Turkey's Revenue Administration has announced the publication of Law No. 7194 in the 7 December 2019 edition of the Official Gazette, which includes several tax reform measures. Some of the key measures are summarized as follows:
A new digital services tax (DST) is introduced that applies for the following:
Further, any proceeds from intermediation services provided digitally for the above services are subject to the digital service tax. Certain services are exempt, including services subject to treasury duty, services subject to communication tax, and certain services covered by the Banking Law, and the sale of products to certain R&D and design centers.
Suppliers meeting a EUR 750 million annual revenue threshold with digital sales of at least TRY 20 million in Turkey are subject to the DST. If a supplier is part of a group, group revenue and sales are considered. The president is also authorized to adjust the thresholds to zero or up to triple the amounts specified for each digital service type together or separately.
The standard DST rate is 7.5%, although the president is authorized to reduce the rate to 1% or double the rate for each service type. The tax base is the gross revenue derived from the supply of digital services, with no deductions. If revenue is calculated in a foreign currency, it should be converted into Turkish lira using the valid Central Bank exchange rate at the time of receipt of the proceeds.
The standard tax period for DST is monthly, although the Ministry of Finance is authorized to prescribe a quarterly period for a taxpayer depending on the type of service and/or operating volume. Returns for DST are due by the end of the month following the tax period. DST paid may be deducted for income and corporate tax purposes.
The DST applies from the third month following the publication of the Law No. 7194 (i.e., 1 March 2020).
A new accommodations tax is introduced that applies on income from accommodation services, including hotels, motels, hostels, guesthouses, campsites, etc., as well as services provided in such accommodation, such as eating, drinking, recreation, use of pools/sports facilities, and similar.
The accommodation tax rate is 2% on the consideration paid for the services, excluding VAT. However, the rate is reduced to 1% until 31 December 2020. Further, certain accommodation services, including those provided to students in dormitories, hostels, and camps, and those provided to diplomatic missions that are exempt under international agreement. The tax period is monthly, with the tax due by the 26th of the following month.
The accommodations tax applies from 1 April 2020.
The individual income tax brackets and rates for employment income are amended as follows:
For other non-employment income, the number of brackets and rates are the same, but the 35% bracket threshold is TRY 98,000 as follows:
The article containing the new brackets/rates (Article 17) is effective for income obtained from 1 January 2019, although it is separately provided that employment income obtained between 1 January and 31 December 2019 remains subject to the brackets/rates prior to amendment.
A progressive valuable housing (residence) tax is introduced on the value of residences situated in Turkey exceeding TRY 5 million:
Certain exemptions apply, including for residences owned by general and special budgeted administrations, municipalities, and universities, persons with only one residence and no income (except pensions), residences used for diplomatic missions (subject to reciprocity), and new residences owned by construction businesses.
The valuable housing tax applies from 1 April 2020.