News on July 6 says that Minister of Finance Naci Ağbal states the new VAT Law will be similar to the English VAT system.
What is current VAT system in Turkey ?
In general, current VAT system in Turkey allows taxpayers to deduct the input VAT paid on purchases from the calculated VAT on sales. When the difference of this offset is positive, the difference is paid to the tax office. However, when the difference is negative, tax office does not refund the negative balance but this balance is carried forward to be offset in the future.
The negative difference can only be refunded if the output VAT of the company is limited by VAT legislation. For example, if sales of the company is;
- VAT exempt (exemption with deduction right) or,
- Sales of the company is subject to VAT withholding (which limits the VAT collection) or,
- Sales of the company is subject to reduced rate VAT.