Ruling Number: 62030549-120[65-2015/261]-18346 Introduction In a private ruling dated March 4, 2016, the Istanbul Tax Office (Taxpayer Services Income Taxes Group Directorate) addressed whether a person becomes a taxpayer for translation services provided to a company located abroad. The taxpayer stated that they provide translation services from Türkiye to a Spanish resident company. The income earned is sent in foreign currency to their bank account from abroad. The taxpayer has no employment relationship with the Spanish company; payment is made for the work performed. The taxpayer requested clarification on whether they are required to pay tax on this income in Türkiye. Legal Framework – Domestic Law Income Tax Law (Law No. 193) Article 1 – Scope: Real persons’ incomes are subject to income tax. Article 3(1)(1) – Full Liability: Real persons resident in Türkiye are taxed on their worldwide income (both within and outside Türkiye). Article 4 – Residence in Türkiye: The following persons are considered resident in Türkiye: Those whose domicile is in Türkiye; Those who stay continuously in Türkiye for more than six months in a calendar year (temporary absences do not interrupt the period). Article 65 – Definition of Professional Service Income: Income arising from any kind of professional service activity constitutes professional service income. Professional service activities are those that rely on personal effort, scientific or professional knowledge, or expertise rather than capital, are non-commercial in nature, and are performed independently without being subordinate to an employer, under personal responsibility, on one’s own behalf and account. Article 66 – Professional Persons: Persons who perform professional service activities as a regular profession are considered professionals. Engaging in another business or duty alongside the profession does not change this status. Article 82 – Occasional Professional Service Income (Arızi Kazanç): Income derived from occasional professional service activities (not carried on as a regular profession) is considered occasional income. If the total occasional income exceeds a certain threshold (for 2015: TL 23,000), an annual income tax return is required. Tax Procedure Law (Law No. 213) Article 210 – Professional Service Ledger: Professionals must keep a professional service ledger (Kazanç Defteri), recording expenses on one side and revenues on the other. Article 236 – Receipt Obligation: Professionals must issue a two-copy professional service receipt for all collections related to their professional activities and give one copy to the customer. Double Taxation Treaty Provisions Türkiye-Spain Double Taxation Treaty (Published in Official Gazette No. 25320 on December 18, 2003, effective January 1, 2004) Article 14 – Professional Services (Paragraphs 1 and 3): 1. Income derived by an individual resident of one Contracting State from professional services or other independent activities shall be taxable only in that State unless the services are exercised in the other State. If exercised in the other State, the income may also be taxed in that other State if: (a) The individual has a fixed base regularly available in the other State for performing the activities; or (b) The individual stays in the other State for 183 days or more in any 12-month period. In such a case, only so much of the income as is attributable to that fixed base or performed during the stay may be taxed in the other State. 3. The term “professional services” includes independent scientific, literary, artistic, educational, and teaching activities, as well as the independent activities of physicians, lawyers, engineers, architects, dentists, accountants, and other activities requiring special professional knowledge and skill. Ruling Conclusion Step 1 – Residency Status The taxpayer resides continuously in Türkiye. Under Article 4 of the Income Tax Law, the taxpayer is a resident of Türkiye (full liability taxpayer). Step 2 – Characterization of the Activity The translation service is performed without being subordinate to an employer, relies on personal effort and professional knowledge, and is done on the taxpayer’s own behalf and account. Factor Determination Nature of activity Translation services (requires professional knowledge and skill) Characterization Professional service income (serbest meslek kazancı) Step 3 – Regular vs. Occasional Professional Service Scenario Characterization Tax Treatment Translation services performed continuously / as a regular profession Regular professional service income Must keep professional ledger, issue receipts, file annual return for all income Translation services performed occasionally (not regularly) Occasional professional service income (arızi kazanç – Article 82) Annual return required only if total occasional income exceeds TL 23,000 (2015 threshold) Step 4 – Treaty Application (Article 14) Factor Determination Where is the taxpayer resident? Türkiye Where are the services performed? Türkiye (without going to Spain) Does the taxpayer have a fixed base in Spain? No Does the taxpayer stay in Spain for ≥183 days? No Taxing right under Article 14(1) Only Türkiye Should the Spanish company withhold tax? No (taxable only in Türkiye) Summary Table Question Answer Is the taxpayer a resident of Türkiye? Yes (domicile and continuous stay in Türkiye) What is the nature of translation income? Professional service income If performed regularly (as a profession): Keep professional ledger, issue receipts, file annual return If performed occasionally (not regularly): Occasional income (arızi kazanç) – annual return required only if > TL 23,000 (2015) Under DTT Article 14, who has the taxing right? Only Türkiye (services performed in Türkiye) Should Spanish company withhold tax? No Required document for treaty benefits in Spain Certificate of Residency from Turkish authorities Compliance Obligations for Regular Professional Activity If the translation service is performed continuously as a regular profession: Register as a professional (serbest meslek erbabı) with the tax office. Certify a professional service ledger (Kazanç Defteri) – record revenues and expenses. Issue professional service receipts (serbest meslek makbuzu) for all collections. File annual income tax return (Yıllık Gelir Vergisi Beyannamesi) – declare all professional service income. Pay income tax according to progressive tax brackets (Articles 103 and 104). No withholding tax applies (since payments are from abroad and not subject to Turkish withholding). Important Notes The taxpayer must self-assess whether the translation activity is regular or occasional. If regular: Full professional registration and reporting obligations apply. If occasional: Tax liability arises only if the annual threshold (TL 23,000 for 2015) is exceeded. The DTT confirms that Türkiye has the exclusive taxing right because the services are performed in Türkiye. 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.