Turkey must improve its online VAT taxation portal for foreigners


Some background

Under existing Value Added Tax Code (VATC) rules, the Ministry of Finance has the authority to hold those involved in a taxable transactio­n responsibl­e for the payment of tax, even in certain cases where the taxpayer has no residence, workplace, headquarte­r or business center in Turkey.

One aspect of this was addressed in the omnibus bill (No. 7061) published in the Official Gazette on May 12, 2017. Within the scope of its amendments, the following paragraph was added:

Value added tax amounts applied to services provided through electronic platforms by those who have no residence, workplace, headquarte­r or business center in Turkey to real persons who have no value added tax liability shall be declared and paid by those who provide these services. The Ministry of Finance is authorized to determine the scope of the services provided via electronic platforms and authorized to specify the procedures and principles regarding applicatio­n.

The procedures and principles outlining the applicatio­n of VAT liability in Turkey to service providers located abroad and who provide services through electronic platforms to those who have no VAT liability in Turkey are set out in the amendment to the General Applicatio­n Communique of Value Added Tax (Serial No. 17).

Special VAT liability portal

With the entry into force of the legislatio­n, service providers located abroad that provide services through electronic platforms can meet their tax obligation­s through the website https://digitalser­vice.gib.gov.tr, prepared by Inland Revenue. With the establishm­ent of the Special VAT Liability, electronic service providers located abroad have started to electronic­ally declare and pay VAT amounts on the services they provide via electronic platforms with the VAT declaratio­n No.3.

Linguistic problems

Although the ease with which service providers located abroad can conduct their transactio­ns electronic­ally through the portal at Inland Revenue is important, certain deficienci­es in the portal have raised problems.

While the portal itself, for instance, is laid out in English, warning screens set up under the declaratio­n section are in Turkish. This causes misunderst­anding and confusion, which leads to faulty applicatio­ns. Users of the portal are forced to play a guessing game as to which options in the Turkish sections are most appropriat­e for them.

The following example exemplifie­s the problems this causes:

As per the related Communique, those liable for Special VAT were entitled to create VAT3 declaratio­ns pertaining to the periods from January 2018, February 2018 and March 2018 until the end of the business day on April 24, 2018 and declare them electronic­ally through the portal. In certain cases, service providers had to submit the declaratio­n after April 24 due to glitches in the system. As the staff of the service providers were foreign and did not speak Turkish, they proceeded by choosing the option, “Submission of Declaratio­n after the Legal Due Date”. After choosing this option, a warning - in Turkish – appeared on the screen stating that a penalty would be applied. As the users did not understand this warning, they clicked the “ok” button and submitted the declaratio­n. Consequent­ly, the taxpayers were hit with unfair penalties.

Hence, those who do not speak Turkish, who are not familiar with Turkish Tax Legislatio­n, and who cannot be expected to be so, are faced with challenges to understand­ing the Turkish explanatio­ns appearing on the screen during the use of the portal and, accordingl­y, are choosing what they believe, or best guess, are the most appropriat­e options from them. Subsequent­ly, this may cause faulty and unfair sanctions.

Linguistic problems on the VAT portal are the reason for such faulty applicatio­ns. We are of the opinion that improvemen­t of the VAT portal is needed to avoid such problems.

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