International transportation, in its most general form, refers to the transportation of goods from one country to another. In our country, where transportation activities are particularly intensive, the tax exemptions applied to these activities are of great importance.
The Value Added Tax Law contains special provisions for transportation operations, and these provisions are of critical importance for exporting companies and companies operating in the transportation sector.
II. Legal Framework
- Article 14 of VAT Law No. 3065 exempts transit and transportation operations between Turkey and foreign countries from taxation, as determined by the President.
- The exemption covers:
- Transportation operations that begin in a foreign country, pass through Turkey, and end in a foreign country,
- Transportation operations that begin in a foreign country and end in Turkey,
- Transportation operations that begin in Turkey and end in a foreign country.
Furthermore, Article 32 of the Law stipulates that VAT shown on invoices and documents related to transactions covered by the exemption may be deducted, and VAT that cannot be deducted may be refunded provided that it is requested by the end of the second calendar year following the period in which the transaction took place.
III. Application of the Exemption
Detailed explanations regarding the international transportation exemption are provided in Section (II/C-1) of the VAT General Application Circular.
VAT Incurred and Right to Refund
Section (IV/A-1.2) of the Circular covers the following points:
- VAT incurred consists of VAT on purchases and expenses related to the transaction giving rise to the right to refund, general manufacturing and general administrative expenses, and expenditures related to economically depreciable assets (ATİK).
- The amount of VAT to be refunded is calculated from the following sources:
- a) Goods and services that constitute the direct input of the transaction,
- b) General expenses related to the transaction (telephone, stationery, transportation, accommodation, fuel, electricity, rent, etc.),
- c) VAT incurred due to ATIK purchases used in the transaction.
According to the calculation method, direct inputs are considered first, followed by general expenses, and finally VAT related to ATIK. VAT on unrelated expenses is not included in the refund calculation.
ATIK Charge
Section (IV/A-1.3) of the Circular contains special provisions regarding ATIK:
- In order for a share of the VAT incurred due to ATIK to be included in the refund account, the ATIK must be actually used in transactions giving rise to a refund right.
- If the ATIK is manufactured by the taxpayer, the VAT incurred may be included in the refund account from the date it is capitalized and begins to be used.
- The VAT that can be refunded in a tax period (maximum refundable tax) cannot exceed 20% (general VAT rate) of the transaction amount giving rise to the refund right in that period.
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 for the January 2024 period and their VAT refund is also calculated for the July 2024 period, the final application date for both periods is December 31, 2026.
- Consequently, the final application date for taxpayers with a VAT refund related to the 2023 accounting period is December 31, 2025.
- Applications made after these dates are RED and transferred to the treasury.
VAT exemptions and refund processes in the context of international transportation, especially considering ATIK loading, require detailed knowledge of the legislation. Incorrect or incomplete applications may lead to the rejection of refund requests or financial liabilities for taxpayers.
Therefore, professional management of these processes is critical for companies.
For professional support regarding international transportation exemptions and VAT refund processes, you can contact us at OzbekCPA.
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