Value-added tax (VAT) cuts from Facebook ads have officially begun in Turkey as of this month, according to a statement made by the social media platform.
Facebook, which operates in Turkey through its Ireland operations, will now be subject to 18 percent VAT in the country. The Finance is expected to obtain a VAT income of about TL 450 million from Facebook, which closed last year with an estimated turnover of TL 2.5 billion.
Facebook ads have been officially taxed in Turkey as of April 1, 2019. Eighteen percent VAT will now be deducted from ads on Facebook, Instagram, Messenger or Marketplace.
Those who want to publish a new ad on the platform face the tax declaration on the payment screen and Facebook will ask for a tax identification number onscreen.
It should be noted that this tax, which is added to the advertising budget paid to Facebook, comes out of the advertisers' pocket. The amount paid to Ireland would be sent to Turkey's Revenue Administration.
Facebook conducts its operations in Turkey as a nonresident organization through Facebook Ireland Ltd. With the new period beginning on April 1, Facebook Ireland Ltd. is now subject to VAT in the country.
Although it has not been officially announced, it is estimated that Facebook closed 2018 with a turnover of TL 2.5 billion in Turkey and that figure keeps growing every year.
Almost all of the TL 2.5 billion revenue consists of advertising. In other words, with the new VAT regulation, the finance ministry will receive a minimum of TL 450 million - 18 percent of TL 2.5 billion in VAT income - annually from Facebook.
According to January 2019 data, Turkey has 43 million users on Facebook and 38 million users on Instagram. The data released by the social network at the end of November 2018 suggests almost 2 million small and medium-sized enterprises (SMEs) across the country have a business account on Facebook. In addition to these businesses, anyone who has a Facebook account can advertise in various formats on the platform.
So now all those who want to advertise on Facebook and on site platforms will pay VAT. It is also an issue of concern how this new development, which will increase costs for advertisers, will affect the volume of ads on Facebook. Prior to that millions of account holders were able to put commercial ads on Facebook without establishing an official company in Turkey. However, in the new period, these accounts will be subject to VAT liability regardless of whether they run a company or not.
In this context, Facebook also made notifications to users in Turkey, saying, "As of April 1, 2019, Facebook will begin to receive Turkish Value Added Tax (VAT). To ensure that you are taxed correctly, add your VAT number (Tax ID Number) and confirm that you will declare VAT by yourself."
For example, if Facebook receives a payment of TL 100 when you reach a billing level of TL 100, you will be charged TL 100 for advertising costs.
With the addition of 18 percent VAT, a total of TL 118 will be paid for this fee (TL 100 + TL 18 = TL 118). For this reason, people who use Facebook ads will be charged more than the billing level due to the VAT application.