Turkey free trade zone service supplies VAT change

Wed 25th Sep 2013

The Turkish VAT rules on the supply of services within free trade zones is changing following a recent tax case.

Tax court finds free zone services Turkish VAT free

Services are generally subject to Turkish VAT at 16%.  This includes those provided by non-resident companies; the recipient is required to record the VAT as a reverse charge.  It has not been clear if this applied to free trade zones too.  This was creating losses for non-resident recipients operating within the zones as they did not have VAT registrations to apply the input VAT against.

The Turkish tax office had followed the practise that since the zones were under the political patronage of Turkey, then the VAT charge applied.

However, a Supreme Court decision has now ruled that the zones are mean to be treated as outside the Turkish VAT and customs jurisdiction, and so no VAT should be levied.

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