With the decision numbered 2015/8353 published in the Official Gazette dated January 1, 2016, and numbered 29580, the following items were added to the list numbered (I) annexed to the Council of Ministers Decision dated December 24, 2007, and numbered 2007/13033, regarding the determination of Value Added Tax rates, based on Article 28 of the Value Added Tax Law, and item 23 of the section titled “B) OTHER GOODS and SERVICES” in the list numbered (II) annexed to the same Decision was repealed.
The VAT on feed was reduced from 8% to 1%, and on fertilizer from 18% to 1%. What will happen to the remaining VAT in the business?
These changes will be implemented from January 1, 2016.
Let’s recall the decision in question. This decision divides the applicable Value Added Tax (VAT) rates into three lists: 1%, 8%, and 18%.
VAT Rates
ARTICLE 1 – (1) The VAT rates to be applied to deliveries of goods and services are determined as follows:
a) For taxable transactions, excluding those listed in the attached lists, 18%
b) For deliveries and services listed in the attached List (I), 1%
c) For deliveries and services listed in the attached List (II), 8%
(2) In financial leasing transactions, the VAT rate applicable to the goods subject to the transaction shall be applied.
(3) For retail deliveries of products listed in item 2/a of List (I), the tax rate stipulated in paragraph (a) of this article shall apply, and for retail deliveries of products listed in items 1, 2/b, and 3, the tax rate stipulated in paragraph (c) shall apply.
(4) Retail delivery means selling the delivered products to anyone other than those who sell the products as is or after processing, or those who will use them in their businesses. If those who sell the products as is or after processing, or those who will use them in their businesses, are not subject to VAT under the real method, deliveries made to them are also considered retail deliveries.
(5) The term “used” in item 9 of List (I) refers to vehicles that are not subject to special consumption tax according to the Special Consumption Tax Law No. 4760.
The goods and services included in these lists are specified separately for each list.
With the latest decision, the section beginning with “Oilseed meal…” in the “Other Goods and Services” section of List II, which was previously subject to 8% VAT, has been removed from this list. This removed section is now regulated under item number 19, and the deliveries of fertilizers and fertilizer raw materials, which were previously subject to 18% VAT, are regulated under item number 20 as follows:
“19- Oilseed meal (excluding starch residues and similar residues in position 2303.10 of the Turkish Customs Tariff Schedule Divided into Statistical Positions, put into effect by the Council of Ministers Decision dated 21/12/2015 and numbered 2015/8320, and residues and waste of the brewing and distilled spirits industry in position 2303.30.00.00.00), full-fat soy, bran, razmol, fish meal, meat meal, bone meal, blood meal, tapioca (cassava), sorghum and all kinds of commercially prepared mixed feeds (excluding cat and dog food), straw, fodder turnip, fodder beet, root feeds, dry hay, alfalfa, vetch, sainfoin, hay and silage corn, clover, fodder cabbage, fodder peas and similar animal feeds (green and dry roughage and their pellet form or seasonal needs) (including those processed with or without a binder),
20- Fertilizers registered by the Ministry of Food, Agriculture and Livestock and the delivery of raw materials contained in these products to fertilizer producers.”
As a result of this article, as of January 1, 2016, the Value Added Tax (VAT) rate for oilseed meals, certain pulps and residues specified in the decision, certain feed production products listed, and all kinds of compound feeds, etc., will be reduced from 8% to 1%.
Similarly, the VAT rate for fertilizers and the delivery of raw materials contained in these products to fertilizer producers, which was previously 18%, will be reduced to 1%.
This should be taken into account in your sales and purchases as of January 1, 2016.
VAT Reduced on Feed and Fertilizers, What Will Happen to the Remaining VAT in the Business?
The question arises as to what will happen to feed, feed products, feed raw materials, fertilizers, and fertilizer raw materials, which were added to List 1 in the Council of Ministers Decision No. 2007/13033 with numbers 19 and 20, and whose VAT rates were previously 8% and 18%, and reduced to 1%, if their VAT exceeds 1% or if the VAT incurred in the production of these products exceeds 1%.
The answer to this question is given in section III-B_3 of the VAT application general circular dated April 26, 2014, as follows:
- Refund Application for Transactions Subject to Reduced Rates
The VAT amounts incurred due to deliveries and services for which tax rates have been reduced by the Council of Ministers pursuant to the authority granted by Article 28 of Law No. 3065, and which cannot be offset through deductions, may be refunded in cash upon request in the following year, provided that the amount exceeds the limit determined by the Council of Ministers’ decision, by offsetting it against the debts specified in section (III/B-3.2.2.) of the Communiqué on a tax period basis within the year.
or it can be refunded by offsetting it against the debts in question.
VAT related to goods in inventory and depreciable assets is of particular importance.
3.1.3.2. Goods in Inventory
It is not possible to include the taxes incurred on goods in inventory in the refund account related to transactions subject to the reduced rate. Taxes incurred due to goods in inventory can only be taken into account in the refund account for the tax period in which the sale of these goods took place.
3.1.3.3. Depreciable Assets
It is possible to allocate a portion of the taxes incurred due to depreciable assets to the refund account, provided that these assets are used in transactions subject to the reduced rate.
If the economic assets in question are manufactured and constructed by the taxpayer themselves, a portion of the taxes incurred during manufacturing and construction can be allocated to the refund account from the period when these assets are capitalized and actually used in transactions subject to the reduced VAT rate.
Consequently, due to the reduced VAT rate on feed and fertilizer, the company may have high-rate VAT goods or raw materials in its inventory. These VATs can be refunded according to the principles of VAT refunds at the reduced rate.
VAT amounts incurred and not offset through deductions:
a. Can be offset against tax liabilities by tax period within the year.
b. Can be refunded in cash or offset against tax liabilities as specified in the circular, if requested in the following year.
c. These transactions require either a tax office audit or a Certified Public Accountant audit and report.
Source: www.MuhasebeTR.com
