Taxation of Broadcasters Streaming Live on Social Media Platforms

Introduction

Although technology is developing rapidly, it is not so fast to change people's traditional ways of life. However, with the pandemic, people's interest in technology has increased rapidly. Many people have been introduced to live streaming platforms that existed before but were unknown to many people. The most common live streaming platforms are Twitch, YouTube and Facebook. The content of the broadcasts is determined by the broadcaster, and viewers are kept engaged through fun games, chatting and short entertaining videos. Unlike traditional TV, on these platforms, broadcasters and viewers can interact instantly. Broadcasters' revenues come from subscriptions, advertisements and donations. How will the earnings of broadcasters be taxed in accordance with the Income Tax Law and Value Added Tax Law (VAT Law)? In this article, the issues of how to broadcast on social media platforms, how to earn income and how the earnings obtained are taxed are examined.

1. How Do Broadcasters Earn Income on Social Media?

Anyone from seven to seventy can open a live broadcast from their social media account. It is possible to see even former athletes and TV actors among the broadcasters. While some broadcasters stream on social media platforms as a hobby, others are dedicated to this business and earn their livelihood with the earnings they earn from here. So what are these earnings?

Subscriptions: The most important earnings are subscriptions as they have a fixed return in case of continuity. Viewers pay a subscription fee of around $2-5 per month to support their favorite broadcasters. The subscription fee is estimated and varies with each platform. The subscription fee is determined by specific agreements with the broadcaster, with the platform itself taking a portion and transferring the rest to the broadcaster's account.

Donations: Donations are a system where viewers, whether subscribed or not, support the broadcaster by donating any amount they wish during the broadcast. Donations are sent through the systems contracted by the broadcaster. In addition, the icons determined by the social media platform itself and received for money can be sent in the form of donations from the chat window in an animated way. Bits, which will be bought for real money, can be converted into animated chat icons called Cheers. The Cheers received are sent to the chat screen during the broadcast. Each token sent has a value in dollars and euros and is automatically sent to the donating user. To give an example of the pricing of the tokens that enable donations:

100 Bits: $1.40
500 Bits: $7
1,500 Bits: $20
5,000 Bits: $64.40
10,000 Bits: $126
25,000 Bits: $308 (Shiftdelete.Net. "New Donation System for Turks from Twitch!" Access Date: September 10, 2020)

Although there is no official statement on social media platforms, it is thought that certain deductions are made from the donations made.

Advertisements: As in many social media sites, advertisements appear when the viewer turns on the broadcast or during the broadcast stream, and broadcasters earn income through these advertisements. In addition, the broadcaster makes a profit by agreeing with some companies and promoting the products of those companies in their broadcasts.

The main earnings of broadcasters have been explained and apart from these, they also earn from sponsorships and by participating in many events. Broadcasters who stream as a hobby also have earnings from the places where they work.

2. Taxation of Broadcaster Income

2.1. Tax Procedure Law

Article 156 of the Tax Procedure Law No. 213 defines the workplace. According to the said article; in commercial, industrial, agricultural and professional activities, a workplace is a place that is allocated to or used in the performance of a commercial, industrial, agricultural or professional activity such as stores, offices, bureaus, practices, workshops, factories, branches, warehouses, hotels, coffee houses, entertainment and sports venues, fields, vineyards, gardens, farms, livestock breeding facilities, diving and wharf sites, mines, quarries, construction sites, ferry kiosks.

The Tax Procedure Law has made a broad definition of the definition of workplace and it is possible to consider the environment created by broadcasters broadcasting live on social media as a workplace. Within the scope of Article 37 of the Income Tax Law, the income of broadcasters should be considered as commercial income.

In Article 176 of the TPL, merchants are divided into two classes in terms of bookkeeping.

First-class merchants keep books on the balance sheet basis; second-class merchants keep books on the business account basis.

The invoice is defined in Article 229 of the Tax Procedure Law. Invoice is a commercial document given to the customer by the merchant who sells the commodity or does the work to show the amount owed by the customer in return for the commodity sold or the work done. Article 232 of the said Law lists those obliged to issue invoices:

First and second class merchants;
Self-employed persons;
Merchants whose earnings are determined in simple method;
Farmers who are obliged to keep books;
Tax-exempt craftsmen.

It is stated that they are obliged to give invoices for the commodities they sell or the works they perform, and they are obliged to request and receive invoices from them. Therefore, broadcasters are obliged to issue and receive invoices for their work.

In accordance with the above-mentioned provisions of the TPL, broadcasters who earn commercial income are required to keep books and issue invoices for the services they provide, but as will be mentioned below, with Article 20/B of the Income Tax Law, as of 1/1/2022, an exemption provision has been introduced for earnings that do not exceed the amount specified in the article, if other conditions are met, and those who benefit from the exemption do not need to keep books and issue invoices.

2.2. Income Tax

Article 1 of the Income Tax Law states that the income of real persons is subject to income tax. Article 2 of the Law lists the elements of income that are subject to income tax. The income of real persons broadcasting is subject to income tax, and it has been a subject of debate for a long time which of the seven income elements listed in Article 2 of the law should be subject to income tax. Although the earnings in question are suitable for commercial earnings in terms of their structure, with the Article 20/B added to the Income Tax Law to be applied to the earnings obtained as of 1/1/2022, an exemption provision has been introduced for the said earnings up to the amount specified in the article, and with the Income Tax General Communiqué Serial No. 318 published on 12/01/2022 regarding the application of the said article, it is clearly stated that the said earnings are within the scope of commercial earnings.

Considering the provisions of the Income Tax Law and the Income Tax General Communiqué Serial No. 318, the taxation of these earnings will be as follows.

The income obtained is considered as commercial income in accordance with Article 37 of the Income Tax Law and Income Tax General Communiqué Serial No. 318. In accordance with the provisions of TPL, it is necessary to open a taxpayer registration at the tax office, to keep books, to issue invoices for the services provided, and in accordance with the provisions of the Income Tax Law, a declaration must be submitted on the net income to be reached after deducting the expenses from the income obtained within a year. However, if the conditions are met, the exemption regulated in Article 20/B of the Income Tax Law can be utilized.

With Article 20/B added to the Income Tax Law, an exemption has been introduced to be applied as of 1/1/2022 for the earnings of social content producers who share content such as text, images, audio, video, etc. through social network providers on the internet. The exemption is valid for earnings up to 1.900.000,00 TL for 2023. In other words, if the earnings obtained within a year remain below the exemption amount, the exemption can be utilized if other conditions are met. If the annual earnings exceed this amount, all earnings must be declared.

For 2023, those whose earnings are below 1.900.000,00 TL must obtain an exemption certificate from the tax office where their residence is located in order to benefit from the exemption, go to a bank established in Turkey with the said exemption certificate, open an account and collect all revenues obtained through social media through that account. It is not mandatory to open a new account, it is also possible to use an existing account, but that account will now only be used for these collections.

In addition, if a new account is opened, the information regarding the bank accounts (bank name, bank branch, iban number) must be notified in writing to the tax office within one month from the date of account opening, and if the existing account will be used, the information regarding the bank accounts (bank name, bank branch, iban number) must be notified in writing to the tax office within one month from the date of submission of the exemption certificate to the bank that the existing account will be used for this purpose.

It is not possible to benefit from the exemption if the exemption certificate is not obtained, an account is not opened with the bank, or the smallest collection is collected in a way other than the designated account, for example by hand, or the account information is not reported to the tax office.

Banks will withhold 15% income tax on the amount of revenue transferred to the opened accounts as of the date of transfer.

If the difference between paying tax by benefiting from the exemption and filing a declaration is evaluated; regardless of the amount of the revenue, the rate of tax withheld by the bank is 15%, i.e. fixed. However, if the exemption is not utilized and a declaration has to be made, tax must be paid at rates starting from 15% and rising up to 40% depending on the amount of the income obtained. Based on the year 2023, the tax rate is 15% for earnings up to 70.000,00 TL, when this amount is exceeded, the rates increase as 20%, 27%, 35%, 40%.

For example, if a person who earns 500.000 TL in 2023 and does not have any expenses benefits from the exemption (500.000,00 x0,15=), he/she will pay 75.000,00 TL tax through the deduction made by the bank. If the exemption is not utilized and the person has to submit a declaration, the tax to be paid is 131.400,00 TL.

In addition, when the exemption is utilized, no books are kept, no declaration is made, and invoices are not required to be issued for each service rendered.

If the exemption is not utilized, the bank will not make deductions on the revenue.

Within the scope of social content generation activity, revenues such as advertising revenues, sponsorship revenues, donations, gifts, tips, paid subscription revenues obtained through social network providers will be considered within the scope of the exemption.

Regardless of whether the exemption is benefited or not, after starting the activity within the scope of commercial gain, it is necessary to apply to the tax office and open a taxpayer registration in terms of commercial gain. For those who meet the exemption conditions, the tax office will open the registration when you go to get an exemption certificate.

It is not an obstacle for those who have a taxpayer due to another activity to benefit from the exemption if they also earn from social content generation. The earnings of the taxpayers who have the exemption conditions due to their activities within the scope of the exemption will not be included in the declaration they submit due to their other income.

If the income related to the exempted activities is collected in kind, that is, in the form of goods or services, the exemption conditions will not be violated if the market value of the goods or services subject to collection is deposited into the bank account until the end of the second business day of the following month at the latest, if the income collected in kind is obtained within the last seven days of the current month.

Those who subsequently lose the exemption conditions in the relevant calendar year and those who violate these conditions will not be able to benefit from the said exemption for the year in which the condition is lost or violated, and all of the earnings obtained within this scope will be declared with the annual income tax return. In this case, the taxes withheld by the bank will be deducted from the income tax calculated on the declaration and the difference will be paid. Failure to benefit from the exemption for any reason in the relevant calendar year will not constitute an obstacle to benefit from the exemption in the following years.

In the event that an annual declaration is submitted due to the violation of the exemption conditions, the expenses can be deducted from the declared income. In order for such expenses to be deducted, they must be certified with the documents specified in Law No. 213. While benefiting from the exemption, there is no chance to deduct the expenses from income, because the bank will make the deduction on the revenue, that is, the money collected.

2.3. Value Added Tax

Article 1 of the Value Added Tax (VAT) Law stipulates that deliveries and services made within the framework of commercial, industrial, agricultural and self-employment activities in Turkey are subject to VAT.

The services provided by broadcasters within the scope of commercial activities are subject to VAT.

In Article 4 of the VAT Law, service is defined as;

"1. Services are transactions other than delivery and delivery deemed as delivery and import of goods.

These transactions can be realized in the following ways; making and processing something, creating, manufacturing, repairing, cleaning, preserving, preparing, evaluating, renting, undertaking not to do something.

2. In case the return of a service is a delivery of goods or another service, each of these are separate transactions and are taxed separately according to the provisions of service or delivery." The VAT payer in service works is those who perform these works. Therefore, broadcasters are liable for VAT due to their broadcasting activities on social media accounts and other applications.

In Article 17/4-a of Law No. 3065, deliveries and services subject to the earnings taxed within the scope of Article 20/B of the Income Tax Law are exempt from VAT. The said exemption will be applied to the deliveries and services subject to the earnings taxed within the scope of the said article as of 1/1/2022. Accordingly, as of 1/1/2022, VAT will not be calculated on the deliveries and services subject to the earnings taxed within the scope of Article 20/B of the Income Tax Law, which are obtained by social content producers who share content such as text, image, audio, video over social network providers on the internet and those who develop applications for mobile devices such as smartphones or tablets over electronic application sharing and sales platforms. It is natural that the deliveries and services subject to the earnings that do not fall within the scope of Article 20/B of the Income Tax Law are not exempt and will be taxed according to the general provisions. In addition, if it is determined that the transactions in question do not meet the conditions in Article 20/B of the Income Tax Law from the beginning or that the conditions are violated later, the tax forfeited and the related penalties, interest and increases are sought from those who carry out the transactions. On the other hand, the fact that the total of the earnings within the scope of the first paragraph of the repeated Article 20/B of the Income Tax Law exceeds the amount in the fourth income bracket of the tariff written in Article 103 of the same Law, i.e. 1.900.000,00 TL determined for 2023, and that these earnings will be declared with an annual declaration in accordance with the aforementioned Law, has no effect on the exemption application.

References:

Hürriyet.com.tr. "What is Twitch? How does Twitch.tv work?" ("Twitch nedir? Twitch.tv nasıl işliyor?") Access Date: July 18, 2020
Shiftdelete.Net. "New Donation System for Turks from Twitch!" ("Twitch'ten Türkler için Yeni Bağış Sistemi!") Access Date: September 10, 2020
Revenue Administration. "Tax Guide for Commercial Taxpayers 2018" ("Ticari Kazanç Elde Eden Mükellefler İçin Vergi Rehberi 2018") Access Date: September 05, 2020
Volkan GÜZEL. "Self-Employment Income." Tax Report Magazine. Issue 162. 2013. p.89.
Tax Procedure Law No. 213.
Income Tax Law No. 193.
Value Added Tax Law No. 3065.
Value Added Tax General Implementation Communiqué
Income Tax General Communiqué Serial No. 318

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