Determination of the Refundable VAT

In Turkish VAT practice, VAT situation of the companies may result with a carried forward VAT (CFVAT) position, which means that the input VAT calculated by the suppliers over the purchases exceed the output VAT calculated by the company over the revenues.

This situation does not mean that the CFVAT asset of the company is refundable.

However, according to the Turkish VAT regulation there are some specific types of deliveries which are exempt from VAT;

i.e. the deliveries within the scope of an investment incentive certificate

This means there is no VAT calculation over these types of deliveries.

The input VAT incurred related to VAT exempt sales will be recovered by refunding.

In conclusion, in Turkish VAT practice the refundable VAT is not the CFVAT asset of the company, it is the input VAT amount which is specifically burdened related to the VAT exempt deliveries.

Documents required for cash refunding

Refunding through a letter of guarantee (LOG)

Below are the documents required to be submitted to the tax office in order to claim a VAT refund.    

1.Deductible VAT list of the relevant period
2.Refundable VAT calculation and copies and the list of the invoices forming the refundable VAT amount
3.List and the invoices of the VAT exempt deliveries
4.IIC and the other related documents of EnerjiSa in which the purchases are approved by EnerjiSa.
5.The LOG if necessary

Some of the documents mentioned above should be submitted electronically,

The documents will be reviewed by the Tax Office and the Tax Administration and the collection of the money will be done after their approval.

During review, tax authorities may require additional documents and explanations. Thus, due to the fact that it depends on the performance of the tax authorities, a certain timing related to the collection of the refund receivable can not be given.

LOG’s given to the tax office will be released by the SFA report.

Sworn Financial Advisor (SFA) Report

All the above mentioned documents are also necessary in order to prepare an SFA report. Additionally it is necessary to complete cross check confirmations with the suppliers, depending on our prior experiences this may take time and is the reason for us to estimate a 1 – 3 month time for the preparation of the report.

SFA reports will also be reviewed by the tax authorities and this may take another additional time.

Information related to LOG

The LOG should be issued for the name of the company claiming the refund.

The value of the LOG should cover the amount claimed.

There is not a specific ranking for the Bank which will give the LOG,

For the cash refunding through an LOG certain timing can not be given, estimate it to be completed in 1 month but this may be subject to changes depending on the performance of the tax office.    

Credit mechanism

There is also the option of making the refund through credit from tax and social security liabilities, and the documentation requirements are almost the same with the above mentioned options.

Further more, for the refunding through credit, a SFA report or a LOG is not necessary.