Tax

1.Taxpayers involved in VAT-exempt transactions have the right to claim VAT refunds due to various transactions. Below is a list of such transactions and eligible taxpayers:

• • Exporters (goods, service exporters, roaming service providers,...),
  • Suppliers of sea, air, and railway transportation vehicles,
  • Providers of modification, maintenance, and repair services for sea, air, and railway transportation vehicles,
  • Providers of services for sea and air transportation vehicles at ports and airports,
  • Providers of certain services to oil exploration activities and pipeline transportation,
  • Suppliers and service providers for gold, silver, and platinum exploration, operation, enrichment, and refining activities,
  • Suppliers of machinery and equipment under investment incentive certificates,
  • Suppliers and service providers for the construction, renewal, and expansion of ports, airports, and certain railways,
  • Suppliers and service providers for projects with national security purposes,
  • Suppliers of goods to specialized/commodity exchanges under licensed warehousing and those receiving warehouse receipts,
  • Suppliers and service providers to the Turkish Red Crescent,
  • Suppliers of raw materials to registered fertilizer producers,
  • Suppliers of goods and services to foreigners and those working and residing outside Turkey
  • Providers of printed books and periodicals
  • Providers of transit and transportation services between Turkey and foreign countries
  • Providers of motor fuel to vehicles transporting export goods
  • Providers of goods and services under diplomatic exemption to foreign country or international organization representatives and their personnel
  • Suppliers of housing and workplace properties to foreigners and Turkish citizens working and residing outside Turkey
  • Suppliers of goods and services for the construction of organized industrial zones and small industrial sites
  • Suppliers of machinery and equipment to R&D and design centers for use in R&D, innovation, and design activities
  • Suppliers of goods and services for the construction of buildings donated to the public
  • Providers of healthcare services to foreigners

2.Taxpayers selling goods and services at reduced VAT rates, including,

• • Construction companies,
  • Textile and footwear manufacturers and sellers,
  • Food manufacturers and sellers,
  • Restaurants, cafes, and accommodation providers,

3.Businesses involved in VAT withholding sales and services (e.g., bullion metals, copper, zinc, aluminum, lead, cotton, mohair, wool, scrap metal, iron and steel sellers, and some architectural, engineering, consultancy, catering, transportation, workforce supply, building inspection, cleaning, environmental and garden maintenance, advertising, printing, and publishing service providers)

These taxpayers can request VAT refunds for VAT-exempt sales, sales with reduced VAT rates, and the VAT amounts withheld. They cannot claim refunds for the entire carried-over VAT or the VAT attributable to inventories. To determine the correct refund amount and verify that the purchases were made from genuine suppliers, S-CPAs must prepare VAT refund attestation reports. The refund amount can be obtained earlier by providing a letter of guarantee, which can be either reduced or increased. These guarantee letters are also refunded within the timeframe specified in the S-CPA report. It is crucial that these reports are meticulously prepared and submitted to the tax authorities to prevent delays in the refund process. DKN places great importance on meticulously preparing these reports with our competent and experienced staff to ensure that refund requests are fulfilled in the shortest possible time.

VAT Refund Process

The VAT refund process begins with the submission of returns, continues with the filing of the refund request petition, and ends with the completion of the refund. This process can be challenging and involves several critical steps to ensure its success:

• Accurate Calculation of Refund Amount: Ensure the refund amount is calculated correctly.
• Correct Reporting in Returns: The accurate refund amount must be reflected in the tax return.
• Determining Necessary Audit Minutes from Suppliers and Information Requests from Suppliers' S-CPA: Identify the appropriate parties to whom audit minutes and information requests will be sent.
• Tracking Audit Minutes and Information Requests: Follow up on audit minutes and information requests diligently.
• Uploading Deductible and Accumulated VAT Lists and Refund Certification Report: Ensure these documents are accurately prepared and uploaded.
• Correct Timing for Setoff Refund Requests: Determine the correct date and amount for refund requests if the refund is to be set off against other taxes.
• Exercise Caution Regarding Possible Refund Blocking: Be cautious of the possibility that a portion of the refund may be blocked.
• Attention to SGK Setoff Dates: Pay close attention to the dates for setoffs with the Social Security Institution (SGK).
• Monitoring the Control Report Generated by GİB System: Regularly check the control report produced by the Revenue Administration (GİB) system.
• Timely Response to Additional Information Requests: Provide timely responses to any additional information or document requests from the tax office.
• Contacting Counterparties for Missing Information: If deficiencies arise due to counterparties in commercial transactions, promptly contact them to resolve the issues.
• Maintaining Healthy Communication with the Tax Office: Establish and maintain clear and effective communication with the tax office.
• Step-by-Step Monitoring of the Refund Process: Follow each step of the refund process carefully and ensure it is completed successfully.

Failure to respond to deficiency letters within the stipulated time can result in the rejection of both cash and setoff refund requests. Delays in the setoff refund request process may lead to the calculation of late payment interest. Moreover, untimely SGK setoffs result in the loss of a 5% discount for the following month. Therefore, it is crucial to meticulously follow up on setoff refund requests and particularly SGK setoffs.

Corporate Tax Refund

Corporate tax refunds can be particularly relevant for taxpayers in the following scenarios:

1. Reporting Income in Provisional Tax Returns but Suffering a Loss in the Last Quarter (Taxpayers who have reported income in their provisional tax returns but incurred a loss in the final quarter of the fiscal year may be eligible for a tax refund.),

2. Withholding Taxes Exceeding Payable Corporate Tax Due to Long-Term Construction Projects (Taxpayers engaged in long-term construction projects who have had corporate tax withheld that exceeds their payable corporate tax.)

3. Not Applying Special Reduced Corporate Tax Rates for Manufacturers and Exporters During Provisional Tax Periods (Taxpayers who did not apply the special reduced corporate tax rates for manufacturers and exporters during provisional tax periods but are eligible for these rates for the first time in their annual corporate tax return.)

4. Applying Deductions Such as Investment Allowances, Corporate Tax Exemptions, and Income from Foreign Service Activities for the First Time in the Annual Corporate Tax Return (Taxpayers who are applying deductions for the first time in their annual corporate tax return, including investment allowances, corporate tax exemptions, and income from foreign service activities.)

Refund Claim Procedures

While these are the most common scenarios for claiming corporate tax refunds, refunds can also be requested in special situations related to the correction of past year returns. For example, deductions not claimed in past years due to losses, such as the cash capital interest deduction, can be corrected and claimed.

Timing of Refund Requests

• Refund requests can be made in cash or by offsetting within the year after being declared in the corporate tax return during the normal declaration period. Without a request, a refund will not occur solely based on the tax return declaration.
• After entering the refund request, the Revenue Administration system will conduct various cross-checks and generate questions for the taxpayer to answer. After these responses are reviewed and approved by the tax office, the refund process will be completed.

Post-Declaration Period

• Refund requests can also be submitted via an amended tax return after the normal declaration period has passed.

For more information on corporate tax refunds, please contact us.