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

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.

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

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”

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”

Digital Services VAT, VAT

Digital Services in VAT Law

December 5, 2017

VAT Law Article 9 which determines the “tax responsibles” has been amended on December 5, 2017 and digital service providers are held responsible for the VAT on the service that they provide to Turkish non-taxpayers.

Inserted sentence to the Law is translated as below;

“To the extent that, VAT related to the services supplied in electronic means to non taxpayer natural persons by suppliers that are neither resident in Turkey, nor have a workplace or business place in Turkey shall be declared and paid by the suppliers of this services. Ministry of Finance is empowered to determine the scope of these services and principles of the procedural applications.”

Communiqué published on electronically supplied services explain the scope and procedures in detail.