31 July Deadline for VAT Compliance under the Import Surveillance Regime

A professional legal/tax translation would read as follows:

Accordingly, taxpayers carrying out imports shall comply with the following requirements:

The above provision has been incorporated into the Communique.

The Communique also includes an illustrative calculation demonstrating the allocation of deductible and non-deductible VAT amounts.

The example provided in the Communique clearly establishes that, in cases involving the import surveillance regime, the restriction on the deduction of VAT does not apply to the entire surveillance value. Rather, it is limited to the portion of VAT attributable to the amount arising from the application of the surveillance measure that cannot be substantiated.

The illustrative example provided in the Communique is set out below.

Example: A Inc. imports Product Z under the import surveillance regime. The CIF value of the imported product is TRY 4,000,000, while the surveillance value is TRY 10,000,000. The import is subject to 10% customs duty, 15% additional customs duty, and 20% VAT. The amount arising from the application of the surveillance measure that cannot be substantiated has been declared in the customs declaration as a foreign expense.

Accordingly, the amounts of deductible VAT and non-deductible VAT under the import surveillance regime are calculated as follows:

As can be seen, taxpayers whose aggregate import value for a six-month period does not exceed the Sworn-in Certified Public Accountant (YMM) certification threshold (TRY 2,600,000) prescribed under General Communique No. 46 on the Law on Certified Public Accountancy and Sworn-in Certified Public Accountancy are required to verify whether the VAT paid under the relevant import practices has been correctly deducted in the VAT returns for the relevant tax periods. The outcome of this verification must be submitted in writing to the competent tax office by the end of the month following the relevant six-month period.

Where the aggregate import value for a six-month period exceeds the aforementioned threshold, it becomes mandatory to substantiate, by means of a Special Purpose Sworn-in Certified Public Accountant (YMM) Report submitted by the end of the month following the relevant six-month period, whether the VAT paid under the relevant import practices has been deducted in accordance with the applicable rules.

The Communique further provides that a separate Special Purpose YMM Report will not be required where the taxpayer has a full certification agreement executed in due time for the year in which the import transaction took place, provided that the corresponding full certification report includes an explanation regarding the imports carried out within the scope of the relevant provisions and the deductibility of the VAT paid in respect of such imports.