Tax on Consumptions

Do you know that approximately for 70% of the taxes collected in Turkey comes from indirect taxes?

That is why indirect taxes are very important in the management of tax costs.

Taxes that need to be collected from consumers and transferred to the State can become your company’s cost.

Main taxes on goods and services are as follows in Turkey:
1. Value Added Tax (Law No. 3065)
2. Special Consumption Tax (Excise Duty) (Law No. 4760)
3. Special Communication Tax (Law No. 6802)

1. Value Added Tax (VAT)

Since 1 January 1985, the Value Added Tax has been in effect in Turkey.
So, Turkey has important experience VAT application.

Commercial, industrial, agricultural, and independent professional goods and services, goods and services imported into the country, and deliveries of goods and services as a result of other activities are all subject to VAT.

The generally applied VAT rates are set at 1%, 8%, and 18% in Turkey.

VAT exemptions include, but are not limited to, the following:

Exports of goods and services
Roaming services rendered in Turkey for customers from outside Turkey (i.e. non-resident customers) in line with international roaming agreements, where a reciprocity condition is in place
Contract manufacturing for clients operating in free zones
Petroleum exploration activities
Services rendered at harbors and airports for vessels and aircrafts
Supply of machinery and equipment within the scope of an investment certificate
Transit transportation
Deliveries and services made to diplomatic representatives and consulates on condition of reciprocity and to international organizations with tax exemption status and to their employees
Banking and insurance transactions that are subject to Banking and Insurance Transactions Tax

Taxpayers of VAT

VAT taxpayers are defined in the VAT Law as those engaged in taxable transactions, irrespective of their legal status or nature and their position with regard to other taxes.
The following people or entities are liable to VAT:

Those supplying goods and services,
Those importing goods or services,
Those required to complete customs formalities in case of transit of goods through Turkey,
General Directorates of Postal Services and radio and television corporations,
Organizers of any kind of chance and gambling,
Organizers of shows, concerts and sporting events with the participation of professional artists and professional sportsmen,
Lessors of goods and rights stated in Article 70 of the PIT Law,
Applicants for optional tax liability.

The Credit Mechanism

VAT is collected at every stage of the production and distribution process from the initial sale by the producer to the final sale to the consumer.
At each of these stages, the amount of tax payable is the difference between the total amount of tax charged on the invoices issued by the taxpayer and the total amount of tax charged on invoices issued to the taxpayer during the same period.
In the absence of transactions subject to VAT, or if the output VAT is less than the input VAT, then the input VAT which cannot be deducted is refunded to those who perform such transactions, on the basis of principles to be determined by the Ministry of Treasury and Finance.

2. Special Consumption Tax / Excise Duty (SCT)

Special consumption tax (SCT) is levied only for once at one stage of consumption process of the goods within the scope of four lists annexed to the SCT Law No. 4760.
There are mainly four product groups that are subject to SCT at different tax amounts and rates:

List I is related to petroleum products, natural gas, lubricating oil, solvents, and derivatives of solvents,
List II is related to automobiles and other vehicles, motorcycles, planes, helicopters, yachts,
List III is related to tobacco and tobacco products, alcoholic beverages and cola,
List IV is related to luxury products.

Unlike VAT, which is applied on each delivery, SCT is charged only once.

Taxpayers of the SCT

For List I; manufacturers including refineries or importers of the petroleum products,
For List II, traders of motor vehicles, importers for their use (not for selling) or sellers of untaxed vehicles through auction,
For List III, manufacturers and importers of the goods or sellers of untaxed goods through auction,
For List IV, manufacturers and importers of the goods or sellers of untaxed goods through auction

3. Special Communication Tax (SCT)

Telecommunication services (the mobile phone services, radio and TV broadcasting services and internet services) are subject to special communication tax. Special Communication Tax is not included in the VAT base. Special communication tax rates are as follows:

On mobile electronic communication services (including the sales for pre-paid lines) 7,5%,
The services regarding the transmission of radio and television broadcasts on satellite platforms and cable medium 7,5%,
The internet providing services by wired, wireless and mobile 7,5%,
Electronic communication services not listed above 7,5%.

Taxpayers are the operators who provide the electronic communication services.

Taxpayers shall declare the communication tax on the VAT returns and pay the accrued tax by the 15th day of the following month.

Also Special Communication Tax is not deductible for income and corporate tax purposes.

Please contact us for more information about consumption taxes in Turkey.