VAT SYSTEM in
TURKEY
2012 Fiscalis Revenue
Administration VAT Department
Ankara
1
SCOPE
I-INTRODUCTION
1-Brief History
2- Legal Framework
3-General Characteristics
4-General Overview
II. TAXATION
1- Taxable Transactions
2-Territory
3.Taxable Persons
4.Taxatıon
5.VAT Registratıon, Records,
VAT Return, Taxable
Period And Payment
III- EXEMPTIONS, CREDIT
MECHANISM, TAX REFUND
1- Exemptions
A- Type of Exemptions
B- Export Exemption
C- Import
2- Credit Mechanism
3- Tax Refund
2012 Fiscalis Revenue
Administration VAT Department
Ankara
2
I-INTRODUCTION
2012 Fiscalis Revenue
Administration VAT Department
Ankara
3
1-Brief History
 The beginning of the studies on Value
Added Tax (VAT) in Turkey goes back
to 1970.
 The law entered into force on January
1st , 1985.
2012 Fiscalis Revenue
Administration VAT Department
Ankara
4
2- Legal Framework
 VAT Law No.3065
 63 Article+28 Temporary Law
 116 General Comminique, 60 Circular
Note
2012 Fiscalis Revenue
Administration VAT Department
Ankara
5
3-General Characteristics
VAT ;
 general consumption tax
 covers all goods and services
 aplied to all stages from producer to
consumer
 calculated on transaction value with
related rate
2012 Fiscalis Revenue
Administration VAT Department
Ankara
6
General Characteristics
 has credit mechanism.
 is spread but non cumulative and
based on self control system.
 is objective and transparent tax
2012 Fiscalis Revenue
Administration VAT Department
Ankara
7
4-General Overview
The Turkish tax system levies value
added tax on the supply and the
importation of goods and services.
2012 Fiscalis Revenue
Administration VAT Department
Ankara
8
General Overview
(October 2011)
TOTAL COLLECTION of
VAT
78.640.676 (thousand TL)
(33.000.000 Thousand
Euro)
PERSANTAGE of ALL TAX
REVENUE
30,99%
ACTIVE TAXPAYER
2.293.765
2012 Fiscalis Revenue
Administration VAT Department
Ankara
9
II. TAXATION
2012 Fiscalis Revenue
Administration VAT Department
Ankara
10
1- Taxable Transactions
 In line with OECD and EU Directives
 The supply of goods and services,
importation of goods and services
2012 Fiscalis Revenue
Administration VAT Department
Ankara
11
2-Territory
commercial
industrial
agricultural
or independent activities
within Turkey
2012 Fiscalis Revenue
Administration VAT Department
Ankara
12
and
when goods or services are
imported into Turkey
2012 Fiscalis Revenue
Administration VAT Department
Ankara
13
SUPPLY
 The transfer of the
right of disposition
on a property by
the seller to the
purchaser.
2012 Fiscalis Revenue
Administration VAT Department
Ankara
14
SERVICES
 Everything except goods
 After defining service, VAT Law of
Turkey counts some examples of
service;





-making,
-processing,
-creating,
-manufacturing
-repairing,
2012 Fiscalis Revenue
Administration VAT Department
Ankara
-cleaning,
-safekeeping,
-preparing,
-evaluating,
-leasing.
15
IMPORTATION
 Any importation
of goods or
services into
Turkey is a
taxable
transaction.
2012 Fiscalis Revenue
Administration VAT Department
Ankara
16
3.Taxable Persons
A- General
Defined in the VAT Law.
Engaged in taxable transactions,
irrespective of their legal status or
nature and their position with
regard to other taxes.
2012 Fiscalis Revenue
Administration VAT Department
Ankara
17
B-VAT Responsibility and
Reverse Charge VAT
In the event that the taxpayer
 is not resident,
 or does not have a place of business in Turkey, a legal
head office or place of management in Turkey,
 or in other cases deemed necessary,
 having or undocumented goods or purchasing
undocumented services
2012 Fiscalis Revenue
Administration VAT Department
Ankara
18
REVERSE CHARGE IMPLEMENTATION
PARTIAL
REVERSE
CHARGE
IMPLEMENTATION
FULL REVERSE
CHARGE
IMPLEMENTATION
2012 Fiscalis Revenue
Administration VAT Department
Ankara
19
a) Full Reverse Charge
Implementation
 Whole tax is declared and paid by the person in charge.
 services provided from abroad and benefited in
Turkey,
 copyright earnings,

renting and advertising services provided by
taxpayers who are not VAT taxpayers
2012 Fiscalis Revenue
Administration VAT Department
Ankara
20
b) Partial Reverse Charge
Implementation
 Only certain part of the tax (such as 1/3, 1/2, 2/3, 9/10) is
declared and paid by person in charge
 Toll-manufacturing transactions in textile and ready wear
sector
 Delivery of scraps and waste
 Purchase of services such as construction works, cleaning
and security by certain organizations such as public
institutions and banks,
2012 Fiscalis Revenue
Administration VAT Department
Ankara
21
4.Taxation
A.Chargeable Event
 When does VAT become chargeable?
 General rule
 Special rules
2012 Fiscalis Revenue
Administration VAT Department
Ankara
22
B.Taxable Base
 On what VAT is calculated?
Total value of the consideration
received, not including the VAT itself.
2012 Fiscalis Revenue
Administration VAT Department
Ankara
23
 If consideration does not exist or
unknown or is in a form other than
money, the taxable base is the
market value.
 Market value is the average price
payable in the market for similar
goods and services and is determined
with reference to the Tax Procedural
Law.
2012 Fiscalis Revenue
Administration VAT Department
Ankara
24
a) Items Included in Tax
Base;
transport, loading and unloading expenses made
by the sellers,
cost of packaging, insurance,
commission and similar
expenses,
the elements such as taxes,
duties, charges, shares and
contributions to the funds,
2012 Fiscalis Revenue
Administration VAT Department
Ankara
25
miscellaneous incomes such
as due date difference, price
difference interest and
premium
all benefits, services and assets
provided under service or similar names,
2012 Fiscalis Revenue
Administration VAT Department
Ankara
26
b) Items Excluded from Taxable
Base
 VAT itself
 any discounts
2012 Fiscalis Revenue
Administration VAT Department
Ankara
27
Special Types of Taxable Bases
VAT law;

defines special taxable bases

gives authorisation to Ministry of
Finance
2012 Fiscalis Revenue
Administration VAT Department
Ankara
28
C-Tax Rates
 According to Law 10%
 The Council of Ministers is authorised;
 To increase this rate up to 4 times,
reduce it down to 1%,
 To specify different tax rates for various
goods and services and retail phase for
some of the goods.
2012 Fiscalis Revenue
Administration VAT Department
Ankara
29
Currently three VAT rates are applied
CURRENT
GENERAL RATE
18 %
VAT
RATES
2012 Fiscalis Revenue
Administration VAT Department
Ankara
REDUCED VAT
RATES
1%
8%
30
 the standard rate is 18%;
 the reduced rate is 1% for
-particular agricultural products,
-newspapers and magazines,
-supply of residential housing (under 150 m2 )
2012 Fiscalis Revenue
Administration VAT Department
Ankara
31
the reduced rate is 8% for ;










food products (except alcoholic beverages),
cinema, theatre, opera and ballet tickets,
private educational services,
books and similar publications,
certain medical equipment and medical products, medicines,
textile and confection products and
tourism services,
services given by restaurants, bakeries and etc. (except
alcoholic beverage services),
services given to senior citizens, the handicapped and orphans,
agricultural machinery and heavy construction equipment and
leasing of them,
2012 Fiscalis Revenue
Administration VAT Department
Ankara
32
5.VAT REGISTRATION, RECORDS, VAT RETURN,
TAXABLE PERIOD AND PAYMENT
Registration
Any person or entity engaged
in an activity within the scope
of the VAT Law must notify
the local tax office where his
place of business is located.
2012 Fiscalis Revenue
Administration VAT Department
Ankara
33
Records
Taxpayers must keep records in
such a way to enable the
computation and checking of VAT.
2012 Fiscalis Revenue
Administration VAT Department
Ankara
34
Taxable Period and Submission
of VAT Returns
 Monthly taxable periods for all
taxpayers
 For international transportation and
transit transportation, the taxable
period is defined as the quarterly
period.
2012 Fiscalis Revenue
Administration VAT Department
Ankara
35
Submission of VAT Returns
 taxpayers who closed down business shall be
submitted and paid in the monthly procedure.
 taxpayers who will leave country shall submit
VAT return and shall pay VAT within 15 days
before their departure date.
 Even if the taxpayers do not have any
transactions subject to VAT during the taxation
period, they shall submit VAT return.
2012 Fiscalis Revenue
Administration VAT Department
Ankara
36
Electronic Return
The taxpayers of Personal Income Tax
and Corporation Tax who have
commercial, agricultural and
professional activities, are obliged to
send their VAT Returns via internet.
2012 Fiscalis Revenue
Administration VAT Department
Ankara
37
Payment

submit returns within 24 days following the
end of each taxable period.

payments are made 2 days after submission
of VAT returns
2012 Fiscalis Revenue
Administration VAT Department
Ankara
38
THANK YOU
2012 Fiscalis Revenue
Administration VAT Department
Ankara
39
III-EXEMPTIONS,
CREDIT MECHANISM,
TAX REFUND
2012 Fiscalis Revenue
Administration VAT Department
Ankara
40
1-EXEMPTIONS
A) TYPE of EXEMPTIONS:
a) FULL EXEMPTIONS
With right of deduction and refund
b) PARTIAL EXEMPTIONS
With right of deduction
Without right of deduction
2012 Fiscalis Revenue
Administration VAT Department
Ankara
41
a)FULL EXEMPTIONS
Examples
 Exportation
 Supply of sea, air, and railway vehicles
 Services provided to sea and air transportation
vehicles construction, modernization and
extensions of seaports and airports
 National security expenses
 Transit and international transportation
 Diplomatic exemptions
2012 Fiscalis Revenue
Administration VAT Department
Ankara
42
b)PARTIAL EXEMPTIONS
Examples
-With Right of Deduction;
 transitions, transfering,
transformation, division transactions
of enterprises
 participation shares and sales of
immovables of corporations
Non-deductible tax in these exemptions is
not refunded.
2012 Fiscalis Revenue
Administration VAT Department
Ankara
43
- Without Right of Deduction:
importation
cultural and educational purposes
social purposes
delivery of goods and services to small
business
 immovables rental
 banking and insurance transactions




2012 Fiscalis Revenue
Administration VAT Department
Ankara
44
B-EXPORT EXEMPTION
 Fully Exempt from VAT
 Apply zero rate
 VAT amount incurred in earlier stages is
fully refunded
 Subject to be confirmed or approved by
some official or unofficial documents
2012 Fiscalis Revenue
Administration VAT Department
Ankara
45
According to Article 11 in VAT Law, Following
Transactions are Exempt from VAT as an Export

Export deliveries (from Turkey to another country)
(Export of Goods)

Services related to export deliveries (Export of
Service)

Services for customers abroad (Export of Service)
2012 Fiscalis Revenue
Administration VAT Department
Ankara
46
 Roaming services provided in Turkey to foreign
customers by GSM operators
 Delivery of goods to be carried in the personal
luggage of non-resident travellers
 Delivery of goods and provision of services to
foreign transporters and foreigners
participating in fairs and exhibitions
2012 Fiscalis Revenue
Administration VAT Department
Ankara
47
a)EXPORT of GOODS

It can be in different forms

Classic form: Export through Customs to abroad

Conditional Delivery of Export: Conditional sale from
manufacturer to exporter in order that exporter should
export that goods within 3 months

Luggage Trade: Delivery in Turkey then carrying to abroad

Refund at Customs: Buy some goods with VAT and then
take VAT amount back while leaving
2012 Fiscalis Revenue
Administration VAT Department
Ankara
48
a)EXPORT of GOODS
DELIVERY
OF GOODS
GOODS
EXPORTER
SELLER
VAT
VAT
EXEMPTIONS
2012 Fiscalis Revenue
Administration VAT Department
Ankara
C
U
ST
O
M
S
FREE TRADE
ZONE
OR
ABROAD
49
b)CONDITIONAL DELIVERY of EXPORT
 Exemption at pre-export stage
 While exporter buying goods from manufacturer,
doesn’t pay VAT, but has to export goods within
3 months
 Manufacturer calculates and writes VAT on
invoice, and then declare, but doesn’t pay it,
 Delivery is completely linked to export purpose
 VAT is deferred and after export, cancelled
 If export does not occur, VAT is not cancelled.
Exporter has to pay this amount to state.
2012 Fiscalis Revenue
Administration VAT Department
Ankara
50
b) CONDITIONAL DELIVERY of EXPORT
MANUFACTURER
Final
Goods
Final
Goods
EXPORTER
Defermentcancellation
(optional)
2012 Fiscalis Revenue
Administration VAT Department
Ankara
exportation
of goods
(within 3
months)
C
U
S
T
O
M
S
51
c)EXPORT of SERVICE
 Services provided to the customers abroad
 Conditions;
Services should be provided in Turkey to a
customer abroad
 Invoices or similar documents should be issued
in the name of the customer abroad
 Service charge should be brought into Turkey in
foreign currency.
 Services should be consumed abroad

2012 Fiscalis Revenue
Administration VAT Department
Ankara
52
C) IMPORT
 Importation of the goods and services
delivery and performance of which
are tax exempted within the country,
are also exempted from VAT.
2012 Fiscalis Revenue
Administration VAT Department
Ankara
53
D) RENOUNCEMENT FROM
EXEMPTION :
 Taxpayers carrying out transactions
exempted from VAT :
 By filing an application to the local tax
administration,
 By specifying exempted transactions,
can demand the transactions to be
taxed.
 Those taxpayers can not renounce
from their tax liabilities up to 3 years.
2012 Fiscalis Revenue
Administration VAT Department
Ankara
54
2-CREDIT MECHANISM
SCOPE:
Taxpayers deduct
 input VAT that is shown on the
invoices or other relevant documents
related to supplies made to them
from
 output VAT that is calculated on their
supply on monthly basis.
2012 Fiscalis Revenue
Administration VAT Department
Ankara
55
THE CREDIT MECHANISM
 if output VAT exceeds input VAT in the
related month, difference is paid to the tax
office.
 if input VAT exceeds output VAT the
difference is carried forward in order to
offset from future VAT collections.
 There is no time limitation for this system.
2012 Fiscalis Revenue
Administration VAT Department
Ankara
56
THE CREDIT MECHANISM
2- Conditions For Tax Deduction
 In order to deduct charged VAT from
calculated VAT; charged VAT should be;





Related to purchases and expenses related to
business activities,
Shown also in invoices and similar documents,
Recorded in legal books,
Related calendar year shall not be exceeded,
There shall be no provisions in law preventing
deduction.
2012 Fiscalis Revenue
Administration VAT Department
Ankara
57
THE CREDIT MECHANISM
 In cases where the total amount of
input VAT exceeds output VAT, the
difference is not returned to the
taxpayer but transferred to the
subsequent periods. This amount is
not refunded.
2012 Fiscalis Revenue
Administration VAT Department
Ankara
58
THE CREDIT MECHANISM
3-Non-deductible VAT
 Automobiles (except “rent-a-car” companies)
 Missing and stolen stocks (excluding those lost
due to fire in places of compelling reason
declared by Ministry of Finance).
 VAT on non-deductible expenses.
 Expenses that are not accepted in Personal
Income Tax Law and Corporate Income Tax Law.
2012 Fiscalis Revenue
Administration VAT Department
Ankara
59
3- TAX REFUND
 Refund is only possible for some
transactions that are stated in the
Law and related legislation.
2012 Fiscalis Revenue
Administration VAT Department
Ankara
60
TAX REFUND
 Transactions entitling refund right;





Full exemptions,
Reduced rate,
Partial reverse charge application,
International agreements,
Excess and unnecessary tax is paid.
2012 Fiscalis Revenue
Administration VAT Department
Ankara
61
TAX REFUND
 Tax refund from transactions which
entitle refund right is done at the
request of taxpayer;
 In cash,
and
 As a set- off against tax and SSI (Social
Security Institution) premium debt,
 Refund system is arranged in order to
encourage payment on account.
2012 Fiscalis Revenue
Administration VAT Department
Ankara
62
Latest Developments in the
Indirect Taxation
VAT risk analysis system (VATRAS) allows Revenue
Administration;






To analyse risk profiles of all VAT taxpayers in the
country,
To detect taxpayers who have higher possibility of issuing
fake invoice on monthly basis,
To inquire VAT refund lists which are available on
electronic database automatically,
To verify the taxpayers’ data with the suppliers,
To automatically validate guarantee letters,
To examine critically informality of declared revenue.
2012 Fiscalis Revenue
Administration VAT Department
Ankara
63
ANALYSING THE LISTS WITH THE AUTOMATED VAT
REFUND SYSTEM
VAT Return
List of
Suppliers
List of Custom
Declarations
List of Export
Invoices
Tax Office
Claimant
Application
of Refund
Claim
VAT Refund
Control Report
CENTRAL
DATABASE
2012
Fiscalis Revenue
Administration VAT Department
Ankara
64
Latest Developments in
the Indirect Taxation
Statistical data on Risk Analysis Project of VAT Refund for
the period of January 2010-October 2011 is shown
below:
Number of analysed refund request
340.689
Amount of corrected VAT refund after risk analysis
755.654.140 TL
(304.699.250 €)
Amount of increased VAT tax base after risk 1.485.842.501TL
analysis
(599.130.040 €)
2012 Fiscalis Revenue
Administration VAT Department
Ankara
65
65
THANK YOU
 Revenue Expert: Filiz BULGURCU
fbulgurcu@gelirler.gov.tr
2012 Fiscalis Revenue
Administration VAT Department
Ankara
66