01.06.2022/37
Changes to the General Application Communiqué on Value Added Tax (Serial No: 42) Published
The “Communiqué on Changes to the General Application Communiqué on Value Added Tax (Serial No: 42)” was published in the Official Gazette No. 31849 on May 28, 2022.
The key amendments in the Communiqué are summarized below:
1- VAT Exemption on Purchases of National Security Institutions:
With the addition made to section (II/B-7.6.) of the VAT General Application Communiqué, it is foreseen that “national security institutions will be held responsible for the lost tax, related penalties, interest, and fines if the goods and services listed in the exemption certificate issued by the national security institution and approved list are found not to meet the exemption criteria.” The effective date of this change is 28.05.2022, and the regulation will be applied starting from May 1, 2022.
2- Exemption Application on Residential and Commercial Property Deliveries:
With the change in Article 10 of Law No. 7394 and Article 13 of the VAT Law, the holding period for residential or commercial properties delivered under VAT exemption to Turkish citizens living abroad for more than 6 months and foreigners has been extended from 1 year to 3 years. The new regulation regarding these deliveries has been incorporated into the Communiqué, and the holding period for the sale of residential or commercial properties has been changed from “one year” to “three years” in sections (II/B-12.) and (II/B-12.3.). The change in the holding period became effective as of May 1, 2022.
3- Construction Works Under Investment Incentive Certificates for Manufacturing and Tourism Sectors:
The regulation regarding the refund of VAT incurred on construction works for investments under manufacturing industry incentive certificates, which could not previously be deducted or offset, has been converted into an exemption regulation under the amendment made by Law No. 7394. The exemption period has been set to December 31, 2025, and tourism incentive investments have also been included in the scope of the regulation.
With the fourth article of the Communiqué, changes were made to the relevant provisions, and a new section 7.A was added to the II/E section of the VAT General Application Communiqué to clarify the scope and application principles of this exemption.
Therefore, investors with incentive certificates in manufacturing and tourism sectors can procure goods and services for construction works under the scope of their incentive certificates without VAT from May 1, 2022. (The exemption rule under Article 13/d of the VAT Law will still apply to non-construction machinery and equipment purchases listed under the incentive certificate’s global list.)
Sellers providing goods or services to manufacturers and tourism investors for construction works under the incentive certificate with VAT exemption can deduct the VAT they have incurred from these sales and, for the VAT they cannot offset, can apply for a refund according to the principles outlined in Article 4 of the 42nd VAT Communiqué.
4- VAT Exemption on Engineering Services Provided for the Development of Electric Motor Vehicles:
With the addition of temporary Article 42 to the VAT Law by Law No. 7394, the engineering services related to the development of electric motor vehicles, which are manufactured in Turkey as a result of R&D activities conducted in Turkey and are designed to fully eliminate exhaust gas emissions with greenhouse effect, will be exempt from VAT until December 31, 2023. This exemption applies to the services provided under investment incentive certificates to taxpayers involved in the production of electric motor vehicles developed in Turkey as part of these activities. The scope and application principles of this new exemption are regulated in Article 5 of the 42nd VAT Communiqué.
You can access the relevant Communiqué here.
Best regards,
BİLGENER
