+VAT Law - Nr. 3065

++Exportation of Goods and Services - Article 11

+++VAT General Communiqué - Serial No 26

Official Gazette Number: 19681

Official Gazette Date: 31/12/1987

Scope

In addition to amendments made for several articles, new decrees are also added to Value Added Tax Law with Laws numbered 3336 and 3393.

It is regarded as necessary to make a statement related with some subjects which created confusion at the application phase as well as the amendments made at the code.

(…)

K - Service Exportation :

As is known, with previously published (A) Section of VAT General Communiqué serial 17, service exportation exception principals are explained.

In addition to that; representation, consultancy, engineering, supervisory kind services are expressed as “may subject to service exportation“

However, due to cases reflected to our Ministry, it was understood that some doubts raised about exception application at service exportation subject.

As a result, application is directed ay following means in effect from 01.01.1988

It is compulsory to have realized below four conditions all together in order to apply VAT exception at service exportation.

1. Service must be performed at Turkey for a customer abroad:

What was meant by “customer abroad“ is the served person with domicile,business place, legal headquarter or business center abroad or having a bureau,

representative, agency, branch carrying on independent business on behalf of a company present in Turkey.

2. Invoice or suchlike document must be issued in the name of customer abroad:

Invoice or suchlike document to be issued related with the service provided must be in the name of customer abroad whose characteristic is described as above.

3. Service fee must be brought to Turkey as foreign currency:

Fee related to the service performed for the customer abroad must be brought to Turkey as foreign currency.

Party benefiting from the exception must verify above case either with a foreign exchange purchase voucher or with another document

as per foreign-exchange legislation verifying that the foreign exchange is brought to Turkey.

4. Should benefit from the service abroad:

In order to apply the exception, it is necessary to be benefited from the service abroad.

In other words, service provided for the customer abroad must not be related with the same customers activities at Turkey.

Sample Case 1 :

Full liable tax payer company at Turkey, (x) Engineering Ltd , provided a technical drawing related to a textile factory to be established at Jordan on the

agreement signed with a company also resident at Jordan and received the fee for this service via Central Bank of Turkey.

Since all above conditions fulfilled, this service work will benefit from service export exception and (X) Engineering Ltd will not calculate VAT on her invoice to the company at Jordan.

Sample Case 2 :

Company (A) performing brokerage services at Turkey, received a brokerage fee for mediating the supply of textile commodities purchased at Turkey by a company resident at Germany.

Company (A) also certificated that the foreign currency is brought to Turkey by a foreign exchange voucher, performed this agency service to a Company abroad and

issued invoice in the name of company resident at Germany. However,this service does not benefit from service export exception.

Since the service provided to company abroad is benefited at Turkey, Company (A) can not subject this service to “service export exception“

Sample Case 3 :

Turkey based travel agency company (B) Inc. served a tourist group sent by a foreign travel agency by accommodating, tour organizing and catering.

Mentioned taxpayer received 15.000.000 TL in return of services provided.

This Turkey based travel agency spent 13.500.000 TL of the fee received for costs like accommodation,tours and catering.

After those expenses, 1.500.000 TL is left for the company.

Since agency company abroad is benefited from this service, no value added tax is applied to this amount and regarded as service export exception.

However, above mentioned tax payer’s catering,accommodation and tour organizing services provided to the tourist group is benefited at Turkey and those services are subject to taxation.

As a result, services given like accommodation and catering is subject to VAT payment calculated as per general principals.

This tax payer can show the amount subject to tax and exempted from tax separately as well as issuing separate invoices for each service provided.

Sample Case 4 :

A foreign company established a bureau at Turkey for the purpose of marketing own goods.

This bureau assigned (X) Advisory company to make the necessary marketing research in order to identify the marketing strategies better related with the goods under sale.

This advisory service given to the foreign companies bureau at Turkey is not subject to service export exception.

Service given to this bureau is related with the activities of same bureau at Turkey.

Sample Case 5 :

(X) Company resident at Turkey and giving mediation services is searching/finding customers for a Japan based firm for the sale of goods of this Japanese firm.

(X) Company issued the invoice in the name of Japanese firm related with the customer finding mediation service and certified the foreign exchange transfer to Turkey by foreign exchange voucher.

However, (X) Companies service given to Japanese firm is benefited at Turkey and can not subjected to service export exception.