VAT and Withholding Tax on Google Advertising Invoices
If you are making payments for advertisements on foreign-based platforms such as Google, Meta, Facebook, Instagram, or YouTube, you are liable for VAT and withholding tax in Türkiye. Here are the details:
1. Which Taxes Are Payable?
- 20% VAT: As the advertising service is utilized in Türkiye, VAT must be paid under the “reverse charge” mechanism.
- 15% Withholding Tax: Similarly, withholding tax is required for advertising services under the same mechanism.
2. How Are Taxes Calculated?
- The paid advertisement amount is first grossed up.
- Based on the grossed-up amount:
- 20% VAT is calculated.
- 15% withholding tax is calculated.
3. VAT Declaration
- VAT is paid under the VAT Return No. 2 using the reverse charge mechanism.
- Following this payment, it can be deducted in VAT Return No. 1.
4. Withholding Tax Submission
- The calculated withholding tax is reported under the MUHSGK Return with code 279.
- Paid withholding tax can be recorded as an advertising expense and deducted from the tax base.
Note: Corporate Tax Law (KVK) 30 PAY – Advertising Services Provided in an Online Environment: Payments related to advertising services provided online (Article 30/1-d of the Corporate Tax Law).
Summary
For advertising services received from foreign-based platforms, businesses in Türkiye are required to fulfill both VAT and withholding tax obligations. With the correct declarations and payments, this process can be managed to provide tax advantages.
Below, you can review a sample advertising invoice, tax calculations, and an example journal entry.
SAMPLE FOREIGN – GOOGLE ADVERTISING INVOICE
| Type | % | Amount |
|---|---|---|
| Advertising Fee | 300.00 USD | |
| VAT | 0% | 0.00 USD |
| Invoice Total | 300.00 USD | |
| 1 USD = | 32.00 ₺ | |
| Amount in TRY | 9,600.00 ₺ | |
| Withholding and VAT-2 Base (9,600 / 0.85) | 11,294.12 ₺ | |
| Withholding (15%) | 15% | 1,694.12 ₺ |
| Reverse Charge VAT-2 | 20% | 2,258.82 ₺ |
| Total Invoice Cost | 13,552.94 ₺ |
ACCOUNTING ENTRY EXAMPLE FOR FOREIGN EXPENSE INVOICE
| Account | Debit | Credit |
|---|---|---|
| 760 Marketing, Sales, and Distribution Expenses | 11,294.12 | |
| 191 Deductible VAT | 2,258.82 | |
| 329 Other Commercial Payables | 9,600.00 | |
| 360 Taxes and Funds Payable | 3,952.94 | |
| – Reverse Charge VAT | 2,258.82 | |
| – Withholding | 1,694.12 | |
| Total | 13,552.94 | 13,552.94 |
Ali KARAKUŞ
CPA, Independent Auditor
December 7, 2024
İstanbul
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 Karen Audit 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.
