

Turkish legislation does not define the method to determine the location of the customer. The law states that services offered electronically to real persons by those who are not VAT taxpayers in Turkey, by those who do not have a residence, workplace, legal center, or business center in Turkey, should be subject to VAT.

In practice, service providers generally rely on the customer's billing address, country code of the telephone, IP address, and bank account details to determine customer location.

VAT Registration for Foreign Companies

Foreign companies that provide digital services to Turkish non-taxable persons should register for VAT purposes with the Turkish Revenue Administration as “Special VAT Registration for Electronic Service Providers.”

• VAT registration threshold for non-resident suppliers of Digital Services: no registration threshold
• Fiscal representatives: No

VAT Returns and payment of taxes

VAT returns for non-residents

Once registered, businesses should need to collect and remit taxes to the Turkish Revenue Administration. Note that these are returns for non-resident companies - not to be confused with VAT returns of local companies.

Digital Reporting Requirements for Cross-Border Digital Services

Even though there are e-invoicing and digital reporting obligations in Turkey, foreign digital service providers are not in scope of these requirements even if they are registered for VAT purposes.

For more information about digital reporting requirements in Türkiye see E-Invoicing and Digital Reporting Guide.

Foreign Intermediaries Withholding VAT

Türkiye introduced a partial VAT withholding mechanism. The obligation depends on the type of service. Services such as construction work, catering, organization events, contract textile manufacturing, and cleaning services are in scope. However, digital services are not included in this scheme.