Ruling Number: 62030549-125[30-2014/217]-2584 Introduction In a private ruling dated December 5, 2014, the Istanbul Tax Office (Taxpayer Services Income Taxes Group Directorate) addressed whether withholding tax applies to payments made to a German resident company for the acquisition of live match footage. The taxpayer stated that their company operates an online betting website. Live match footage is acquired from a German resident company to be viewed live by member customers only, via computer or mobile phone. The taxpayer requested clarification on whether withholding tax is required on the payments made to the German company for this content. Legal Framework – Domestic Law Corporate Tax Law (Law No. 5520) Article 3(2) – Limited Liability: Corporations whose legal and business centers are both not located in Türkiye are taxed only on their income derived from Türkiye. Article 30(2) – Withholding Tax for Limited Liability Taxpayers: Withholding tax applies to payments made for the sale, transfer, or assignment of intangible rights such as: Copyrights, Patents, Trademarks, Know-how, And similar intangible rights, regardless of whether they are included in commercial or agricultural income. Council of Ministers Decree No. 2009/14593: The withholding tax rate for such payments is 20%. Double Taxation Treaty Provisions Türkiye-Germany Double Taxation Treaty (Effective January 1, 2011) Article 12 – Royalties: 1. Royalties arising in one Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. 2. However, such royalties may also be taxed in the State in which they arise, according to its domestic laws. But if the beneficial owner is a resident of the other State, the tax charged shall not exceed 10% of the gross amount of the royalties. 3. The term “royalties” includes payments of any kind for the use of, or the right to use: Any copyright of literary, artistic, or scientific work (including cinema films, radio and television recordings), Any patent, trademark, design, plan, secret formula, or manufacturing process, Industrial, commercial, or scientific know-how, Industrial, commercial, or scientific equipment. The term “royalties” also includes payments for the use of, or the right to use, a person’s name, image, or any similar personal right. Ruling Conclusion Key Principle – Characterization of the Payment: The acquisition of live match footage to be viewed live by member customers via computer or mobile phone involves: The use of content (match footage) on mobile devices, The right to distribute, display, and use such content. This constitutes the acquisition of an intangible right (copyright of artistic/scientific work – including television/audiovisual content). Therefore, the payments to the German resident company are characterized as ROYALTIES under Article 12 of the DTT. Tax Treatment: Factor Determination Characterization Royalties (Article 12) Domestic withholding tax rate 20% (under domestic law) Treaty reduced rate (Article 12(2)) 10% (maximum) Required withholding tax in Türkiye 10% (treaty rate overrides domestic rate) Conclusion: The payments made to the German resident company for the live match footage are subject to withholding tax at a rate not exceeding 10% of the gross amount under the Türkiye-Germany DTT. Required Documentation for Treaty Benefits To benefit from the reduced treaty rate (10% instead of 20% domestic rate), the German resident company must: Obtain a Certificate of Residency from the competent German authorities proving that it is fully liable to tax in Germany on its worldwide income. Provide the original certificate along with a notarized or Turkish Consulate-certified Turkish translation to the withholding agent (the taxpayer) or the relevant tax office. If the Certificate of Residency cannot be provided: Domestic law provisions (20% withholding tax) will apply instead of the treaty provisions. Summary Table Question Answer What is the nature of the payment? Royalty (intangible right – copyright of audiovisual content) Domestic withholding tax rate 20% Treaty rate (Article 12(2)) 10% (maximum) Withholding tax required in Türkiye? Yes Applicable rate (with certificate) 10% Applicable rate (without certificate) 20% (domestic law) Required document Certificate of Residency from German authorities 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. 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