All you need to know about VAT in Turkey
It is one of the most important things that concern every business owner in Turkey. It is clear that every business has benefits and drawbacks. The tax system is a system spread all over the world, and hardly any work of any kind is devoid of the tax system, especially those works that belong to the governmental and private sectors as well.
• what is it?
It is a tax imposed on the difference between the cost price and selling price of goods and on production. This value has different meanings depending on the subject.
This tax is collected at every stage of the economic cycle, which includes production, distribution, and consumption. It is imposed upon importing goods in addition to customs duties and other fees originally required until it reaches the final consumer, where its burden falls on him within the price or service delivered to him. One of the negative aspects that accompanies this tax is that the consumer bears it completely and exempts the producer from the tax, in addition to charging the various classes of society with equal amounts of the tax and the possibility of imposing double taxation.
• What is the KDV that stands for tax?
It is the name given to the value-added tax in Turkey. It is an abbreviation of the word Katma Değer Vergisi and means in English Added Value Tax. This tax is imposed at different rates according to expenditures. Companies pay tax according to their profits on the sales they make. This amount is originally deducted from consumers, i.e. buyers of goods and customers; individuals. This tax is found in most countries of the world.
• Tax calculation mechanism in Turkey?
At the outset, we must clarify that there are three rates of value-added tax, which are:
1% - 8% - 18%, which is divided according to products as follows:
o Products for which a 1% rate is imposed
It is imposed on basic consumer items such as wheat flour and its derivatives, dryers, nuts, seeds and grains, vegetables, newspapers, transportation, burial services, and funerals, as well as residential units whose area does not exceed 150 square meters.
o Products for which a rate of 8% is imposed
It is imposed on consumer items that are not included in luxury products such as meat and its derivatives, eggs, milk and its derivatives, honey, jam, candy, cotton fibers, threads, shoes, bags, some medical tools, and agricultural machinery.
o Products for which a rate of 18% is imposed
It is imposed on non-essential products and on luxuries and luxuries such as communication products, cars, furniture, electrical appliances, some spices, some animals, and other products and services, bearing in mind that houses and apartments in other than urban development areas are subject to this percentage.
• Has the value-added tax been reduced in Turkey?
The Turkish Minister of Treasury and Finance announced the reduction of value-added tax, and this reduction includes the following:
The tax on cars, household goods, furniture, and real estate. the tax on real estate has been reduced from 18 to 8 percent, in addition to applying discounts on title deed fees by 3 percent. As for furniture, the value-added tax was reduced from 18 to 8 percent, while the value-added tax on electrical household goods was abolished. As for commercial vehicles, the value-added tax was reduced from 18 to 1 percent.
• Value-added tax on real estate for foreigners in Turkey
During the past three years, foreign investments in Turkish real estate witnessed significant growth, in which Arab investors had the largest share, and from here it was necessary to clarify the value-added tax on real estate for foreigners in Turkey.
There are some detailed criteria related to the size and location of the property, under which the value-added tax drops from 18% to 8% or 1%.
There are also exceptions to the value-added tax in Turkey on each residential property or workplace that is defined in the building permit as a house, dwelling, shop, office, or floor apartment when sold for the first time only.
All types of real estate mentioned above must be attached to the floor easement deed and prepared for use by the buyer who will receive it.
As for the beneficiaries of the real estate tax deductions in Turkey, they are:
o Turkish citizens who have been residing abroad for more than six months, provided that they obtain an exit and work permit
o Foreign nationals who are not residing in Turkey.
o important people and institutions.
In conclusion, we find that many countries are trying to find a mechanism that suits all workers who are subject to the tax law, and the most important of these countries is Turkey, which is trying hard to offer the best facilities and discounts for all workers, whether they are Turks or foreigners.
