Turkey must improve its online VAT taxation portal for foreigners
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.
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.