Customs

Royalty Payments in the scope of Customs Value

Although Turkey is not yet part of the EU, as being a party to GATT and having customs union agreement between Turkey and EU, main principles of customs regulation in Turkey is designed in parallel with EU customs rules.

Accordingly, the primary basis for the customs value of import goods is defined as the transaction value, that is the price actually paid or payable for the goods when sold for export to the customs territory of Turkey, and adjusted, where necessary.

Adjustments of the transaction value is defined on articles 27 and 28 of the Customs Law. Besides others, as the subject of this article, royalty related adjustment is defined as below;

royalty and licence fees are to be added to the price actually paid or payable for the import goods where they are related to the goods being valued that the buyer must pay, either directly or indirectly, as a condition of sale of the goods being valued, to the extent that such royalty or licence fees are not included in the price actually paid or payable. Continue reading “Royalty Payments in the scope of Customs Value”

Digital Services VAT, VAT

Digital Services VAT Communiqué has been Published

January 31, 2017

Final version of the Communiqué has been published on the Official Gazette on 31th of January.

Important Updates

  1. New version of the communiqué allows (full or proportional) deduction of VAT on purchases directly related with the supplied digital service.
  2. Due to transition period, VAT declarations of January, February and March 2018 will be submitted between April 1 to 24th.
  3. Detailed explanation of services in the scope has been removed. So all digitally supplied services to non-taxpayer real persons in Turkey is considered in the scope.

Scope

In the draft version of the communiqué electronically supplied services were explained with below articles;

  1. Webpage operations related services (domain, hosting, and all other related services)
  2. Software and hardware distant maintenance, distant system management and online data storage services
  3. Sales of all kinds of softwares and digital products (firewalls, device drivers, antivirus softwares etc.) including access to them, download and update.
  4. Any kind of digital content providing services (e.g. financial/legal content service, online newspaper and publishings, blogs, web statistics services, search engine and indexing services etc.).
  5. All kind of service provided through applications or similar tools on computer or mobile devices such as online/offline game memberships, app download, music service provider app memberships, on-line broadcasting services etc.
  6. Distant education services with limited human involvement
  7. Radio and Television broadcast services,
  8. Other services that is similar to above and supplied through all electronic digital means.

In the published version, above service explanations have been removed. Therefore all digital services supplied to non-taxpayer real persons should be considered in the scope.

Platform Operator’s Responsibility

One of the most important explanation in the communiqué is that platform operators held responsible of the payment of Turkish digital service VAT in case the original service provider is explicitly disclosed on the platform or on the service engagement or on the billing information of the service. Continue reading “Digital Services VAT Communiqué has been Published”

Digital Services VAT, VAT

Withholding VAT Mechanism in Turkey

According to VAT Law Article 8, VAT liability is originally on;

  • seller of the product or provider of the service
  • importer of goods or services
  • carrying or customs responsible of the transit trade
  • and some specially determined parties in the law (i.e. postage service provider, TV radio broadcaster etc.)

Accordingly, in sales transactions that take place in Turkey, seller of the service or product is liable with collecting and declaring the VAT on the transaction.

However, Article 9 of the same law defines Tax Responsibility as;

“In case the liable taxpayer does not have a legal or business center or workplace in Turkey and in other cases which Ministry of Finance finds necessary, other parties that are also involved in the transaction may be held responsible with the payment of the tax.”

With this power provided by the law, MoF determined different type of Withholding VAT mechanisms in Turkey. There are not voluntary basis application. Thus if a transaction falls under one of the below scope of services or deliveries, the withholding VAT application becomes mandatory. Continue reading “Withholding VAT Mechanism in Turkey”

Excise Tax

Excise Taxes in Turkey

Excise tax in Turkey is applicable on different group of products. Different than VAT, this tax is applied only once to a product. After tax is applied once, even the product is delivered again to other traders, excise tax is no more applicable on the same product.

“With a recent law amendment, soda waters with flavor is included in the scope of Excise Tax and this change is applicable as of 1/1/2018.”

Products in the scope of Excise Tax is categorised under 4 lists. Below you may find the scope of each list and general taxation rule applicable.

List I – Fuels and Other Oil Products

Excise list I consists of 2 sub-group of products;

List I (a) includes motor and heating fuels. This group is the main scope of the Excise Tax. Continue reading “Excise Taxes in Turkey”

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. Continue reading “Authority’s Approach to Digitalisation in Taxation”

VAT

VAT Rates in Turkey

Applicable VAT Rates in Turkey

Delivery of goods and services in Turkey is subject to VAT at the standard rate of 18%.

On the other hand, certain type of goods and services are subject to reduced VAT rates which are determined as 8% and 1%.

18%

In the legislation, deliveries of goods and supply of services that fall under each reduced rate category is determined and could be updated by a Council of Ministers Decree. All other goods and services that are not defined as reduced rate fall under the general rate of 18%.

You may find below some examples to reduced VAT rates;

8%

Continue reading “VAT Rates in Turkey”

Digital Services VAT, VAT

Digital Services VAT in Turkey Compared to EU

In terms of Digital Services Scope

Digital services are defined as;

  • Radio and Television Broadcasting Services
  • Telecommunications Services and
  • Electronically Supplied Services

in EU legislation. The first 2 services are defined similarly in Turkey as well. However, the last “Electronically Supplied Services” definition is explained under 3 different sub-headings with explanations and examples in detail in the draft communiqué. We believe the main concept reflects the same idea but some services (such as distant education services) might be regarded different in EU and Turkey.

Please note that this idea is just a prediction at this very early stage but the rulings shall be followed in practice when the rules become applicable in Turkey on 1/1/2018. Continue reading “Digital Services VAT in Turkey Compared to EU”