Various changes are to be adopted with a new Draft Law which intends to change the Value-Added Tax Law numbered 3065. This bulletin aims to give brief information regarding possible changes in the VAT Law.


Article 1- Base for Land Delivery in Construction Works in Return for Land Share

VAT application is reorganized in the construction works in return for land share. According to this; in the construction works in return for land share, VAT base on land delivery is realized by the share of the land that corresponds to the house or work place to be contracted instead of the whole land.


Article 2- Group VAT Liability

Ministry of Finance is given the authority to allow companies with at least a 50% shareholding submitting a consolidated Value Added Tax declaration.


Article 3- Deliveries to Duty Frees is Deemed to Be Export

Competitive inequalities against domestic businesses are eliminated by identifying the deliveries to duty-free shops as export as per Article 12/1-a of VAT Law.


Article 4- Exemption for R&D Equipment, Broadened Scope in Customs Services Exemption

- Value-added tax exemption has been introduced for machinery and equipment purchases used solely for R&D, innovation and design activities.

- Previously being a partial exemption, warehousing and terminal services provided in customs are included in the scope of full exemption. In this way, VAT refund for such services shall become possible.


Article 5- Converting of a Partnership into Equity Company

- As long as the conditions described under Article 81 of Income Tax Law is satisfied, the process of converting ordinary partnerships into equity companies is included in the scope of exception in order to encourage institutionalization.

- Delivery of unusable garment clippings are exempted from VAT.


Article 6- Tax Base in Sale of Second Hand Motor Vehicles

Special tax base implementation is brought for the taxpayers who engage in second hand motor vehicle sale without any substantial modification. The base is determined as the amount remaining after the purchase price applied by non-taxpayers is deducted.


Article 7- Base for Housing Delivery in Construction Works in Return for Land Share

It is regulated that system of cost value defined as second order in Article 267 of Tax Procedural Law is applied in determination the cost of housing or workplace handed to the land owner. As per Article 267 of Tax Procedural Law, “if the cost price is known or possible to calculate, then the tax payer adds 5% for wholesales and 10% for retail sales and precedent value is found.”


Article 8- Refund of Deferred VAT, Extension in the Right of Deduction, Deduction in VAT of Bad Debts

- Excess amount of input VAT, unless not being offset through deduction within 12 months period, is refundable provided that the taxpayer claims refund within the six months following the 12 month deduction period.

- The right for deduction is extended to the end of the following financial year and the current “deduction within the same financial year” principle is abandoned.

- VAT attributed to the bad debts defined under Article 322 of Tax Procedural Law can be deducted within the year when the receivable is recorded as expense.


Article 9- VAT Deduction in Perished Fixed Assets, VAT Deriving from Transfer Pricing

-  In case fully or partially depreciated fix assets become perished, the VAT attributed to the amortized part can be deducted.

-  If VAT (within the scope of transfer pricing) paid to the supplier located in Turkey is declared and paid by the supplier to the tax office, the purchaser can deduct such VAT.


Article 10- Statute of Limitation in VAT Refund, Calculation of Refundable Amount

-  Vat refunds within the scope of Article 32 must be claimed by the end of second year following the transaction term.

-  Authority is given to Ministry of Finance about determining the refundable amount of manufacturer exporters as a percentage of the export amount instead of incurred VAT system.


Article 11- Expense Record of Unrefunded VAT, Different Refund Procedures for the Compliant Taxpayers

- Authority to Council of Ministers is given to accept the unrefunded VAT that is not claimed within the statute of limitation as an exempt from the corporate tax base.

- Ministry of Finance is authorized to determine different refund procedures by taking the compliance level of the taxpayer into consideration.


Article 12- Optional Revenue-Based Taxation System

Optional revenue-based taxation system is regulated. Such system is applicable for those who determine their commercial profit as per operation account method and for self-employed persons. Such methods requires application of a fixed rate over the total VAT included amount and no deduction is allowed from the calculated amount. Incurred VAT can be considered as an expense while determining the corporate tax base.


Article 13- Tax Responsible in Group VAT Liability

In Group VAT Liabilities, tax is accrued for the entities who are obliged to declare the value added tax. However, companies within the group are mutually responsible from the payment.


Article 14- Extension of Tax Payment

Ministry of Finance is authorized to extend the payment period of those who keeps their books within the scope of operation account method to the end of second month following the declaration.


Article 15- Late Payment Fee for the Refunds Actualized after 3 Months

If the VAT refund is not finalized within 3 months upon the completion of all required documents by the taxpayer, late payment fee shall be calculated and paid to the taxpayer together with the refund amount.


Article 16- Games Developed in Technology Zones is Deemed to Be Exempt

Application software related games are also added to the exemption regarding the delivery of technological products by the companies operating in Technology Development Zones.


Article 17- Procedures in Refund of Deferred VAT

Provisional Article 39 has been added to the VAT Law. According to this article, the VAT amount which cannot be reimbursed through deduction till 31.12.2018, is tracked in a separate account. Ministry of Finance is authorized to refund it fully, to have it offset against other taxes and to allow its expense record. If full or partial refund of such amount is regulated, the VAT which are not claimed in line with procedures cannot be deducted, refunded or recorded as expense.


Article 18: VAT Refund Investigations

Investigations on VAT refund lasts 3 months, additional time requests can only be accepted up to 2 months.


Article 19: CPAs Can Prepare VAT Refund Report

Ministry of Finance is authorized to have CPAs prepare VAT refund report.