Page 10 - VGTemmuz_2015
P. 10
Vergide Gündem
English Translation
New approach in the determination of
whether the refundable value added tax
is recovered through deduction
1. Introduction
The payer of the value added tax (VAT), which is levied on expenditures, is the final
consumer. This tax should not be ultimately born by enterprises, except the situations
specified in the VAT Law. The Law prescribes a deduction and refund mechanism to
ensure the realization of this consequence, which constitutes the principal rationale of
the value added tax practice for enterprises.
Taxpayers who have conducted exempt transactions cannot recover the taxes they
have incurred due to these transactions through the deduction mechanism. The
miscellaneous regulations in our legislation aim to relieve such transactions from tax,
either through refund or expensing methods.
In our tax literature, exempt transactions whose tax input is allowed to be refunded
are called “full exemption” or “transactions entitled to refund”, while exempt
transactions whose tax input is allowed to be booked as expense or cost are called
“partial exemption” or “transactions not entitled to deduction”.
The “input VAT” of the exempt transaction refers to the amount of VAT to be refunded
in respect of fully exempt transactions, while it refers to the amount of VAT whose
deduction will be cancelled in terms of partially exempt transactions.
In this article, we will discuss the regulations, methods, principles and new approaches
relating to the calculation of the transaction’s input VAT.
2. Input VAT of the exempt transaction
Under the article 32 of the VAT Law, the value added tax shown on invoices and similar
documents for fully exempt transactions shall first be subject to deduction, then
refunded if it cannot be recovered through deduction.
Based on the legal regulations, we could say that fulfilment of the three conditions
below would be required in order for a refund right to arise in relation with taxes subject
to deduction:
a) It must be a transaction entitled to refund.
b) There must be a tax that is incurred and subjected to deduction in respect of the
transaction.
c) The tax subjected to deduction should not have been recovered through
deduction.
Input VAT refers to the total amount of taxes paid due to expenditures directly or
indirectly related with the performance of the service rendered in case of services
performed, or related with the manufacturing, acquisition, preservation and sale of
goods delivered, in case of deliveries of goods in the scope of exemption.
10 Temmuz 2015