VAT

DEFINITION OF VAT

Value Added Tax (VAT) is a broadly based tax on consumer spending and is generally neutral in its effect on businesses. Briefly, it’s a general consumption tax that covers all goods and services  which is applied to all stages from producer to consumer and is calculated on transaction value with related rate.

 

In Turkey, all goods and services that are supplied/rendered within the scope of commercial, industrial, agricultural and professional services etc. activities are subject to value-added tax (VAT). The importations of goods and services into Turkey are also subject to VAT.

 

GENERAL OVERVIEW

VAT is levied at each stage of the production and the distribution process.

Although liability for the tax falls on the person who supplies or imports the goods or services, the real burden of VAT is borne by the final consumer.

For instance;

A SYSTEM WITHOUT VAT

Purchase price of good 200 TL
Selling price of good 250 TL
The profit is 50 TL
VAT is not calculated on this profit and the final consumer should pay 250 TL

 

A SYSTEM WITH VAT

 

Purchase price of good 100 TL  
Input VAT  18 TL  
Total amount 118 TL  
VAT is not calculated on this profit and the final consumer should pay 250 TL  
     
Selling price of good 150 TL input vat        18
Output VAT 27 TL

output            27

9 must be paid to tax office

Total Received amount 177 TL

input vat        27

OUTPUR VAT 18

     9 LİRA SONRA AYA ALACAK OLARAK DEVİR EDER.

ALACAK OLARAK DEVİR EDER.

VAT paid to tax office

9 TL (50 x %18 )  
Profit 50 TL  
The final consumer should pay 177 TL.

 

SCOPE AND RATES

VAT rate specified by Law is 10% for each of the transactions that are subject to tax.

The standart rate of VAT is 18 percent.

Besides, there are two reduced VAT rates and exemptions. Which are 8 percent and 1 percent.

The goods and services subject to the reduced rate of 8 percent are ;

  • Foodstuffs
  • Textile Products
  • Overnight services/accomodation in accomodation facilities.

The goods and services subject to the reduced rate of 8 percent are ;

  • Certain agricultural products
  • Actually, there is no zero rate in Turkish VAT Law. However, some transactions are exempt from

VAT with credit, including:

  • Export of goods and services
  • International transportation
  • Roaming services rendered in Turkey for customers outside Turkey
  • Delivery of machinery and equipment to those who have an investment and who are VAT taxpayers
  • Services rendered at harbors and airports for vessels and aircraft.  etc

There are also exemptions without credit; including;

  • Deliveries made by the government and other cultural, educational, health and similar purposed organizations.
  • Services rendere in Free Trade Zones
  • Banking and insurance transactions

 

RETURNS

  • Frequency of VAT returns:

The taxation period for VAT purposes in one month and a VAT return should be filed by the 24th day of the month following the end of the taxation period and the tax should be paid on 26th day of the same month . The VAT return should be filed for each month even if no deliveries subject to VAT have been made. During declaration, if any return claim has arised due to any reasons, this claim has to be declared in the VAT declaration in advance.

 

Taxpayers can submit their VAT returns electronically.

  • Other returns that need to be submitted :

VAT on importation is declared in the customs entry decleration. If this form is not used, import VAT must be reported in a special return.

 

DEDUCTION MECHANISM

  • VAT is initially computed by applying the appropriate rate of taxation to the taxable amount for goods and services supplied by the taxable person during a taxable period.
  • This amount is then reduced by a credit for VAT previously paid on importation and on goods and on services supplied to taxable person.
  • VAT represented on invoices or similar documents made out for supplies and services conducted for themselves.
  • VAT paid for imported goods and services.

Taxable persons record VAT seen on the invoices or other relevant documents as input VAT their accounting entries and deduct input VAT from VAT collections (output VAT) from supply of goods or services monthly basis.

 

TAX REFUND

  • If the sum of the deducted tax exceeds the sum of the calculated VAT, the difference is “transferred to next taxation period” and is not refunded.
  • Refund is only possible for some transactions that are stated in the Law and related legislation.

Transactions entitling refund right;

  • Transactions that are in the scope of full exemptions;
  • Transactions that are subject to reduced rate,
  • Transactions that are in the scope of partial reverse charge application,
  • Transactions prescribed in international agreements,
  • Transactions for which excess and unnecessary tax is paid.