TAXATION ON THE YOUTUBE AND SOCIAL MEDIA INCOME 9 September 2021
TAXATION ON THE YOUTUBE AND SOCIAL MEDIA INCOME
1. INTRODUCTION
Many new job opportunities are emerging today because of the developments in technology and the raised involvement of social media in human life. People may gain earnings by producing content on the social media platforms such as Youtube, Linkedin, Twitch, etc. It has not been clearly understood that whether these incomes earned on social media platforms will be taxed or not and if so how they will be taxed since earning gains on social media is a relatively new business area.
Income taxes in Turkey are examined under two headings as income tax and corporate income tax. The income taxation earned by real persons is subject to the Income Tax Law and therefore income tax. Besides, income taxation of corporations/legal entities is subjected to corporate income tax.
According to the Income Tax Law, Various elements are required for the taxation on the income of a natural person. In Article 2 of the Income Tax Law, these elements are revealed as;
- Trading profits
- Income from agriculture
- Fees
- Self-Employment Incomes
- Income From Immovable Property
- Income From Moveable Capitals
- Other Income and Earnings
The income that does not include any of these elements will not be the subject of income tax within the scope of the law even if it is counted as income.
2. WHAT ARE THE CHARACTERISTICS OF THE EARNINGS FROM YOUTUBE AND SOCIAL MEDIA?
Commercial enterprise is defined in the Turkish Commercial Code (“TTK”). Accordingly, the commercial enterprise; is an enterprise in which activities aiming to generate income exceed the limit for the artisan enterprise are conducted continuously and independently. All activities of the commercial enterprise are defined as commercial activities. At this point, the earned income of the commercial enterprise is considered commercial income. According to the Turkish Revenue Administration’s consistent view on the issue, the earnings from Youtube and Social Media are commercial income.
3. WHAT ARE THE CONSEQUENCES OF DEFINING INCOME AS COMMERCIAL INCOME?
a. CONSEQUENCES IN TERMS OF INCOME TAX LAW
According to the advance ruling of the Turkish Revenue Administration dedicated to the applicant paid by Google published on 13.11.2019, The income earned by the applicant should be considered as commercial income in accordance with article 37 of the Income Tax Law. Moreover, article 85 of the Income Tax Law states that the annual income tax return should be filed. At this point, the relevant incomes might be taxed in 2 different ways which are establishing a sole proprietorship, joint-stock company, or limited liability company and billing the company which the payment is received.
In this regard, it would be appropriate to mention the tax exemption for persons under the age of 29. Accordingly, if the annual income of the sole proprietorships established by persons under the age of 29 does not exceed 75,000,00 TL (seventy-five thousand Turkish Liras), the interested person is exempted from tax within the scope of the income exemption.
b. CONSEQUENCES IN TERMS OF TAX PROCEDURE LAW
Defining social media incomes as commercial income results in several responsibilities, such as establishing amenability, keeping books, invoicing, and submitting declarations continually, for the income earners in accordance with the Tax Procedure Law.
c. CONSEQUENCES IN TERMS OF VALUE ADDED TAX LAW
Article 1/1 of Value Added Tax Law No. 3065 states that deliveries and services made in Turkey within the framework of commercial, industrial, agricultural, and self-employment activities are subjected to VAT. However, in article 11/1-a, services made for customers abroad are exempted from VAT, and then in article 12/2, it is stated that for a service to be considered as service made for customers abroad, the service must be made for a customer abroad and the service must be benefited at abroad.
In the light of all these articles, it can be said that people who earn income for their activities in Turkey through Youtube or different social media platforms are liable to Value Added Tax. Besides, the advance ruling of the Revenue Administration dated 07.06.2021 states that if the video content published on Youtube offers exclusively for viewing abroad, the relevant service is subjected to Article 11/1-a of the VAT Law and therefore will be evaluated within the scope of service export and VAT will not be calculated over this service income provided that other conditions regarding the export of services are also met.
On the other hand, if it is possible to watch the video content published on Youtube in the domestic country as well as abroad, it is not possible to evaluate the earned income from the service; which is not exclusively for customers abroad, within the scope of service export, and VAT is calculated for these services according to the general provisions.
4. CONCLUSION
The consistent view of the tax administration is that social media incomes are commercial incomes. Following this view, different results arise in terms of different codes. According to the Income Tax Law, the person has to pay income tax. In addition to that those who have social media incomes must fulfill several obligations within the scope of the Tax Procedure Law such as establishing amenability, keeping books, invoicing, and submitting declarations continually. Finally, individuals have the obligation to pay VAT for their activities within the scope of the Value Added Tax Law other than the export of services.
