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TURKISH VAT SYSTEM
Timur CAKMAK
Head of Department
Turkish Revenue Administration
• The beginning of the studies on Value Added Tax (VAT) in Turkey goes back to 1970.
• In 1974, a draft VAT law, which was the result of studies of a technical group, was prepared. The system was inspired by the EU model.
• The 8th draft was enacted on November 2nd , 1984 and entered into force on January 1st , 1985.
• By the VAT Law, eight indirect taxes on consumption were abolished
GENERAL OVERVIEW
TURKISH VAT SYSTEM
VAT ;
• is a general consumption tax
• covers all goods and services
• is applied to all stages from producer to consumer
• is calculated on transaction value with related rate
GENERAL OVERVIEW
TURKISH VAT SYSTEM
• VAT is levied at each stage of the production
and the distribution process.
Although liability for the tax falls on the person who supplies or imports the goods or services, the real burden of VAT is borne by the final consumer.
GENERAL OVERVIEW
TURKISH VAT SYSTEM
A SYSTEM WITHOUT VAT
Purchase price of good 100 TL
Selling price of good 150 TL
The profit is 50 TL
VAT is not calculated on this
profit and the final consumer
should pay 150 TL
TURKISH VAT SYSTEM
A SYSTEM WITH VAT
Purchase price of good 100 TL
Input VAT 18 TL
Total amount 118 TL
Selling price of good 150 TL
Output VAT 27 TL
Total Received amount 177 TL
VAT paid to tax office 9 TL (50 x %18 )
Profit 50 TL
The final consumer should pay 177 TL.
TURKISH VAT SYSTEM
The Turkish tax system levies
value added tax on
the supply and the importation
of goods and services.
TURKISH VAT SYSTEM
Liability for VAT arises; When a person or entity performs
commercial
industrial
agricultural
or independent professional activities
within Turkey
and when goods or services are imported into Turkey
TURKISH VAT SYSTEM
REVENUE ADMINISTRATION
Instutional Structure- Central
Commissioner
Vice Commissioner Vice Commissioner Vice Commissioner
Department of Legal
Consultancy
Department of
Consultancy on
Press and Public
Relations Department of
Strategic
Development
Dep. of
Audit and
Management
of
Compliance
Dep. of
Revenue
Controllers
Dep. of
Human
Resources
Dep. of
Revenue
Management
I, II, III
Dep. of
Taxpayer
Services
Dep. of
EU and
Foreign
Affairs
Dep. of
Support
Services
Dep. Of
Implementation
And Data
Management
Dep. of
Collection
and
Disputed
Cases
Vice Commissioner Vice Commissioner Vice Commissioner
TURKISH VAT SYSTEM
REVENUE ADMINISTRATION Instutional Structure- Local Tax Office Directorates
Taxpayer Services
Group Directorate
LTU
Istanbul
Large Taxpayer’s
Tax Diroctorate
Audit
Group Directorate
Strategy
Group Directorate
Local
Auditors
Offices
Directorships
Directorships
Directorships
Tax Office
Directorate
Human Resources
Group Directorate
Judgement
and
Disputed
Proceedings
Group Directorate
Support
Services
Group Directorate
Tax Assessment
Committees
Legal
Advisors
TURKISH VAT SYSTEM
TAXPAYERS
VAT taxpayers are defined in the
VAT Law as those engaged in
taxable transactions, irrespective
of their legal status or nature and
their position with regard to other
taxes.
TURKISH VAT SYSTEM
TAXABLE AMOUNT
• The taxable amount of a transaction is generally the total
value of the consideration received, not including the VAT
itself.
• The VAT Law deals with the taxable amount under four
headings, namely the taxable base on supply of goods
and services, importation, international transportation and
special types of taxable amount.
TURKISH VAT SYSTEM
VAT RATES
• VAT rate specified on Article 28 of the Law is 10% for each of the transactions that are subject to tax
• The Council of Ministers is authorised;
To increase this rate up to 4 times, to reduce it down to 1%,
To specify different tax rates for various goods and services and
retail stage for some of the goods.
TURKISH VAT SYSTEM
VAT RATES
CURRENT
VAT
RATES
STANDART
RATE
18 %
REDUCED VAT
RATES
1 %
8 %
Currently three VAT rates are applied
TURKISH VAT SYSTEM
• The standard rate is 18%;
• Reduced rate of 1% is applied certain products such as some
agricultural goods, foodstuffs
• Reduced rate of 8% is applied certain products such as textile
products, education services
VAT RATES
TURKISH VAT SYSTEM
TYPE OF EXEMPTIONS
Full Exemptions
With right of deduction and with right of refund
– Exportation exemption
– Exemption for sea, air, and railway vehicles
– Services provided to sea and air transportation vehicles
– Petroleum explorations
– Exploring, processing, enrichment and refining activities for precious metals
TURKISH VAT SYSTEM
TYPE OF EXEMPTIONS
Partial Exemptions
Input VAT can’t be deducted and refunded, therefore the input
VAT charged on invoices is either expensed or “cost of goods”
TURKISH VAT SYSTEM
- Exemption for transitions, transferring, transformation, division transactions of enterprises
- Exemption for participation shares and sales of immovables of corporations
- Exemption for delivery of participation shares and immovables to banks as recompensation claims
FULL EXEMPTION Purchase price of good 100 TL
Input VAT 18 TL
Selling price of good 150 TL
Output VAT 0 TL
VAT paid to tax office 18 TL
In this situation, taxpayer deducts the input VAT from the output
VAT. If input VAT exceeds output VAT, the tax payer can be
received this difference from the tax office.
The profit amount doesn’t change.
The final consumer should pay 150 TL
TURKISH VAT SYSTEM
PARTIAL EXEMPTION
Purchase price of good 100 TL
Input VAT 18 TL
Selling price of good (for profit 50 TL) 168 TL
The final consumer should pay 168 TL
TURKISH VAT SYSTEM
DEDUCTION MECHANISM
• VAT is initially computed by applying the appropriate rate of taxation to the taxable amount for goods and services supplied by the taxable person during a taxable period.
• This amount is then reduced by a credit for VAT previously paid on importation and on goods and on services supplied to taxable person.
• VAT represented on invoices or similar documents made out for supplies and services conducted for themselves.
• VAT paid for imported goods and services.
TURKISH VAT SYSTEM
Taxable persons record VAT seen on the invoices or other
relevant documents as input VAT their accounting entries and
deduct input VAT from VAT collections (output VAT) from
supply of goods or services monthly basis.
DEDUCTION MECHANISM
TURKISH VAT SYSTEM
TAX REFUND
• If the sum of the deducted tax exceeds the sum of the
calculated VAT, the difference is “transferred to next
taxation period” and is not refunded.
• Refund is only possible for some transactions that are
stated in the Law and related legislation.
TURKISH VAT SYSTEM
• Transactions entitling refund right;
– Transactions that are in the scope of full exemptions,
– Transactions that are subject to reduced rate,
– Transactions that are in the scope of partial reverse charge application,
– Transactions prescribed in international agreements,
– Transactions for which excess and unnecessary tax is paid.
TAX REFUND
TURKISH VAT SYSTEM
ACCELARATED VAT REFUND SYSTEM
• Taxpayers who fulfill the certain conditions are given Accelerated
VAT Refund Certificate.
• Request in cash and/or on account submitted by taxpayers with
AVRC certificate is fulfilled without the request of any guarantee,
inspection report or Sworn Fiscal Consultant full certification
report.
TURKISH VAT SYSTEM
• Difficulty in voluntary compliance
• False or misleading invoices
• Lack of auditing
TURKISH VAT SYSTEM
PROBLEMS
TAXABLE PERIOD AND SUBMISSION OF VAT RETURNS
• The Ministry of Finance has established monthly taxable periods for all taxable persons under the normal VAT regime as of 01.10.1985.
• Taxable persons shall submit their returns to the local tax office within 24 days following the end of each taxable period.
TURKISH VAT SYSTEM
ELECTRONIC RETURN
The taxable persons of Personal Income Tax and Corporation Tax who
have commercial, agricultural and professional activities, are obliged to
send their VAT Returns via internet since October of 2007
TURKISH VAT SYSTEM
VAT payments are made 2 days after submission of VAT returns to tax offices or banks.
PAYMENT
TURKISH VAT SYSTEM
DISTRIBUTION PERCENTAGE OF TAX REVENUE COLLECTION IN GENERAL BUDGET
(2000-2009)
TAX REVENUE DIRECT TAXES (1) INDIRECT TAXES (2)
YEARS ( TL) (%) ( TL) (%) ( TL) (%)
2000 26.503.698.413 100 10.849.961.708 41 15.653.736.705 59
2001 39.735.928.150 100 16.058.048.860 40 23.677.879.290 60
2002 59.631.867.852 100 20.060.524.608 34 39.571.343.244 66
2003 84.316.168.756 100 27.780.137.576 33 56.536.031.180 67
2004 101.038.904.000 100 31.147.157.000 31 69.891.747.000 69
2005 131.948.778.000 100 43.081.460.000 33 88.867.318.000 67
2006 151.271.701.000 100 47.334.572.000 31 103.937.129.000 69
2007 171.098.466.000 100 57.473.256.000 34 113.625.210.000 66
2008 189.980.827.000 100 67.240.001.000 35 122.740.826.000 65
2009 196.289.914.000 100 71.478.586.000 36 124.811.328.000 64
NOT : BU TABLODA YER ALAN :
(1) DOLAYSIZ VERGİLER; GELİRDEN
ALINAN VERGİLER VE SERVETTEN
ALINAN VERGİLER GRUPLARINI
KAPSAMAKTADIR.
(2) DOLAYLI VERGİLER; MAL VE
HİZMETLERDEN ALINAN VERGİLER, DIŞ
TİCARETTEN ALINAN VERGİLER
GRUPLARI İLE KALDIRILAN VERGİLER
ARTIKLARINI KAPSAMAKTADIR.
TURKISH VAT SYSTEM
THE SHARE OF VAT IN GENERAL BUDGET REVENUE
(1988 - 2009) (1000 TL.)
YEARS COLLECTION OF TAX REVENUES
TOTAL AMOUNT OF VAT COLLECTION
(INWARD + İMPORT)
SHARE OF VAT IN TAX REVENUES
(%)
1988 14.232 4.177 29,3
1989 25.550 6.461 25,3
1990 45.399 12.371 27,2
1991 78.643 22.832 29,0
1992 141.602 42.088 29,7
1993 264.273 81.877 31,0
1994 534.888 176.742 33,0
1994 587.760 176.742 30,1
1995 1.084.350 354.980 32,7
1996 2.244.094 743.026 33,1
1997 4.745.484 1.561.562 32,9
1998 9.228.596 2.725.083 29,5
1999 14.802.280 4.164.334 28,1
2000 26.503.698 8.379.554 31,6
2001 39.735.928 12.438.860 31,3
2002 59.631.868 20.400.201 34,2
2003 84.316.169 27.031.099 32,1
2004 101.038.904 34.325.208 34,0
2005 119.250.807 38.280.429 32,1
2006 151.271.701 50.723.560 33,5
2007 171.098.466 55.461.123 32,4
2008 189.980.827 60.066.230 31,6
2009 196.289.914 60.166.409 30,7
TURKISH VAT SYSTEM
FLEXIBILITY OF VAT COLLECTION ACCORDING TO GDP (BASED ON 1998)
(1999 - 2009) (1000 TL.)
YEARS GDP
TOTAL AMOUNT OF VAT
COLLECTION
INCREASE (%) FLEXIBILITY
1999 104.595.916 4.164.334 52,81 1,08
2000 166.658.021 8.379.554 101,22 1,71
2001 240.224.083 12.438.861 48,44 1,10
2002 350.476.089 20.400.201 64,00 1,39
2003 454.780.659 27.031.100 32,50 1,09
2004 559.033.026 34.325.208 26,98 1,18
2005 648.931.712 38.280.429 11,52 0,72
2006 758.390.785 50.723.560 20,02 1,19
2007 843.178.421 55.461.123 9,34 0,84
2008 950.534.251 60.066.230 8,30 0,65
2009 953.973.862 60.166.409 0,17 0,46
TURKISH VAT SYSTEM
• VAT was introduced by the Directive 77/388/EEC, 17 May
1977 (6th Directive)
• From 1st January 2008 a new directive 2006/112/EC
• Each Member State's national VAT legislation must comply
with the provisions of EU VAT law as set out in Directive
2006/112/EC
• Now EU have 27 Countries
EU VAT SYSTEM
• Before the abolition of the customs control inside the European
Union (1993), the customs officer controlled the physical
transport from one country to another
• Since 1.1.1993, there is no check of the goods transported
from one member state to another
EU VAT SYSTEM
• Intra-community supplies/acquisitions = All the transactions
inside the Community
• Exports/Imports = All the transactions for or from the
countries outside the Community. They can’t use these
terms for transactions inside Community
• The customer is registered for VAT in another Member
State and has supplied his VAT number to the supplier
• The goods are dispatched or transported by the customer
or the supplier or by a person acting on their behalf from
member state of the supplier to another member state
EU VAT SYSTEM
OECD ANKARA
MULTILATERAL
TAX CENTER
The OECD Ankara Multilateral Tax Center has been established in 1993 based on a Memorandum of Understanding between the OECD and the Republic of Turkey. Other OECD Multilateral Tax Centers : Budapest Seoul Vienna Mexico
LEGAL BASIS
BUDGET
In general, costs of the OECD Multilateral Tax
Centers are being covered by the total budget composed of voluntary cash and in-kind contributions of the OECD member countries.
The expenditures of the OECD Ankara Multilateral Tax Center are also being covered both by cash and in-kind contribution of the Turkish Revenue Administration.
EVENTS
3869 mid and high-level tax officials
42 countries from 1993 to date
Experienced experts and high level officials from OECD Secretariat and member countries Senior officials from the Turkish Revenue Administration have also been contributing as lecturer in events held in Ankara and in other OECD Centers.
Events held in Ankara Multilateral Tax Center are mostly related to International Taxation System and current tax topics.
Generally all events include case studies and workshops where participants from different countries have the opportunity to present their practices.
EVENTS (Cont’d)
EVENTS (Cont’d)
Encourage non-OECD economies to adopt taxation practices which promote economic growth through the development of international trade and investment.
Aim to associate non-OECD economies with international best practice in taxation and provide a forum for multilateral dialogue between the OECD and non-OECD economies.
1993-2010
NUMBER OF PARTICIPANTS
Albania 560
Armenia 141
Azerbaijan 339
Bangladesh 10
Belarus 140
Bosnia 13
Bulgaria 15
Cambodia 7
China 122
Croatia 3
Czech Rep. 13
Egypt 55
Estonia 14
Georgia 383
Hungary 10
India 12
Indonesia 17
Kazakhstan 156
Kosovo 65
Kyrgyzstan 108
Latvia 27
Lithuania 22
Macedonia 9
Mongolia 383
Moldova 219
Montenegro 3
Morocco 71
Pakistan 41
Poland 39
Romania 63
Russian Fed. 317
Saudi Arabia 14
Sierra Leone 3
Slovak Rep. 8
Slovenia 20
South Afr. Rep. 4
Tajikistan 82
Turkmenistan 138
Ukraine 102
United Kingdom 1
Uzbekistan 115
Vietnam 5
TOTAL 3869
NUMBER OF THE PARTICIPANTS IN 2009
• ALBANIA 31
• ARMENIA 3
• AZERBAIJAN 9
• BELARUS 8
• CHINA 3
• CROATIA 2
• GEORGIA 8
• INDIA 12
• INDONESIA 7
• KOSOVO 15
• MOLDOVO 1
• MONGOLIA 8
• MOROCCO 7
• PAKISTAN 12
• RUSSIAN FED. 8
• SAUDI ARABIA 6
• SIERRA LEONE 3
• UZBEKISTAN 11
• UKRAINE 1
TOTAL 155
TOPICS OF THE EVENTS HELD IN OECD ANKARA MTC
Transfer Pricing
Tax Incentives
Tax Policy-Modeling
International Tax Avoidance and Evasion
Auditing Multinational Enterprises
Tax Treaty Issues
Application of Tax Treaties
Auditing Small and Medium Enterprises
TOPICS OF THE EVENTS HELD IN OECD ANKARA
MTC (Cont’d)
Tax Administration
Taxation of Non Residents
Indirect Methods of Taxation
VAT & Electronic Commerce
Property Tax
Exchange of Information and Bank Secrecy
Bribery Awareness For Tax Examiners
Taxation of Financial Instruments
BILATERAL SEMINARS
Due to the protocol between the Turkish Ministry of Finance Revenue Administration and the Turkish International Cooperation Agency (TICA), Revenue Administration arranges seminars up to demand of the transition economies.
Sharing experience with the officials of the participant country on
tax matters
Providing legislative infrastructure
Developing the cooperation on taxation system
CERTAIN TOPICS OF THE SEMINARS
• Tax Procedure Law, Personal-Corporate Income Tax, VAT, Special
Consumption Tax
• Tax Audit
• Electronic Declaration, Risk Analysis and Automation System
• Tax Exemptions
• Tax Collection and Administration of Tax
• The System of Documentation, Cash Register Application, Registry
and Conveyance of Taxpayer
• Restructuring Process of Revenue Administration
COUNTRIES INVOLVED IN THE SEMINARS IN
A BILATERAL BASIS (2005-2010)
• Azerbaijan
• Bangladesh
• Bosnia Herzegovina
• China
• Kosovo
• Kyrgyzstan
• Mongolia
• Morocco
• Pakistan
• Tajikistan
• Turkmenistan
• Uzbekistan
SEMINAR ROOMS
International events have been carried out in
2 different classrooms of the center both of
which have the latest technological
equipment like simultaneous translation
facilities for 6 languages: English, French
(conditional). Russian, Turkish, Albanian
and Arabic (conditional).
OVERLOOK ON MENA PROJECT AND
OECD ANKARA MTC
Republic of Turkey and OECD have signed a
Memorandum of Understanding in order to establish
OECD Ankara MTC, for a period of five years in 1993,
which can be extended for five-year-periods. A
provision adopted at the last extension in 2008 allows
the technical facilities of the OECD-Ankara Multilateral
Tax Centre to be utilised for MENA project.
Turkey’s annual in cash contribution to the MENA
project is € 75.000.
THANK YOU