What is VAT Refund in Exports?
VAT refund in exports refers to the process by which exporters are reimbursed by the government for the Value Added Tax (VAT) they previously paid on goods and services purchased for export sales from Turkey to abroad. This mechanism is implemented to reduce the financial burden of taxes incurred by exporters during production and trade processes, and to encourage exports.
In Turkey, VAT is generally collected from the end consumer during the sale of goods and services. However, in export transactions, since the goods or services are sent outside the borders of Turkey, VAT is not charged. Therefore, the VAT paid by exporters during the production or supply phase is recognized as a legal right to be refunded.
VAT refund in exports both eases cash flow and increases companies’ competitiveness in international markets. If VAT is not refunded, it becomes an extra cost for the exporter; thus, the government’s reimbursement of this tax plays a critical role in supporting exports. In this way, companies can allocate more resources to export activities and maximize their growth potential.
The VAT refund process is subject to certain procedures and rules. Exporters must submit all relevant documents completely and act in accordance with the legislation. In this context, invoice records, customs declarations, and other supporting documents are checked. If documents are incorrect or missing, the VAT refund request may be rejected or delayed.
In conclusion, VAT refund in exports serves as a government-backed incentive for exporters, directly contributing to the development of exports in the Turkish economy and providing a cost advantage in international trade.
The Importance and Benefits of VAT Refund
VAT refund in exports is an important incentive tool in Turkey’s foreign trade policies. This practice reduces the financial burden of exporting businesses, increases their competitiveness, and directly contributes to the national economy. VAT refund provides significant benefits for both companies at the micro level and the economy at the macro level.
Firstly, VAT refund regulates exporters’ cash flow. The reimbursement of taxes paid during production and supply accelerates the capital cycle of businesses. Thus, companies can create more resources to increase their production capacity, make new investments, and expand their exports.
Secondly, VAT refund reduces export costs and allows products to be sold at more competitive prices in international markets. This is vital, especially for companies operating in sectors with high price sensitivity. Competitive advantage enables an increase in export volume and market share.
Additionally, the VAT refund system encourages Turkey’s exports and increases foreign exchange inflows. The rise in exports contributes to closing the country’s current account deficit, economic growth, and supporting employment. For the government, this incentive aims at long-term economic vitality and expansion of the tax base.
Finally, the VAT refund system encourages exporters to comply with tax legislation. The requirement for regular and transparent document flow helps to prevent the informal economy and ensures discipline in commercial transactions.
Important Note
VAT refund in exports not only reduces the financial burden on exporters but is also a strategic tool that increases Turkey’s international competitiveness.
How Does the Postponement–Cancellation Practice Work?
The postponement–cancellation (“Tecil-Terkin”) practice is a special mechanism developed to provide financial convenience to exporters in the VAT refund process. Thanks to this practice, instead of receiving all or part of the VAT directly as a refund, exporters are temporarily exempted from the collection of this tax and the obligation to pay is postponed.
“Postponement” (Tecil) refers to deferring the payment of the tax to a later date, while “cancellation” (Terkin) means the tax is wholly or partially written off, i.e., not paid. In this system, the exporter is first exempted from the collection of VAT; after export transactions are completed and documents are approved, the cancellation procedure is applied, and the VAT payment is completely eliminated.
The postponement–cancellation practice regulates exporters’ cash flow and allows them to fulfill their obligations to the tax office on time and in full. Since tax collection is deferred, companies can use their financial resources to grow their business.
The process generally consists of the following stages:
- Application and Registration: The exporter applies to the relevant tax office for the postponement–cancellation practice and submits the required documents.
- Postponement Process: If the tax office finds the application appropriate, VAT collection is deferred and the exporter does not make a payment for this tax.
- Cancellation Procedure: After the export process is completed and the documents are officially approved, the deferred VAT is fully cancelled, and no tax remains to be paid.
The postponement–cancellation system simplifies bureaucratic procedures in the VAT refund process and accelerates exporters. However, to benefit from the system, it is essential to meet the conditions set out in the legislation and submit all documents completely.
Warning
Exporters who cannot benefit from the postponement–cancellation practice or submit incomplete documents may have to collect the VAT refund directly, which can increase their financial burden.
Conditions for Obtaining VAT Refund
In order to obtain a VAT refund in exports, exporters must fully meet certain legal and administrative requirements. These requirements are detailed by legislation to ensure the healthy operation of the VAT refund process and to prevent incorrect or improper refund requests.
Firstly, the export transaction must be a genuine export from Turkey. In other words, the export of goods from Turkey must be documented with official customs declarations, and all relevant documents must be submitted completely. These documents form the main basis for the VAT refund request.
In addition, the exporting company must be a VAT taxpayer and its tax registration must be active. The invoices and other commercial documents used in the refund request must be properly prepared, and VAT must be correctly calculated.
To apply for a VAT refund, it is also necessary that:
Documents Proving Export Has Taken Place
Official documents such as customs exit declarations, invoices, and delivery notes must be complete.
VAT Return for the Relevant Period
The refund request must be compatible with the period indicated in the VAT return.
VAT Rates and Calculations
The VAT to be refunded must comply with the rates and calculation methods specified in the legislation.
Tax Office Approval
The refund request must be reviewed and approved by the relevant tax office.
In addition, having no previous tax debt and regularly fulfilling legal obligations also have a positive impact on the refund process. Any deficiencies discovered during tax audits may result in the rejection or delay of the VAT refund.
Important Reminder
Before applying for a VAT refund, all documents should be prepared correctly and completely to ensure the process runs quickly and smoothly.
Calculation and Limits in VAT Refund
VAT refund in exports is calculated in accordance with the rates and limits specified in the legislation. This calculation is made both to ensure that the VAT paid by the exporter is properly refunded and to maintain control and order in the tax system.
There are certain limits that may apply in VAT refunds:
Annual Refund Limits
Upper limits may be set for the annual amount of VAT refund in certain sectors.
Period-Based Limits
Refund requests may be limited for certain periods (monthly, quarterly).
Special Sector Regulations
Different limits and practices may apply in sectors such as agriculture and mining.
In refund calculations, the postponement–cancellation practice or other tax deductions are also considered to determine the final refund amount. Additionally, since the legislation is updated from time to time, exporters should follow current regulations.
Important Information
Since VAT refund calculations and limits may vary by sector and period, it is advisable to seek expert advice and keep up to date with the legislation for detailed information.
Frequently Asked Questions About VAT Refund
Frequently asked questions about the VAT refund process in exports are compiled to eliminate exporters’ uncertainties and facilitate transactions. Below are explanations on the most curious topics.
Which documents are required to obtain a VAT refund?
Official documents such as customs exit declarations, invoices, and delivery notes must be submitted completely.
How long does it take to process a VAT refund request?
The review period by the tax office generally varies between 1 and 3 months.
How can I benefit from the postponement–cancellation practice?
You can benefit from this practice by applying to the relevant tax office and completing the necessary documents.
In which cases is a VAT refund request rejected?
The request may be rejected in cases of incomplete documentation, improper export, or tax debt.
How can I track the refunded VAT amount?
Tracking can be done through the tax office’s e-return system or relevant accounting software.
