Communique (Serial No. 17) on Amending the Corporate Tax General Communique (Serial No. 1) Has Been Published

As is known, with the Presidential Decree No. 476 (“Decree”) published in the Official Gazette dated 19.12.2018, payments made for advertisement services offered/mediated for online platforms had been included within the scope of tax withholding. You may access our article here that includes our reviews about the Decree, which entered into force to be applicable for payments to be made after 01.01.2019.

“The Communique (Serial No. 17) on Amending the Corporate Tax General Communique (Serial No. 1)” (“Communique”), which introduces clarifications and further details to the said withholding obligation, was published in the Official Gazette No. 30687, dated 15.02.2019 and entered into force. The amendments introduced by the Communique are as follows:

1. It has been determined that in advertisement services provided on online platforms by those which are obliged to withhold tax, as listed in Article 15 of the Corporate Tax Law (Public administrations and organizations, state-owned economic enterprises, other institutions, commercial companies, business partnerships, foundations, associations, economic enterprises owned by foundations and associations, cooperatives, investment fund managers, tradesmen and the self-employed which are obliged to declare their real income, and farmers who determine their agricultural revenues on the basis of balance sheet or agricultural enterprise account, all of which have their legal and principal office addresses in Türkiye), tax withholding must be applied at the rate of
   • 15%, if the advertisement service is provided by or through the intermediary of a real person,
   • 0%, if the advertisement service is provided by or through the intermediary of corporate taxpayers,
   • 15%, if the advertisement service is provided by or through the intermediary of a legal entity which is a limited taxpayer with limited tax payment liability;

   Whereas, those who are not obliged to withhold tax shall not have any obligation to withhold tax over the payments to be made by them in consideration of advertisement services they obtain on online platforms from limited or full taxpayer entities;

   In respect of the services provided before 19.12.2018 (Date of Entry into Force of the Presidential Decree), tax shall be withheld over the payments made as of 1/1/2019 (inclusive of this date);

   In case of a payment made in cash or on account before 19.12.2018 to those which provide or act as an intermediary for the provision of advertisement services on online platforms, no tax shall be withheld over any further payments to be made after 1/1/2019 for the services which constitute the subject of these payments.

   It would be useful to give some examples regarding the issue to clarify the confusion in practice:

   If a company resident in Türkiye:

   • Gets a software development service or additional development service invoice from an abroad company, it will be subjected to 20% withholding tax regardless of using or selling this software;
   • Uses a monthly packet program from an abroad company, there will be no withholding tax, regardless of making the payment as monthly or annually;
   • Gets all copyright of a software from an abroad company, it will be subjected to 20% withholding tax without prejudice to provisions of double taxation agreements between both countries;
   • Gets an invoice from an abroad search engine company by giving an advertisement, it will be subjected to 15% withholding tax;
   • Applies to a broker company resident in Türkiye for online ads, there will be no withholding tax to be applied;
   • Applies to a broker company resident in Türkiye who reflects the payment of the abroad search engine company, then it will be subjected to 15% withholding tax.
2. The said Communique’s section entitled “Taxation of the transactions, which are made with non-shareholders, in cooperatives that are exempted from corporate tax” has been amended as below: “To enable the determination of the income obtained from transactions made with non-shareholders, and of the tax base subject to corporate tax, the cooperatives that are exempted from corporate tax must keep track of their revenue, cost and expense items within the scope of their transactions made with non-shareholders, separately from the same items that are within the scope of their transactions that are not considered as made with non-shareholders, and must not associate their revenue, cost and expense items related to transactions made with non-shareholders, with other transactions, and must enter them in their legal ledgers in a way that will ensure such distinction.”
3. 3. Another amendment introduced by the Communique authorizes the President of the Republic of Türkiye, pursuant to Article 11, paragraph 7 of the Tax Procedure Law, to determine different tax withholding rates regarding taxable transactions, on the condition of remaining within the minimum and maximum limits as specified by the relevant tax codes, depending on business groups, business types, sectors and commodity groups, and to allow those which are party to or act as intermediary in taxable transactions to apply tax withholding, regardless of
   • the taxpayer status of the recipients of the payment,
   • whether or not the persons making or acting as intermediary for the payment have the obligation to withhold tax as per the tax laws,
   • whether or not the payment originates from trading of goods and services,
   • whether or not the transaction is made in electronic medium,
   • and whether or not such payment amount is subjected to tax deduction by the recipient of the payment in determination of its tax base.

You may access the full text of the Communique here.