The tax court of Turkey settles that entities functioning in free trade zones are not required to calculate value added tax (VAT) using a reverse-charge basis with respect to services provided by resident and non-resident companies who are subject to VAT because the services are deemed to be used or to provide a benefit in Turkey. Under Turkey’s VAT law, services performed or the benefits of which are provided in Turkey are subject to VAT.
In the recent ax court and Supreme Court decisions conclude that even though free trade zones are within the political boundaries of Turkey geographically, but taking into consideration that they have been formed with the aim of increasing exportation and are outside the customs area. Free trade zones must be accepted as being outside of Turkey “economically.” Accordingly, services received by entities in free trade zones from resident or non-resident suppliers are not subject to VAT.
Although there are no changes in VAT law in relation to this issue but non-residence companies may declare and file their VAT-II returns by inserting a reservation clause.
