According to Article 11/1-a of Law No. 3065, services provided to customers abroad are exempt from VAT.
Scope of the Exemption
For a service to be exempt from VAT under Article 11/1-a of Law No. 3065, according to Article 12/2 of the same Law, the following conditions must be met:
- The service must be provided to a customer abroad,
- The service must be used abroad
The fact that the service is provided to a customer abroad is evidenced by an invoice or similar document issued in the name of the customer abroad.
The intention of benefiting from the service abroad is that the service provided in Turkey for the customer abroad is related to the customer’s business, transactions, and activities abroad and is not related to their activities in Turkey.
Services Not Covered by the Exemption
- Since the goods and services that foreign companies send to Turkey are consumed in Turkey, the consulting, brokerage, supervision, customer acquisition, market research, etc. services provided to these companies in Turkey are not considered within the scope of the service export exemption and are subject to VAT.
- In this case, in order to determine eligibility, the service provided must be directly related to the imported goods.
- Services provided in connection with goods imported by foreign companies from Turkey are considered service exports.
- Modification, maintenance, and repair services provided to foreign-flagged ships and aircraft that do not have the right to transport within Turkey are exempt from VAT as service exports.
- Services provided from Turkey to free zones are not considered service exports.
Certification and Declaration of Exemption
- The service export exemption is certified by the service invoice issued to the customer abroad.
- A list showing photocopies or printouts of service invoices approved by company officials is provided.
- These documents must be submitted with a petition within the declaration period in which the exemption is declared.
- For the declaration of the exemption, it is not mandatory to provide a payment document for the service (a document certifying that the foreign currency has been brought to Turkey, a bank receipt, etc.).
Declaration Method
- The export exemption is declared on the VAT Return No. 1 for the tax period in which the service was performed.
- The declaration is made using the transaction type code 302 in the “Exemptions-Other Transactions Giving Rise to a Right of Refund” tab.
- The price of the service is entered in the “Delivery and Service Amount” column.
- The VAT amount included in this service and calculated in accordance with the explanations in section (IV/A) of the Circular is entered in the “VAT Incurred” column.
- If no refund is requested, ‘0’ is entered in the “VAT Incurred” field.
The refund of VAT incurred and not offset through deduction for transactions declared in this manner will not be made until the service fee arrives in Turkey in foreign currency.
Refund Procedures
The following documents are required for refund requests arising from service exports:
- Standard Refund Request Form
- Service invoice or list
- Payment document (a document certifying that the foreign currency has been brought to Turkey, bank receipt, etc.)
- VAT Deduction List for the period in which the service export was declared
- VAT Paid List
- VAT Refund Calculation Table
Offset Refund
- Taxpayers’ offset refund requests arising from service exports and not exceeding TL 10,000 are fulfilled without requiring an audit report, YMM report, or collateral.
- If it exceeds TL 10,000, the refund of the excess amount is fulfilled according to the tax audit report or YMM certification report.
Cash Refund
- Taxpayers’ cash refund requests arising from service exports are fulfilled according to the tax audit report or YMM report, regardless of the amount of the request.
- If collateral is provided, the taxpayer’s refund request is fulfilled and the collateral is released according to the outcome of the tax audit report or YMM report.
Note:
- All VAT Refund Claims Any type of refund arising from VAT must be claimed by the end of the second year following the refund claim period.
- For example, if a taxpayer’s VAT refund is calculated in the January 2024 period and their VAT refund is also calculated in the July 2024 period, the final application date is December 31, 2026, which is valid for both periods.
- Consequently, the final application date for taxpayers with VAT refunds related to the 2023 accounting period is December 31, 2025.
- Applications made after these dates are RED and transferred to the treasury.
Service export VAT exemptions and refund processes can be carried out smoothly by carefully following the legislation and submitting the correct documents on time.
To get expert support on this matter or to learn more about the processes, you can contact us at OzbekCPA via contact.
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