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2012 Fiscalis Revenue Administration VAT Department Ankara 1 VAT SYSTEM in TURKEY.

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Presentation on theme: "2012 Fiscalis Revenue Administration VAT Department Ankara 1 VAT SYSTEM in TURKEY."— Presentation transcript:

1 2012 Fiscalis Revenue Administration VAT Department Ankara 1 VAT SYSTEM in TURKEY

2 2012 Fiscalis Revenue Administration VAT Department Ankara 2 SCOPE I-INTRODUCTION 1-Brief History 2- Legal Framework 3-General Characteristics 4-General Overview II. TAXATION 1- Taxable Transactions 2-Territory 3.Taxable Persons4.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

3 2012 Fiscalis Revenue Administration VAT Department Ankara 3 I-INTRODUCTION

4 2012 Fiscalis Revenue Administration VAT Department Ankara 4 1-Brief History  The beginning of the studies on Value Added Tax (VAT) in Turkey goes back to  The law entered into force on January 1st, 1985.

5 2012 Fiscalis Revenue Administration VAT Department Ankara 5 2- Legal Framework  VAT Law No.3065  63 Article+28 Temporary Law  116 General Comminique, 60 Circular Note

6 2012 Fiscalis Revenue Administration VAT Department Ankara 6 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

7 2012 Fiscalis Revenue Administration VAT Department Ankara 7 General Characteristics  has credit mechanism.  is spread but non cumulative and based on self control system.  is objective and transparent tax

8 2012 Fiscalis Revenue Administration VAT Department Ankara 8 4-General Overview The Turkish tax system levies value added tax on the supply and the importation of goods and services.

9 2012 Fiscalis Revenue Administration VAT Department Ankara 9 General Overview (October 2011) TOTAL COLLECTION of VAT (thousand TL) ( Thousand Euro) PERSANTAGE of ALL TAX REVENUE 30,99% ACTIVE TAXPAYER

10 2012 Fiscalis Revenue Administration VAT Department Ankara 10 II. TAXATION

11 2012 Fiscalis Revenue Administration VAT Department Ankara Taxable Transactions  In line with OECD and EU Directives  The supply of goods and services, importation of goods and services

12 2012 Fiscalis Revenue Administration VAT Department Ankara 12 2-Territory commercial industrial agricultural or independent activities within Turkey

13 2012 Fiscalis Revenue Administration VAT Department Ankara 13 and w hen goods or services are imported into Turkey

14 2012 Fiscalis Revenue Administration VAT Department Ankara 14 SUPPLY  The transfer of the right of disposition on a property by the seller to the purchaser.

15 2012 Fiscalis Revenue Administration VAT Department Ankara 15 SERVICES  Everything except goods  After defining service, VAT Law of Turkey counts some examples of service; -making,-cleaning, -processing,-safekeeping, -creating, -preparing, -manufacturing -evaluating, -repairing, -leasing.

16 2012 Fiscalis Revenue Administration VAT Department Ankara 16 IMPORTATION  Any importation of goods or services into Turkey is a taxable transaction.

17 2012 Fiscalis Revenue Administration VAT Department Ankara 17 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.

18 2012 Fiscalis Revenue Administration VAT Department Ankara 18 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

19 2012 Fiscalis Revenue Administration VAT Department Ankara 19 REVERSE CHARGE IMPLEMENTATION FULL REVERSE CHARGE IMPLEMENTATION PARTIAL REVERSE CHARGE IMPLEMENTATION

20 2012 Fiscalis Revenue Administration VAT Department Ankara 20 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

21 2012 Fiscalis Revenue Administration VAT Department Ankara 21 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,

22 2012 Fiscalis Revenue Administration VAT Department Ankara 22 4.Taxation A.Chargeable Event  When does VAT become chargeable? General rule Special rules

23 2012 Fiscalis Revenue Administration VAT Department Ankara 23 B.Taxable Base  On what VAT is calculated? Total value of the consideration received, not including the VAT itself.

24 2012 Fiscalis Revenue Administration VAT Department Ankara 24  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.

25 2012 Fiscalis Revenue Administration VAT Department Ankara 25 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,

26 2012 Fiscalis Revenue Administration VAT Department Ankara 26 miscellaneous incomes such as due date difference, price difference interest and premium all benefits, services and assets provided under service or similar names,

27 2012 Fiscalis Revenue Administration VAT Department Ankara 27 b) Items Excluded from Taxable Base VAT itself any discounts

28 2012 Fiscalis Revenue Administration VAT Department Ankara 28 Special Types of Taxable Bases VAT law;  defines special taxable bases  gives authorisation to Ministry of Finance

29 2012 Fiscalis Revenue Administration VAT Department Ankara 29 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.

30 2012 Fiscalis Revenue Administration VAT Department Ankara 30 CURRENT VAT RATES GENERAL RATE 18 % REDUCED VAT RATES 1 % 8 % Currently three VAT rates are applied

31 2012 Fiscalis Revenue Administration VAT Department Ankara 31  the standard rate is 18%;  the reduced rate is 1% for -particular agricultural products, -newspapers and magazines, -supply of residential housing (under 150 m 2 )

32 2012 Fiscalis Revenue Administration VAT Department Ankara 32 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,

33 2012 Fiscalis Revenue Administration VAT Department Ankara 33 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.

34 2012 Fiscalis Revenue Administration VAT Department Ankara 34 Records Taxpayers must keep records in such a way to enable the computation and checking of VAT.

35 2012 Fiscalis Revenue Administration VAT Department Ankara 35 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.

36 2012 Fiscalis Revenue Administration VAT Department Ankara 36  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. Submission of VAT Returns

37 2012 Fiscalis Revenue Administration VAT Department Ankara 37 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.

38 2012 Fiscalis Revenue Administration VAT Department Ankara 38 Payment  submit returns within 24 days following the end of each taxable period.  payments are made 2 days after submission of VAT returns

39 2012 Fiscalis Revenue Administration VAT Department Ankara 39 THANK YOU

40 2012 Fiscalis Revenue Administration VAT Department Ankara 40 III-EXEMPTIONS, CREDIT MECHANISM, TAX REFUND

41 2012 Fiscalis Revenue Administration VAT Department Ankara 41 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

42 2012 Fiscalis Revenue Administration VAT Department Ankara 42 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

43 2012 Fiscalis Revenue Administration VAT Department Ankara 43 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.

44 2012 Fiscalis Revenue Administration VAT Department Ankara 44 - 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

45 2012 Fiscalis Revenue Administration VAT Department Ankara 45 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

46 2012 Fiscalis Revenue Administration VAT Department Ankara 46 Export deliveries (from Turkey to another country) (Export of Goods) Export deliveries (from Turkey to another country) (Export of Goods) Services related to export deliveries (Export of Service) Services related to export deliveries (Export of Service) Services for customers abroad (Export of Service) Services for customers abroad (Export of Service) According to Article 11 in VAT Law, Following Transactions are Exempt from VAT as an Export

47 2012 Fiscalis Revenue Administration VAT Department Ankara 47  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

48 2012 Fiscalis Revenue Administration VAT Department Ankara 48  It can be in different forms Classic form: Export through Customs to abroad 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 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 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 Refund at Customs: Buy some goods with VAT and then take VAT amount back while leaving a)EXPORT of GOODS

49 2012 Fiscalis Revenue Administration VAT Department Ankara 49 a)EXPORT of GOODS SELLER EXPORTER C U ST O M S DELIVERY OF GOODS VAT GOODS VAT EXEMPTIONS FREE TRADE ZONE OR ABROAD

50 2012 Fiscalis Revenue Administration VAT Department Ankara 50  Exemption at pre-export stage While exporter buying goods from manufacturer, doesn’t pay VAT, but has to export goods within 3 months 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, Manufacturer calculates and writes VAT on invoice, and then declare, but doesn’t pay it, Delivery is completely linked to export purpose Delivery is completely linked to export purpose VAT is deferred and after export, cancelled VAT is deferred and after export, cancelled If export does not occur, VAT is not cancelled. Exporter has to pay this amount to state. If export does not occur, VAT is not cancelled. Exporter has to pay this amount to state. b)CONDITIONAL DELIVERY of EXPORT

51 2012 Fiscalis Revenue Administration VAT Department Ankara 51 b) CONDITIONAL DELIVERY of EXPORT MANUFACTURER EXPORTER CUSTOMSCUSTOMS Final Goods Deferment- cancellation (optional) Final Goods exportation of goods (within 3 months )

52 2012 Fiscalis Revenue Administration VAT Department Ankara 52 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

53 2012 Fiscalis Revenue Administration VAT Department Ankara 53 C) IMPORT  Importation of the goods and services delivery and performance of which are tax exempted within the country, are also exempted from VAT.

54 2012 Fiscalis Revenue Administration VAT Department Ankara 54 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.

55 2012 Fiscalis Revenue Administration VAT Department Ankara 55 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.

56 2012 Fiscalis Revenue Administration VAT Department Ankara 56 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.

57 2012 Fiscalis Revenue Administration VAT Department Ankara 57 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.

58 2012 Fiscalis Revenue Administration VAT Department Ankara 58 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.

59 2012 Fiscalis Revenue Administration VAT Department Ankara 59 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.

60 2012 Fiscalis Revenue Administration VAT Department Ankara TAX REFUND  Refund is only possible for some transactions that are stated in the Law and related legislation.

61 2012 Fiscalis Revenue Administration VAT Department Ankara 61 TAX REFUND  Transactions entitling refund right; Full exemptions, Reduced rate, Partial reverse charge application, International agreements, Excess and unnecessary tax is paid.

62 2012 Fiscalis Revenue Administration VAT Department Ankara 62 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.

63 2012 Fiscalis Revenue Administration VAT Department Ankara 63 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.

64 2012 Fiscalis Revenue Administration VAT Department Ankara 64 ANALYSING THE LISTS WITH THE AUTOMATED VAT REFUND SYSTEM List of Suppliers List of Custom Declarations VAT Return Claimant CENTRAL DATABASE Application of Refund Claim VAT Refund Control Report Tax Office List of Export Invoices

65 2012 Fiscalis Revenue Administration VAT Department Ankara Statistical data on Risk Analysis Project of VAT Refund for the period of January 2010-October 2011 is shown below: Latest Developments in the Indirect Taxation Number of analysed refund request Amount of corrected VAT refund after risk analysis TL ( €) Amount of increased VAT tax base after risk analysis TL ( €)

66 2012 Fiscalis Revenue Administration VAT Department Ankara 66 THANK YOU  Revenue Expert: Filiz BULGURCU


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