Temporary cut n sales taxes n certa n sectors
Temporary tax cuts signed by the President Recep Tayyip Erdogan went into effect after publication in the official gazette on October 31. It’s hoped the measures will stimulate spending in the following key sectors.
1. Immovable property
The tax authority will continue the VAT reduction on immovable property. The government previously cut the VAT rate on immovables to 8 percent from 18 percent for six months (through the end of October). This reduction will continue until year end. Similarly, the government will continue to collect a 3 percent title deeds charge (instead of 4 percent) until year end.
The decision drops the VAT rate on furniture to 8 percent until year end.
However, the excess input VAT accumulated by the seller due to the 8 percent VAT (instead of 18 percent) on sales is not eligible for VAT refunding. Such excess input VAT will be carried forward as deductible VAT.
3. Household appliances
The special consumption tax rate for household appliances (including air conditioners, freezers, refrigerators, washing machines, dryers, vacuum cleaners) has been eliminated until year end.
On January 1, the special consumption tax rate will return to 6.7 percent, unless another change is announced.
4. Commercial vehicles
The VAT rate on certain commercial vehicles which are otherwise taxed at 18 percent has been reduced to one percent until year end. Excess input VAT accumulated by the seller due to the 8 percent VAT (instead of 18 percent) on sales is not eligible for VAT refunding. These amounts will be carried forward as deductible VAT. 5. Passenger cars
The acquisition of a new car in Turkey is subject to a one-off special consumption tax based on the vehicle’s engine size and pre-tax price. A VAT rate of 18 percent is then applied to the combined pre-tax price and the special consumption tax. Purchase taxes can more than double the pre-tax price of vehicles. The tax cut will lower the special consumption tax rate on certain passenger cars to between 5 and 15 percent until year end. The most significant reduction is on passenger cars with engine sizes of 1600cc and less. In this category, special consumption tax will be charged as 30 percent (instead of 45 percent) if the pre-tax price is less than 70,000 TL. If the pre-tax price is between 70,000 TL and 120,000 TL, the special consumption tax will be 35 percent (instead of 50 percent). On the other hand, passenger cars in this category with pre-tax price over 120,000 TL will continue to be taxed at 60 percent.