|
|
VALUE
ADDED TAX
In Turkey, there are several indirect taxes, but most
important indirect tax is Value Added Tax (VAT)
The VAT levies on the supply and the importation of
goods and services.
Liability for the VAT arises;
- When a person or entity performs commercial,
industrial, agricultural or independent professional
activities within Turkey,
- When goods or services are imported into Turkey.
The VAT is levied at each stage of the production and
the distribution process. Although, the real burden of
VAT is borne by the final consumer.
This result is achieved by a tax-credit method where
the computation of the VAT liability is based on the
difference between the VAT liability of a person on his
sales (output VAT) and the amount of VAT he has already
paid on his purchases (input VAT).
The VAT system employs multiple rates and the Council
of Ministers is authorized to change the VAT rates
within certain limits.
The VAT taxpayers
The VAT taxpayers are defined in the VAT
Code as those engaged in taxable transactions,
irrespective of their legal status or nature and their
position with regard to other taxes.
The following people or entities are liable to VAT:
- Those supplying goods and services,
- Those importing goods or services,
- Those required to complete customs formalities
in case of transit of goods,
through Turkey,
- General Directorates of the Authorized Public
Lotteries, including Spor-Toto and National Lottery,
- General Directorates of Postal Services (PT and
Telecom) and radio and television corporations,
- Organizers of horse races and other betting
activities,
- Organizers of shows, concerts and sporting
events with the participation of professional
artists and professional sportsmen,
- Lessors of goods and rights stated in Article 70
of the Income Tax Code.
Goods and rights set out in Article 70 of the Income
Tax Code including immovable property such as land,
buildings, mines and rights which are in the nature of
immovable property; and. other goods and rights.. such
as all kinds of motor vehicles, machines and equipment,
ships, literary, artistic and commercial copyrights,
commercial or industrial know-how, patents, trademarks,
licenses and similar intangible properties and rights.
The 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, the Ministry of Finance is
authorized to hold any one of the people involved in a
taxable transaction responsible for the payment of tax.
According to the VAT Code, there is a so-called
reverse charge VAT mechanism, which requires the
calculation of VAT by resident companies over payments
to abroad. Under this mechanism, VAT is calculated and
paid to the related tax office by the Turkish company or
customers on behalf of the non-resident company (foreign
company). On the other hand, the local company treats
this VAT as input VAT and offsets it in the same month.
The VAT tax base
The taxable base of a transaction is generally the
total value of the consideration received, not including
the VAT itself. The VAT Code deals with the taxable base
under four headings, namely the taxable base on
deliveries and services, on importation, on
international transportation, and special types of
taxable base.
In case a consideration does not exist, is 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 Code.
Exclusions from the tax base
The taxable base for goods delivered and services
rendered does not include the VAT itself or any
discounts, provided that they are at a reasonable rate
with regard to commercial practice and are expliCITCy
listed in all invoices or similar documents.
Tax rates
The standard (general) VAT rate is set at 10% in the
VAT Code, but this rate was increased to 18% as of 15
May 2001.
The special VAT rates;
- For the deliveries and services mentioned in
List No. I, 1% (e.g. agricultural products such as
raw cotton, dried hazelnuts, supply and leasing of
goods within the scope of the Finance Leasing Code)
- For the deliveries and services mentioned in
List No. II, 8% (e.g. basic food stuffs, books and
similar publications)
The credit mechanism
The VAT is collected at every stage
of the production and distribution process from the
initial sale by the producer to the final sale to the
consumer. At each of these stages, the amount of tax
payable is the difference between the total amount of
tax charged on the invoices issued by the taxpayer and
the total amount of tax charged on invoices issued to
the taxpayer during the same period. Thus the VAT is
initially computed by applying the appropriate rate of
taxation to the taxable base for goods and services
supplied by the taxpayer during a taxable period. This
amount is then reduced by a credit for VAT previously
paid on importation and on goods and services supplied
to the taxpayer.
Non-deductible VAT (Cost or
non-deductible item or capitalized)
In the following cases, VAT may not be credited from
the VAT computed on taxable transactions.
- VAT on purchases of cars (which should be
recorded as an expense or cost) (except for
businesses related with lease or operation of cars)
- Missing and stolen stocks,
- VAT on expenses accepted as non-deductible in
determining income according to Income Tax Code and
Corporate Tax Code,
- Input VAT on exempt deliveries listed in Article
17 of the VAT Code.
VAT refund
Value Added Tax (input VAT) shown on invoices and
similar documents related to the transactions which are
exempt from the tax, such as:
- Exportation of goods and services,
- Exemption for vehicles, petroleum exploration
and investments made under an investment incentive
certificate (IIC),
- Transit transportation,
- Diplomatic exemption,
are deducted from the VAT (output VAT) to be
calculated on the transactions of the taxpayer which are
subject to VAT. In the absence of transactions subject
to VAT, or if the output VAT is less than the input VAT,
then the input VAT which cannot be deducted is refunded
to those who perform such transactions, on the basis of
principles to be determined by the Ministry of Finance.
|
