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Turkey abolishes right of businesses to deduct import VAT under certain measures

Businesses importing goods into Turkey will no longer be able to deduct import VAT in certain circumstances following a new presidential decree.

The decree was published in the Official Gazette and states that deductions made under some trade policy measures are no longer valid.

It relates specifically to import VAT declared due to anti-dumping duty, countervailing duty, protective measures and surveillance instruments.

In Turkey, the VAT base for imports is comprised of:

  • Customs value of goods.
  • All relevant taxes and duties applicable on imports.
  • Any other expenses and payments made – but not taxed – before the registration date of the customs declaration.

When trade policy measures are applied to imports of certain goods, the customs value – and therefore the VAT base – of those goods is increased.

One consequence of this is a rise in the amount of import VAT declared, as policies such as surveillance in imports or anti-dumping duty are applied.

The new decree means that businesses do not have the right to deduct the VAT paid on the higher value, meaning the total amount of deductible VAT will be lower.

What’s more, no VAT can be deducted when it is paid within the scope of customs duties or any further financial protection measures. A number of taxes, duties fees and shares generated by these trade policy measures are also no longer deductible.