Digital Transformation in Tax

Authority’s Approach to Digitalisation in Taxation

Digitalisation has entered to the heart of every industry in today’s world. In fact, taxation might be one of the laggards trying to benefit its advantages. Turkish tax authorities have introduced many electronic taxation service to catch up these benefits. This article aims to indicate the biggest benefit of digital transformation arise for the tax authority which is;

Audit Effectiveness

Below electronic services went live until the date of this article (and we are aware that there are more to go live in the near future such as e-waybill.);

e-Tax Declaration: Today, almost all tax declarations (including Corporate Income Tax, VAT, Excise Tax, Withholding Tax etc.) are submitted in electronic format through an XML declaration generator software published by the authorities.

In addition to that, customs declarations are also submitted in electronic format during import/export operations.

e-Invoicing, e-Archive Invoicing: Today, taxpayers that have a sales revenue over 10m TRY are obliged to use e-Invoicing system and companies having a revenue over 5m TRY and doing internet sale are obliged to register for e-Archive Invoicing.

An e-Invoice XML is generated in UBL-TR standard and delivered through Revenue Administration’s servers. An XML e-Invoice file specifically tags every detail on the invoice by using standard libraries for the information. Some of these information are Tax ID of parties, quantity, unit price, unit code, discounts, additions, total price, currency type, tax code, tax amount, tax exemption code, payable amount etc. If log records of these e-invoices passed through Revenue Administration are kept, a significant amount of transactional information will be available to the authority.

e-Archive invoices are also generated standard and delivered to non e-Invoice registered parties. However, these invoices are delivered to recipients directly, but an e-Archive Report is submitted to the authority which contains the summary data of all e-Archive Invoices issued in a month.

e-Ledger: With the e-ledger application, Journal and General ledgers are kept in a standard electronic format in XBRL by an “authorised” electronic bookkeeping software. The obligation scope is the same with e-Invoicing scope. Accordingly, Turkish GAAP ledgers of all companies in Turkey are in a standard format. These ledgers are not submitted to authority (but archived by the taxpayer to show in a possible inspection) but a summary file that prove the encrypted closure of a month’s ledger is submitted to authority. Previously, these summary files only had identifying value but did not include any content from the ledgers but recently, authorities requested sum of VAT and revenue accounts to be included in these summary files.

e-Record Keeping: Electronic record keeping is obligatory for Special Consumption Tax (Excise Duty) taxpayers. e-Record keeping is the most detailed data requirement mentioned until now. This data includes all transactional data of sales, purchases, import, export, production etc. with all possible details. Record keeping data is not submitted to the authority but has to be kept for a possible future audit.

BA-BS and all Other Notification and Filings: Every month, companies should submit a BA/BS notification to the authority containing debit/credit balance of its suppliers and customers. These balances are cross checked between suppliers and customers reports and questioned if any mismatch reported.

Besides, there are many other notification requirements for certain activities. Some of these are;

  • VAT refund filings (transaction based) in electronic format
  • Imported excise products notification
  • Special VAT transaction notifications (withholding VAT, export committed sale VAT etc.)
  • e-Commerce transactions passed through Banks, Courier companies, e-Commerce platform operators, Ad-service providers

As a result of all these digital transformation activities in recent years, tax authority is able to conduct digital audits and improve risk analysis based controls even through its data analytics tools. This distant audit activity detects any kind of fraud or defect possibility which triggers an audit to a more accurate destination afterwards.

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