As known, under our Newsletter (No.Q2/2015) it was explained that according to temporary Article 34 of the Value Added Tax ("VAT") Code, deliveries and services provided as of 1 January 2014 to those who perform construction and modernization works for transit petroleum pipe line projects exempted from VAT within the framework of the international agreement provisions will be evaluated as exempt from VAT. The exemption and refund principles in relation to the construction and modernization of transit petroleum pipeline projects stated in the temporary Article 34 of the VAT Code were determined by the tax authority through the Communique on Amendment to the VAT General Application Communique (Serial No.3) (published in the Official Gazette dated June 27, 2015 and No.29399). Accordingly, in order for the exemption to be applied;

  • There must be an international agreement put into effect in accordance with the procedures before April 07, 2015 when the temporary article 34 of the VAT Code became effective,
  • This agreement must fall under the scope of the Law no. 4586 on Transit Passes of Petroleum through Pipelines,
  • The international agreement must contain a provision regarding the transit petroleum pipelines to be constructed and modernized are exempt from VAT.

Deliveries and services which are provided to those performing construction and modernization of transit petroleum pipelines fulfilling the abovementioned conditions and in relation to the construction and modernization are exempt from VAT as of 1 January 2014.

The Ministry of Energy and Natural Resources provides a certificate stating that the transit petroleum pipeline project is within the scope of this exemption. Only those who have this certificate could benefit from the exemption. In order to perform transactions within the scope of the exemption, the exemption certificate must be submitted to the seller taxpayer who will perform the delivery or service.

Purchases of goods and services and furniture, soft furnishing and similar fixtures, and passenger cars, minibuses, buses and similar vehicles which are in relation to administrative activities of the certificate owners and construction, instalment and operation of the administrative buildings, plants and equipment could not be evaluated within the scope of the exemption.

Regarding the goods and services which are within the scope of the exemption between January 1 2014 and the date of exemption certificate but obtained through paying VAT by taxpayers holding certificates, necessary corrections will be made within the framework of the explanations made under the section "I/C-1.1 Excessive or Unjust Taxes" of the VAT Application Communique.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.