VAT taxation of B2C digital services

Internet and digitalization have changed the way commerce works. Big firms of the past could not catch the trend and were erased from the market. The ones who adapted themselves flourished and became the new leaders of market. The role of the state is to tax this income without damaging the commerce itself. However, the task of the state seems harder this time. Because, with the spread of the internet the modus of commerce has changed. Now the firms can serve anywhere in the world without needing any physical presence there. This change has blurred the notion of borders and customs. This blurring should be tried to be eliminated in legal terms. In this study, we will examine a subject that presents us new problems with the development of technology. We will try to make an assessment of digital services in terms of value added tax. First, we don't analyze all sorts of e-commerce but only B2C (Business to Consumer). Second, we don't analyze all B2C e-commerce (supply of goods etc.) rather only supply of digital services. Finally, we don't analyze supply of digital services in B2C in every aspect of tax, instead we focus on VAT taxation of this activity. In the first chapter we tried to define electronic commerce and analyzed some tax types in order to enlighten the relation between VAT and e-commerce. In the second chapter we laid our questions which we grouped by three: The problems related to definition of e-commerce; determination of place of supply and effective collecting mechanisms. In the last chapter we have tried to answer these questions.