Ruling Number: B.07.1.GİB.4.34.16.01-GVK 37-2410 Introduction In a private ruling dated December 30, 2011, the Istanbul Tax Office (Taxpayer Services Income Taxes Group Directorate) addressed whether a limited liability person residing abroad is subject to taxation in Türkiye on sales made via the internet. The taxpayer stated that they have been living in the United Kingdom for one year and have established a company there. They make sales via the internet (through gittigidiyor.com and sahibinden.com). Sales proceeds from buyers in Türkiye are deposited into their bank account in Türkiye. The income derived from these sales is taxed in the United Kingdom. The taxpayer requested clarification on whether these sales activities are subject to taxation in Türkiye. Legal Framework Income Tax Law (Law No. 193) Article 3 – Full Liability: The following real persons are taxed on their entire worldwide income: Those resident in Türkiye; Turkish citizens residing abroad who are affiliated with official institutions or organizations whose headquarters are in Türkiye (provided that if they are subject to income tax or a similar tax abroad, they are not taxed again in Türkiye on those earnings). Article 6 – Limited Liability: Real persons not resident in Türkiye are taxed only on their income derived from Türkiye. Article 7 – Income Deemed Derived in Türkiye (for limited liability persons): 1. Commercial Income: The income is deemed derived in Türkiye if: The taxpayer has a place of business or permanent representative in Türkiye, and The income is obtained through such place or representative. Exception: Persons whose business center is not in Türkiye who purchase or manufacture goods in Türkiye for export without selling them in Türkiye are not deemed to derive commercial income in Türkiye. Definition of “selling in Türkiye”: The buyer or seller (or both) being in Türkiye, or the sales contract being made in Türkiye. Definition of “business center”: The place where business transactions are actually conducted and managed. Article 8 – Place of Business and Permanent Representative: “Place of business” is determined according to the Tax Procedure Law. “Permanent representative” means a person who is bound by a service or agency agreement and is authorized to carry out multiple commercial transactions on behalf of the represented party, for a definite or indefinite period. Article 37 – Commercial Income: All income arising from commercial and industrial activities constitutes commercial income. Double Taxation Treaty Provisions Türkiye-UK Double Taxation Treaty (Published in Official Gazette No. 19964 on October 19, 1988, effective January 1, 1989) Article 7 – Business Profits: Profits of a UK resident enterprise are taxable in Türkiye only if the enterprise carries on business in Türkiye through a permanent establishment situated therein. Article 5 – Permanent Establishment: Paragraph 5 – Dependent Agent: A person acting on behalf of an enterprise in one Contracting State creates a permanent establishment for that enterprise if they habitually exercise authority to conclude contracts in the other State. Paragraph 6 – Independent Agent: An enterprise is not deemed to have a permanent establishment in the other State if it carries on business through a broker, general commission agent, or other independent agent acting in the ordinary course of their business. Internet Sales and Permanent Establishment: A website alone does not constitute a permanent establishment. However, if the taxpayer controls (through lease or ownership) a server hosting the website in the other State, and the other conditions are met, that server’s location constitutes a permanent establishment. Ruling Conclusion Key Principle: Sales made via the internet (through platforms such as gittigidiyor.com and sahibinden.com) constitute commercial income because the activities are continuous in nature. Case 1 – Server Located in Türkiye: If you make sales via the internet by leasing or purchasing a server located in Türkiye (i.e., exercising control over the server), then the income derived from such sales shall be taxable in Türkiye. Case 2 – Server Not Located in Türkiye, or No Control Over Server: If the server is not located in Türkiye, or even if located in Türkiye, you purchase services from the server without exercising control (e.g., hosting service without lease or ownership), then the income shall be taxable only in the United Kingdom, and not taxable in Türkiye. Summary Table Scenario Permanent Establishment in Türkiye? Taxability in Türkiye Server located in Türkiye, controlled by taxpayer (lease or ownership) Yes Taxable Server not located in Türkiye No Not taxable Server located in Türkiye but taxpayer purchases services only (no lease/ownership control) No Not taxable Important Notes This private ruling is based on Article 413 of the Tax Procedure Law No. 213. The ruling becomes invalid if incorrect information is provided, or if there is ongoing tax audit, litigation, or reconciliation related to this matter. Acting in accordance with this ruling protects the taxpayer from tax penalties and default interest for the related transactions. Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.