2012 Fiscalis Revenue Administration VAT Department Ankara 1 VAT SYSTEM in TURKEY

2012 Fiscalis Revenue Administration VAT Department Ankara

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VAT SYSTEM in TURKEY


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SCOPEI-INTRODUCTION

1-Brief History2- Legal Framework3-General Characteristics4-General Overview

II. TAXATION1- Taxable Transactions2-Territory3.Taxable Persons4.Taxatıon 4.Taxatıon 5.VAT Registratıon,

Records, VAT Return, Taxable Period And Payment

III- EXEMPTIONS, CREDIT MECHANISM, TAX REFUND

1- ExemptionsA- Type of ExemptionsB- Export ExemptionC- Import

2- Credit Mechanism3- Tax Refund


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I-INTRODUCTION


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1-Brief History

The beginning of the studies on Value Added Tax (VAT) in Turkey goes back to 1970.

The law entered into force on January 1st , 1985.


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2- Legal Framework

VAT Law No.3065

63 Article+28 Temporary Law

116 General Comminique, 60 Circular Note


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3-General Characteristics

VAT ; general consumption tax covers all goods and services aplied to all stages from producer to

consumer calculated on transaction value with

related rate


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General Characteristics

has credit mechanism.

is spread but non cumulative and based on self control system.

is objective and transparent tax


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4-General Overview

The Turkish tax system levies value added tax on the supply and the importation of goods and services.


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General Overview(October 2011)

TOTAL COLLECTION of VAT

78.640.676 (thousand TL) (33.000.000 Thousand Euro)

PERSANTAGE of ALL TAX REVENUE

30,99%

ACTIVE TAXPAYER 2.293.765


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II. TAXATION


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1- Taxable Transactions

In line with OECD and EU Directives

The supply of goods and services, importation of goods and services


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2-Territory

commercial

industrial

agricultural

or independent activities

within Turkey


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and

when goods or services are imported into Turkey


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SUPPLY

The transfer of the right of disposition on a property by the seller to the purchaser.


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SERVICES Everything except goods

After defining service, VAT Law of Turkey counts some examples of service; -making, -cleaning, -processing, -safekeeping, -creating, -preparing, -manufacturing -evaluating, -repairing, -leasing.


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IMPORTATION Any importation

of goods or services into Turkey is a taxable transaction.


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3.Taxable PersonsA- General

Defined in the VAT Law.

Engaged in taxable transactions, irrespective of their legal status or nature and their position with regard to other taxes.


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B-VAT Responsibility and Reverse Charge VAT

In the event that the taxpayer

is not resident,

or does not have a place of business in Turkey, a legal head office or place of management in Turkey,

or in other cases deemed necessary,

having or undocumented goods or purchasing undocumented services


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REVERSE CHARGE IMPLEMENTATION

FULL REVERSE CHARGE

IMPLEMENTATION

PARTIAL REVERSE CHARGE

IMPLEMENTATION


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a) Full Reverse Charge Implementation

Whole tax is declared and paid by the person in charge.

services provided from abroad and benefited in Turkey,

copyright earnings,

renting and advertising services provided by taxpayers who are not VAT taxpayers


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b) Partial Reverse Charge Implementation

Only certain part of the tax (such as 1/3, 1/2, 2/3, 9/10) is declared and paid by person in charge

Toll-manufacturing transactions in textile and ready wear sector

Delivery of scraps and waste

Purchase of services such as construction works, cleaning and security by certain organizations such as public institutions and banks,


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4.Taxation 4.Taxation AA.Chargeable Event.Chargeable Event

When does VAT become chargeable?

General rule Special rules


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B.Taxable Base

On what VAT is calculated?

Total value of the consideration received, not including the VAT itself.


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If consideration does not exist or unknown or is in a form other than money, the taxable base is the market value.

Market value is the average price

payable in the market for similar goods and services and is determined with reference to the Tax Procedural Law.


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a) Items Included in Tax Base;

transport, loading and unloading expenses made by the sellers,

cost of packaging, insurance, commission and similar

expenses,

the elements such as taxes, duties, charges, shares and contributions to the funds,


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miscellaneous incomes such as due date difference, price

difference interest and premium

all benefits, services and assets provided under service or similar names,


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b) Items Excluded from Taxable Base

VAT itself

any discounts


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Special Types of Taxable Bases

VAT law; defines special taxable bases

gives authorisation to Ministry of Finance


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C-Tax Rates

According to Law 10%

The Council of Ministers is authorised; To increase this rate up to 4 times,

reduce it down to 1%, To specify different tax rates for various

goods and services and retail phase for some of the goods.


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CURRENT

VAT

RATES

GENERAL RATE

18 %

REDUCED VAT

RATES

1 %

8 %

Currently three VAT rates are applied


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the standard rate is 18%;

the reduced rate is 1% for

-particular agricultural products, -newspapers and magazines,-supply of residential housing (under 150 m2 )


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the reduced rate is 8% for ;

food products (except alcoholic beverages), cinema, theatre, opera and ballet tickets, private educational services, books and similar publications, certain medical equipment and medical products, medicines, textile and confection products and tourism services, services given by restaurants, bakeries and etc. (except

alcoholic beverage services), services given to senior citizens, the handicapped and orphans, agricultural machinery and heavy construction equipment and

leasing of them,


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5.VAT REGISTRATION, RECORDS, VAT RETURN, TAXABLE PERIOD AND PAYMENT

RegistrationAny person or entity engaged

in an activity within the scope of the VAT Law must notify the local tax office where his place of business is located.


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Records

Taxpayers must keep records in such a way to enable the computation and checking of VAT.


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Taxable Period and Submission of VAT Returns

Monthly taxable periods for all taxpayers

For international transportation and transit transportation, the taxable period is defined as the quarterly period.


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taxpayers who closed down business shall be submitted and paid in the monthly procedure.

taxpayers who will leave country shall submit VAT return and shall pay VAT within 15 days before their departure date.

Even if the taxpayers do not have any transactions subject to VAT during the taxation period, they shall submit VAT return.

Submission of VAT Returns


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Electronic Return

The taxpayers of Personal Income Tax and Corporation Tax who have commercial, agricultural and professional activities, are obliged to send their VAT Returns via internet.


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Payment

submit returns within 24 days following the end of each taxable period.

payments are made 2 days after submission of VAT returns


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THANK YOU


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III-EXEMPTIONS, CREDIT MECHANISM,

TAX REFUND


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1-EXEMPTIONSA) TYPE of EXEMPTIONS:

a) FULL EXEMPTIONS

With right of deduction and refund

b) PARTIAL EXEMPTIONS

With right of deductionWithout right of deduction


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a)FULL EXEMPTIONSExamples

Exportation Supply of sea, air, and railway vehicles Services provided to sea and air transportation

vehicles construction, modernization and extensions of seaports and airports

National security expenses Transit and international transportation Diplomatic exemptions


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b)PARTIAL EXEMPTIONSExamples

-With Right of Deduction; transitions, transfering,

transformation, division transactions of enterprises

participation shares and sales of immovables of corporations

Non-deductible tax in these exemptions is not refunded.


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- Without Right of Deduction: importation cultural and educational purposes social purposes delivery of goods and services to small

business immovables rental banking and insurance transactions


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B-EXPORT EXEMPTION Fully Exempt from VATFully Exempt from VAT

Apply zero rateApply zero rate

VAT amount incurred in earlier stages is VAT amount incurred in earlier stages is fully refundedfully refunded

Subject to be confirmed or approved by Subject to be confirmed or approved by some official or unofficial documentssome official or unofficial documents


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Export deliveries (from Turkey to another country) Export deliveries (from Turkey to another country)

(Export of Goods)(Export of Goods)

Services related to export deliveries (Export of Service)Services related to export deliveries (Export of Service)

Services for customers abroad (Export of Service)Services for customers abroad (Export of Service)

According to Article 11 in VAT Law, Following According to Article 11 in VAT Law, Following Transactions are Exempt from VAT as an ExportTransactions are Exempt from VAT as an Export


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Roaming services provided in Turkey to foreign customers by GSM operators

Delivery of goods to be carried in the personal luggage of non-resident travellers

Delivery of goods and provision of services to foreign transporters and foreigners participating in fairs and exhibitions


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It can be in different forms It can be in different forms

Classic form:Classic form: Export through Customs to abroadExport through Customs to abroad

Conditional Delivery of Export:Conditional Delivery of Export: Conditional sale from Conditional sale from

manufacturer to exporter in order that exporter should manufacturer to exporter in order that exporter should

export that goods within 3 monthsexport that goods within 3 months

Luggage Trade:Luggage Trade: Delivery in Turkey then carrying to abroadDelivery in Turkey then carrying to abroad

Refund at Customs:Refund at Customs: Buy some goods with VAT and then Buy some goods with VAT and then

take VAT amount back while leavingtake VAT amount back while leaving

a)EXPORT of GOODS


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a)EXPORT of GOODS

SELLEREXPORTER

CU

STOMS

DELIVERY OF GOODS

VAT

GOODS

VAT EXEMPTIONS

FREE TRADE ZONE

OR

ABROAD


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Exemption at pre-export stageExemption at pre-export stage While exporter buying goods from manufacturer, While exporter buying goods from manufacturer,

doesn’t pay VAT, but has to export goods within doesn’t pay VAT, but has to export goods within 3 months3 months

Manufacturer calculates and writes VAT on Manufacturer calculates and writes VAT on invoice, and then declare, but doesn’t pay it,invoice, and then declare, but doesn’t pay it,

Delivery is completely linked to export purposeDelivery is completely linked to export purpose VAT is deferred and after export, cancelledVAT is deferred and after export, cancelled If export does not occur, VAT is not cancelled. If export does not occur, VAT is not cancelled.

Exporter has to pay this amount to state.Exporter has to pay this amount to state.

b)CONDITIONAL DELIVERY of EXPORT


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b) CONDITIONAL DELIVERY of EXPORT

MANUFACTURER EXPORTER

CUSTOMS

Final Goods

Deferment-cancellation(optional)

Final Goods

exportation of goods (within 3 months)


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c)EXPORT of SERVICE

Services provided to the customers abroad Conditions;

Services should be provided in Turkey to a customer abroad

Invoices or similar documents should be issued in the name of the customer abroad

Service charge should be brought into Turkey in foreign currency.

Services should be consumed abroad


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C) IMPORT

Importation of the goods and services delivery and performance of which are tax exempted within the country, are also exempted from VAT.


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D) RENOUNCEMENT FROM EXEMPTION :

Taxpayers carrying out transactions exempted from VAT : By filing an application to the local tax

administration, By specifying exempted transactions,

can demand the transactions to be taxed.

Those taxpayers can not renounce from their tax liabilities up to 3 years.


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2-CREDIT MECHANISM

SCOPE: Taxpayers deduct input VAT that is shown on the

invoices or other relevant documents related to supplies made to them

from output VAT that is calculated on their

supply on monthly basis.


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THE CREDIT MECHANISM if output VAT exceeds input VAT in the

related month, difference is paid to the tax office.

if input VAT exceeds output VAT the difference is carried forward in order to offset from future VAT collections.

There is no time limitation for this system.


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THE CREDIT MECHANISM 2- Conditions For Tax Deduction

In order to deduct charged VAT from calculated VAT; charged VAT should be; Related to purchases and expenses related to

business activities, Shown also in invoices and similar documents, Recorded in legal books, Related calendar year shall not be exceeded, There shall be no provisions in law preventing

deduction.


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THE CREDIT MECHANISM

In cases where the total amount of input VAT exceeds output VAT, the difference is not returned to the taxpayer but transferred to the subsequent periods. This amount is not refunded.


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THE CREDIT MECHANISM

3-Non-deductible VAT Automobiles (except “rent-a-car” companies)

Missing and stolen stocks (excluding those lost due to fire in places of compelling reason declared by Ministry of Finance).

VAT on non-deductible expenses.

Expenses that are not accepted in PersonalIncome Tax Law and Corporate Income Tax Law.


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3- TAX REFUND

Refund is only possible for some transactions that are stated in the Law and related legislation.


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TAX REFUND

Transactions entitling refund right; Full exemptions, Reduced rate, Partial reverse charge application, International agreements, Excess and unnecessary tax is paid.


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TAX REFUND Tax refund from transactions which

entitle refund right is done at the request of taxpayer; In cash,

and As a set- off against tax and SSI (Social

Security Institution) premium debt, Refund system is arranged in order to

encourage payment on account.


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Latest Developments in the Indirect Taxation

VAT risk analysis system (VATRAS) allows Revenue Administration;

To analyse risk profiles of all VAT taxpayers in the country,

To detect taxpayers who have higher possibility of issuing fake invoice on monthly basis,

To inquire VAT refund lists which are available on electronic database automatically,

To verify the taxpayers’ data with the suppliers, To automatically validate guarantee letters, To examine critically informality of declared revenue.


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ANALYSING THE LISTS WITH THE AUTOMATED VAT REFUND SYSTEM

List of List of SuppliersSuppliers

List of List of Custom Custom DeclarationsDeclarationsVAT ReturnVAT Return

Claimant

CENTRAL DATABASE

Application of Refund

Claim

VAT Refund Control Report

Tax Office

List of List of Export Export InvoicesInvoices


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Statistical data on Risk Analysis Project of VAT Refund for the period of January 2010-October 2011 is shown below:

Latest Developments in Latest Developments in the Indirect Taxationthe Indirect Taxation

Number of analysed refund request 340.689

Amount of corrected VAT refund after risk analysis 755.654.140 TL(304.699.250 €)

Amount of increased VAT tax base after risk analysis

1.485.842.501TL(599.130.040 €)


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THANK YOU

Revenue Expert: Filiz BULGURCU

[email protected]

Documents

2012 Fiscalis Revenue Administration VAT Department Ankara 1 VAT SYSTEM in TURKEY