Online Advertising Services are included in the Scope of Withholding Tax

Hatice ZÜMBÜL*[1]



In accordance with technological, commercial and economic developments, services provided via Internet and platforms created on it became widespread. Accordingly, commercial activities, especially advertising activities, performed on these platforms are being more and more critical and useful for commercial enterprises.

In parallel with these developments, actions operated on above-cited platforms are required to be under control and supervised, pursuant with legislation, in terms of personal data protection and intellectual property law. In this regard, governments, international institutions and organizations have started to take legal actions regarding mentioned platforms and users of it.


Through the Resolution of the President No. 476 (Resolution), published in the Official Gazette dated December, 19 2018 and numbered 30630, online advertising services provided on social media websites and search engines are included in the scope of withholding tax provided that they operate and monetize in Turkey, such as Google, Twitter and Facebook etc. even though they were not liable for withholding tax.

Pursuant to the Resolution, payments made within the scope of Tax Procedure Code, Income Tax Code and Corporate Tax Code, for advertising services provided through the Internet to the providers of this service or to those who act as an intermediary for the provision of this service are included in the scope of withholding tax whose rate is 15%.With Law on Supporting Investments on Project Basis and Amending Certain Laws and Decree Laws numbered 6745 (“Amending Code”) published in the Official Gazette dated September, 7 2016 and numbered 29824, a new paragraph was added to Art. 11 of Tax Procedure Code. New regulation empowers Council of Ministers to make parties of or/and intermediaries for taxable operations be included in the scope of withholding tax regardless of whether the payment is for merchandise or provided services and payee is a tax payer or not; and determine different tax rate for the mentioned operations.


In this context, payments made for those who provide online advertising services and/or are intermediaries for online advertisings services are included in the scope of withholding tax regardless of whether they are taxpayers or not. Additionally, it could be said, by considering recent cases, social media firms and other organizations performing their activities on Internet are likely to be subjected to varied similar regulations and rules etc. in the forthcoming days.

Moreover, digitalization process which could be observed in almost every field today has been effective on the economy thus, new business models have been developed such as generating income via online advertising services by Twitter and Facebook etc. In addition to these, companies such as AirBnB and are started to provide intermediation services through the structures they created.

Physical workplace environment based taxation method makes nearly impossible of , taxability of online advertising activities and services provided on the Internet which are operated by the Twitter, Facebook, AirBnB and etc. As dealing with it, the draft of the Code, a provision regarding a definition of the digital workplace environment and the status of being tax payer of those who are intermediary for supplying, payment and/or purchaser for goods and services is included.


Nevertheless, pursuant to the VAT, services within the scope of operations which are commercial, industrial, agricultural and related to self-employment may be subjected to VAT provided that above-mentioned services are intrastate in Turkey or must be conducted in Turkey. Under cited circumstances, non-resident companies are subject to VAT in terms of provided services which are intrastate in Turkey even if, mentioned services are performed outside.

The main point to take into consideration in respect of VAT is whether the services are provided via Internet are used in Turkey or not; regardless of whether services are provided from outside of Turkey. Digital and social media services shall be subjected to VAT in case that Turkish resident company who is providing services via services of non-resident companies (for example; advertisement service is provided by Irish resident company Google Inc. for Turkish-resident company which trades in cosmetic goods via e-commerce web sites). Persons who shall declare the tax in the capacity of responsible in terms of VAT are users of the above-mentioned services. In this context, even if the service is provided via Internet and by non-resident persons, the tax shall accrue.

On the other hand, according to the amendment on Paragraph 1 of article 9 of VAT through the Law numbered 7061 and dated 08.11.2017, in case that persons who do not have residence, office, legal head office and work center in Turkey provide services on electronic environment for real persons who are not taxpayer, the former shall declare and pay the tax. Non-resident electronic service providers must declare the tax in regard to services to be provided for real persons who are not tax payer by the means of “Establishing Tax Liability for Electronic Service Providers” with VAT Declaration No. 3 on electronic environment. However, if the provider of electronic service is undefined, declaration shall be made by those who act as an intermediary for above-mentioned service.

In this regard, electronic services which are provided by non-resident companies and used in Turkey refer the dual structure in terms of taxation within the scope of VAT. According to this, on the condition that the person who gets the services is the tax payer, declaration shall be made by him/her in the capacity of responsible through submitting VAT Declaration No. 2.  If real person who gets the services is not taxpayer, the tax shall be accrued after the provider of the electronic services (mediator, if provider cannot be defined) establish tax liability in terms of VAT on the purpose of this operation and submit the VAT Declaration No. 3 on electronic environment.


It can be said that it is a new era for taxation system that 15% tax will be deducted from the payment made for tax payers who are limited and unlimited real person providing advertisement services on the Internet or act as an intermediary for providing mentioned services and limited tax payer institutions within the scope of the Resolution (It is known that, unlimited tax payers whose headquarters or business quarters are in Turkey and they shall pay tax in Turkey on their all global income. Limited tax payers whose headquarters or business quarters are not in Turkey, shall pay tax on income which only earn in Turkey).



*The author is the Head of Litigation and Dispute Resolution at Nazalı Attorney Partnership. She wishes to    express her thanks to colleagues for their assistance in the preparation of this article.