The taxable base of a transaction is usually the total amount of the payment received. The taxable base does not include the VAT itself or any discounts, provided that they are at a reasonable rate with regard to commercial practice and are explicitly listed in all invoices or similar documents
2Reverse Charge VAT
In a case the origin of company or the taxpayer is not resident in Turkey, the related authorized Ministry can hold any of person who is dealing with tax transaction and responsible for tax payments. This process is called Reverse charge VAT mechanism requiring that the resident company calculate the amount of VAT to be paid over payments to abroad. According to this procedure, the resident company is in charge of paying tax to Turkish tax office or customers on behalf of the non-resident company (foreign company). Consequently, the local company takes this VAT as input VAT and offsets that in the current month.
3The Credit Mechanism of VAT
The Value Added Tax is received in every stage of sale from the production, distribution to the final sale to consumers. At every the sale stage the liable tax which will be charged by tax office is the difference amount of between the invoices which taxpayer issue to buyer and received from product or service seller during the same time.
Thus the VAT is initially calculated by employing the suitable tax rate to the taxable base for products and services provided by the taxpayer during a taxable period. This amount is then reduced by a credit for VAT previously paid on importation and on goods and services supplied to the taxpayer.
The following VAT or input VAT which is written on the invoices and similar documents are exempt from the tax system which are as:
* Exportation of goods and services,
* Exemption for vehicles, petroleum exploration and investments made under an investment incentive certificate (IIC),
* Transit transportation,
* Diplomatic exemption
are deducted from the Value Added Tax (output VAT) to be calculated on the transactions of the taxpayer which are subject to VAT. 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 Finance.
5Special Consumption Tax (SCT)
There are 4 different product groups which are levied to particular consumption tax in addition to VAT.
Petroleum products, natural gas, lubricating oil, solvents, and derivatives of solvents
Automobiles and other vehicles, motorcycles, planes, helicopters, yachts
Tobacco and tobacco products, alcoholic beverages
Unlike VAT, which is applied on each delivery, special consumption tax is charged only once.
6Banking and Insurance Transaction Tax
Banking and insurance company transactions remain exempt from VAT but are subject to a Banking and Insurance Transaction Tax. This tax in Turkey applies to income earned by banks, for example on loan interest. The general rate is 5%, while interest on deposit transactions between banks is taxed at 1% and no tax is levied on sales from foreign exchange transactions.
7Stamp Duty Tax
Stamp duty applies to a wide range of documents, including contracts, agreements, notes payable, capital contributions, letters of credit, letters of guarantee, financial statements, and payrolls. Stamp duty is levied as a percentage of the value of the document at rates ranging from 0.189% to 0.948%, and collected as a fixed price (a pre-determined price) for some documents.