Tax Treaty Case Law around the Globe 2023

1. Introduction

Turkish legislative efforts to tax digital services rendered to Turkish consumers by digital giant companies without a physical presence in Turkey started in 2017 by introducing a new registration obligation for foreign digital enterprises. The result was that the Turkish Government began collecting VAT on services provided by remote digital enterprises to domestic individual consumers in Turkey. The second attempt was to introduce an income withholding tax on digital advertisement service payments made to non-resident digital companies (or individuals) applicable whether the non-resident online advertising service providers are taxable persons in Turkey or not. In 2018, the president imposed a 15% withholding tax (WHT) on the online advertising services income of non-resident individuals and companies for the first time. The WHT obligation started to apply as of 1 January 2019. Finally, Turkey introduced, on 7 December 2019, a digital services tax (DST) for the first time. The DST started to be applied as of 1 March 2020.

The so-called income withholding tax applied as an income tax collection method instead of self assessment on the advertisement income of non-resid...