Articles

Excise Duty, Excise Tax, Special Consumption Tax (SCT)

Excise Duty (SCT) Adjustment on Fuel Products

Recent currency fluctuations in Turkish Lira required authorities to take some urgent actions to moderate its effect on the local market. One of these regulations was the Cabinet Decree dated May 14, 2018 no. 2018/11818 that allowed Excise Duty (Special Consumption Tax [SCT]) amount of certain fuel products to be rearranged in line with the f/x changes to stabilize the price of fuels in the market.

In principle, the decree allowed Ministry of Finance to rearrange Excise Duty on Gasoil, Diesel and LPG products and their variances when the Turkish Lira currency is devalued over other currencies. With the power of this decree, several decisions were taken by the ministry and published on its website that reduced (and increased afterwards when recovery realised) these amounts.

Now it seems that SCT amounts of Gasoil products (95 and 98 Octane) has returned to values before the decree was published but not yet for Diesel and LPG. Below is a graph that indicates the Excise Duty amount changes between the days before the decree and today.

Fuel Excise TAXATIONTURKEY

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Excise Duty, Excise Tax, Special Consumption Tax (SCT), VAT

Turkey to reduce VAT and SCT (excise) taxes until year end

Authorities in Turkey continue to take preventive measures against the shrinkage risk of the consumption in the local market.

Here is the summary of today’s Presidential Decree about reduction in some taxes in Turkey;

1- Deadline of reduced title fee (3% instead of 4%) is extended to year end.

2- Deadline of reduced VAT rate on house sales (8% instead of 18%) is extended to year end.

3- VAT rate on the sale of furnitures is reduced to 8% until the year end.

4- VAT rate on the sale of commercial vehicles is reduced to 1% until the year end.

5- Reduced Special Consumption Tax (SCT) on passenger cars (highest reduction is 15% for vehicles that SCT base is <120.000TL & engine is <1.600cm3) until the year end.

6- Special Consumption Tax (SCT) on home appliances (white goods) reduced to 0% until the year end.

These changes are of course very good developments on the consumer side. But still, there will be discussions on the days switching from full taxable days to tax reduced days (or vice versa) from corporates’ perspective. If you have further queries on this issue, please feel free to contact us.

Customs, Free Trade Zone, Incentives

Free Trade Zones in Turkey

Free Trade Zones (FTZs) in Turkey are special areas that are determined by the Council of Ministers where all types of industrial, commercial and certain service activities are encouraged by tax exemptions and incentives.

According to Article 1 of the Free Trade Zones Law; purposes of FTZs are:

  • to improve investments and production for export purposes
  • accelerate foreign direct investment and technological development,
  • direct companies to export activities and improve international trade.

Free Trade Zones are within the political borders of Turkey, but from a Turkish customs legislation perspective, they are considered and treated outside the customs borders of Turkey. Therefore, products brought to FTZ from abroad are not subject to import regime but movement of goods from a Turkish FTZ to Turkey is subject to import regime. On the contrary, movement of goods from Turkish customs territory to a FTZ is considered as export. This consideration allows significant advantages for companies operate in a FTZ.

Production, trade and service activities are allowed in Free Trade Zones. For this purpose, companies should obtain the related activity licence.

Some other advantages are;

  • Corporate Tax exemption for production companies
  • Income Tax withholding on employee salaries exemption for companies exporting more than 85%
  • Procure goods and services from Turkey with VAT exemption

If you have further queries on this issue, please feel free to contact us.

Customs

Turkey to bring 25% Customs Duty on Steel imports

On October 2, 2018 a new presidential decree has been published regarding the implementation of a protection measure on steel imports to Turkey.

According to decree, Turkey still investigates whether the global developments on steel tariffs may have a probable impact of serious harm on the local steel industry. The decree states that during the investigation period (for 200 days) %25 of the import value will be collected as a guarantee payment on these imports and if at the end of the investigation, it is decided to collect the exact rate; collected guarantees will be converted to revenue. If the investigation results with a lower rate or deciding not to implement a tariff, collected guarantees will be refunded.

On the other hand, a tariff quota is defined per product type (hs code) and per country that will not be taxed on import. Accordingly, the imports exceeding this tariff quota will be subject to tax. A communique has been published on 16th of October about the distribution of this quota. The communique states that the quota amount will be used in a “first come first serve” principle which means early imports will be considered in the quota limits but when the total imported product per HS code or per country reaches the defined limit, later imports will be subject to tax.

Monetary Policy

Contracts Between Residents

A new presidential decree has been published on today’s official gazette regarding monetary policies.

According to this new regulation, contracts between residents of Turkey cannot be based on other currencies. Especially foreign currencies was commonly used in properties rental and sale contracts. But the change is not limited with these but includes all contracts including other sales, business and service contracts in the market. Thus new contracts shall be in TRY and old contracts that were based on other currencies shall be amended within 1 month.

Please remind that contracts in Turkey are subject to stamp tax once over the highest figure of the contract. Amendment of a contract may trigger additional stamp tax obligation even only the value is updated.

If you have further queries on this issue, please feel free to contact us.

Customs

Customs Tax rate reduced to 0% on 1882 types of raw materials

A new Decision annex to Import Regime Decision has been published on the Official Gazetted dated June 27, 2018 which reduces the custom tax to 0% for 1882 different type of raw materials for producers.

The relief is made by adding all these products to annex “list V” of the mentioned decree, which means importer of these products must use these materials in their production and the customs tax will be suspended during the importation if they fulfil the necessary documentation that validate their use of these materials in the production.

If you have further queries on this issue, please feel free to contact us.

Excise Duty, Excise Tax, Special Consumption Tax (SCT)

Change in Tobacco Excise Duty

Tobacco products are listed in list 3-B of Excise Duty law (also known as Special Consumption Tax – SCT). In general, excise duty of tobacco products is calculated with the combination of “ad-valorem rate”, “fixed tax” and “minimum fixed tax”.

With a recent Decision of Council of Ministers published on official gazette dated 30/06/2018, some tobacco products’ ad-valorem rate is reduced to 63% (previously was 65,25%), fixed and minimum fixed tax amount is raised between 0,0096 and 0,095 TL. With this change, it is not expected to see a difference on the retail prices of most packed cigarettes. But, only low price cigarettes retail price may increase due to increase in minimum fixed tax amounts.

If you have further queries on this issue, please feel free to contact us.

Excise Change Tobacco