VAT liability of non-residents in Turkey

According to a new legislative amendment, non-resident providers of all kinds of services by internet to real persons resident in Turkey are required to submit a VAT return

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Services provided in Turkey by those whose residences, workplaces, legal headquarters and principle offices are not located in Turkey and services provided abroad but from which an individual resident in Turkey derives a benefit are considered to be subject to VAT, on the basis that such services are considered to have been provided in Turkey (paragraph (b) of article 6 of VAT Act No. 3065).

While, in terms of these transactions, the entity performing the transaction is essentially the company located abroad and liable to pay tax, the buyer who benefits from such service in Turkey, as the party responsible, is obliged to declare and pay the whole of the VAT related to such service purchases, explain the Ecovis experts. It is not mandatory that those who reside in Turkey at the time of the provision of such service and benefit from such service in Turkey be liable to pay VAT. Those not liable to pay VAT must withhold VAT for such transactions and declare the amounts of such withholding to their respective tax offices on VAT return form no. 2.

Where the service is exempted from tax or the service so purchased does not benefit an individual in Turkey, then it is not necessary to accrue and pay any VAT.

Examples of such services provided and subject to VAT in Turkey are:
  • layout plan drawn abroad for a construction project performed in Turkey
  • consultancy service purchased from abroad for the operation of a company operating in Turkey
  • computer software service purchased from abroad for a general budget administration that does not have any VAT liability
  • Provision of a service of sending information from abroad to a non-governmental organisation that does not have any VAT liability in connection with its subject matter
According to the legislative amendment in article 9 of the VAT Act No. 3065 which came into effect in early 2018, providers of services by internet who do not have legal headquarters, residences or workplaces in Turkey to any natural persons who do not have any VAT liability in Turkey have to declare any VAT related to such transactions on VAT return form no. 3. Those who provide such services must complete the form available under “www.digitalservice.gib.gov.tr” before they submit their tax returns for the first time. Following the completion of such a form, tax liability is created in the name of the service provider.

Those who are covered by special VAT liability provisions calculate VAT for the services which they provide to any natural persons who do not have any VAT liability in Turkey at the rate to which such services are subject. Such entities are not required to keep accounts and have them signed off by competent professionals as per article 227 (duplicate) of Act No. 213. However, they must declare the VAT which they have calculated for the services they have provided on electronic media in Turkish lira on VAT return form no. 3 not later than the evening of the 24th day of the month following the one in which the services were provided, according to the monthly taxation terms, and pay the amount they declare not later than the evening of the 26th day of the month in which the tax return is submitted. If such taxpayers do not have any transactions in the relevant month, they need not submit any tax returns for the relevant month.

In the event that the amounts are collected in a foreign currency, they must be converted to Turkish lira on the foreign currency buying rate of the Central Bank of the Republic of Turkey as published in the Official Journal on the date when the operation giving rise to tax takes place.

Any taxes arising on this basis may not only be payable to the competent tax offices but to any contracted banks or with the cash cards or credit cards of the banks authorised to collect at the website of the revenue administration. Provisions related to tax penalties of the Act No. 213 shall be applied to those who fail to fulfil their obligation to declare.

Author:

Mustafa Bulut, PhD., Partner, Sworn in CPA, Chief Auditor, ECOVİS DİPLOMAT Denetim ve YMM A.Ş, İzmir, Turkey

Email: mbulut@diplomatymm.com.tr 
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