Turkey: Polish And Turkish Legal Systems For Value Added Tax

Last Updated: 28 October 2013
Article by Agata Michalewicz

The value added tax (VAT), is a type of indirect turnover based tax that is levied during the final phase of the purchaser of the goods and is included in the price of the purchased item or service. Being a turnover tax, VAT is levied at each stage of the production and the distribution process as well. Although liability for the tax rests on the person who supplies or imports the goods or services, the real burden of VAT is borne by the final consumer (shifting feature). This means that such type of tax is characterized by its shift. It is non-cumulative, based on the method of invoice (only Japan is the exception), aimed at entrepreneurs as well. Tax shifting is the most important concept associated with VAT. With the deduction mechanism the difference between the VAT liability of a person on his (their) sales (output VAT) and the amount of VAT, has been already paid by them on his (their) purchases (input VAT). This brief article targets to summarize and compare the VAT systems of Turkey and of Poland with consideration on the general applications of VAT in EU countries.

A. VAT in Poland

In Poland, the VAT ('Podatek od Towarów i Usług' / PTU) is applied since 1993. Currently, VAT is regulated and adapted along with the current tax laws in the European Union, by the Act on Value Added Tax of 2004 (Journal of Laws of 2004, No. 54, item 535).

The basic rate applied in Poland (for the period between January 1, 2011 and December 31, 2013) is 23%. Although for some goods and services, the reduced rate of 8% and 5% are also applied (5% for food, books and magazines; 8% for supply, construction, renovation, modernization or reconstruction of thermal buildings or parts of building subjected to the concerned community housing scheme). A 7% rate is charged by the buyer of goods from a flat-rate farmer (Article 115 § 2 of the VAT Act) and 0% (exemption) is applicable for intra-community (EU) supply of goods and export of goods.

According to Article 85 of the Polish VAT Act, in areas of services of trade and catering, the taxpayer is allowed to calculate the amount of VAT with respect to the gross value of goods using the following rates:

  • 18.70% of the gross value of goods and services for which the applied rate is 23%;
  • 7.41% of the gross value of goods and services for which the applied rate is 8%;
  • 4.76% of the gross value of goods and services for which the applied rate is 5%.

In accordance with tax calculation rules, the taxpayer is entitled the amount of tax applied to goods and services that are used to perform taxable transactions, in the amount of input tax and the input tax is the:

  • sum of the amounts specified in tax invoices received by the taxpayer;
  • total sum of taxes resulting from a customs document (for imports);
  • lump-sum tax refund;
  • amount of tax due on imported and the amount of tax due in respect of intra-Community acquisition of goods.

As for the method payment, the registered VAT taxpayers are required to submit their tax returns for monthly periods to the tax offices by the 25th day of the following month in which the tax liability arose. Small taxpayers (taxpayers whose sales - along with the amount of the tax, does not exceed the cap, that is the equivalent of €1,200,000, during the previous fiscal year), who have opted for a cash accounting method, may submit their quarterly tax returns by the 25th day of the month following each quarter.

The amount of output VAT may be reduced by the amount of input VAT when purchasing goods and services. The purchases must be related to a sale that is eligible for a VAT deduction. The input VAT reduction concerns the purchase of cars (up to 60 % of the VAT on the invoice) or real estate, used partly for purposes other than conducted business activity. The Polish VAT Act prohibits the deduction of input VAT for the purchase of fuel for cars or hospitality services.

If no taxable sales or sales outside of Poland are concluded, the taxpayer may apply for a tax refund within 180 days of filing the VAT tax return. The tax refund is paid into the bank account indicated by the taxpayer.

VAT rate in Poland is considered high within Europe concerning the average rates of other member countries. For example the basic rate of VAT in Spain is 18%, in Luxembourg 15%, in Germany 19%, in Slovenia and Slovakia 20%, in the Netherlands 19%, in France 19,6 % and in the Czech Republic, Bulgaria, Estonia and Austria is 20%. A higher rate of VAT is applied only in Hungary (27%), Romania (24%), Denmark and Sweden (25%) as well as in Croatia (25%).

B. VAT in Turkey

In contrast to Poland, VAT ('Katma Değer Vergisi' / KDV) is introduced earlier. The Turkish VAT Law No.3065 was enacted on November 2, 1984 and entered into force on January 1, 1985 (Official Gazette No. 18563, dated November, 1984). By such law eight previously enforced indirect taxes were abolished and replaced by one VAT.

The Turkish tax system levies VAT on the supply and the importation of goods and services.

VAT rate specified on Article 28 of the Law is 10% for each of the transactions that are subject to tax. What is important and differs from Polish system is that The Council of Ministers in Turkey is authorized to increase this rate up to 4 times, to reduce it down to 1%, to specify different tax rates for various goods and services and retail stage for some of the goods. Accordingly to such increases by the Council of Ministers, the currently applicable VAT rates are:

  • standard rate - 18%;
  • reduced rate - 8 % (applied certain products such as textile products, education services);
  • reduced rate - 1 % (applied to certain products such as some agricultural goods, food products).

Another aspect that differs the Turkish VAT system from the Polish, is the taxable period and submission of VAT returns. In Turkey, the Ministry of Finance has established monthly taxable periods for all taxable persons under the normal VAT regime as of October 1, 1985. Taxable persons shall submit their returns to the local tax office within 24 days following the end of each taxable period.

VAT on purchases of cars, missing and lost stocks, and on expenses are accepted as non-deductible in determining income according to Turkish Income Tax Law and Turkish Corporate Tax Law and input VAT on exempt deliveries listed in Article 17 of the Turkish VAT Law as transactions that are not considered/counted as taxable transactions.

VAT is refunded only when the invoices include the transactions which are exempt from the tax, such as the exportation of goods and services, exemption for vehicles, petroleum exploration and investments made under an investment incentive certificate, transit transportation and diplomatic exemption. In the absence of transactions subject to VAT, or if the output VAT is less than the input VAT, then the input VAT which cannot be deducted is refunded to those who perform such transactions.

There are different procedures implemented in the Turkish tax system for VAT returns. Accordingly, there are two basic types of exemption; full exemption and partial exemption. In full exemption, the VATs may be deducted or refunded however in partial exemption, the excess VAT cannot be deducted or refunded. Refund is the cash return of the already paid VAT. On the other hand deductions are made by reducing such amount by a credit for VAT previously paid on importation and on goods and on services supplied to taxable person since the VAT is initially computed by applying the appropriate rate of taxation to the taxable amount for goods and services supplied by the taxable person during a taxable period. It shall be mentioned that deductions can also be reflected to any present or future public debts including but not limited to VAT, insurance premiums and corporate tax. Article 13 of the Value Added Tax Act sets forth the full exemptions to be applied on the VAT. According to Article 13, full VAT exemption is provided for; exportation, sea, air, and railway vehicles, services provided to sea and air transportation vehicles, petroleum explorations, exploring, processing, enrichment and refining activities for precious metals, and for sales of equipment and machinery to tax payers with investment incentive certificate. In accordance with Article 32 of the same Act, any VAT stated by an invoice that is issued for a transaction exempted from VAT by Article 13, is deducted or if deduction is not possible, is refunded.

C. VAT in European Union

Tax harmonization task in the EU tries to implement the idea of a common market, based on the four freedoms (the movement of persons, movement of goods, movement of services, the movement of capital). Therefore, indirect taxes call for a high degree of harmonization. The aim of VAT harmonization is to simplify the tax system in order to make different tax systems more accessible to the taxpayers. The second one is broadening the tax base, and the third one is the removal of tax barriers.

Among members of the EU, the difference between the standard applicable VAT rates may be as much as 10%. The lowest possible rate 15% is applied at Cyprus, Luxembourg and the United Kingdom and the highest rate 25% is applied at Denmark and Sweden.

EU VAT was introduced by the Directive 77/388/EEC, 17 May 1977 (6th Directive). From January 1,2008, the directive 2006/112/EC has entered into force. Accordingly each Member State's national VAT legislation must comply with the provisions of EU VAT Law as set out in Directive 2006/112/EC. A harmonization process was initiated both in Poland, as a member state, and in Turkey, as a candidate.

However, disharmony can still be pointed out in Turkish tax system with regards to the EU VAT harmonization. Some VAT regulations do not comply with the requirements of the 'Acquis Communautaire' (the legislation of the EU) which is noted in the 'Screening Report of Turkey, Chapter 16 - Taxation', approved by the EU Council at January 24, 2007. It is said that 'Turkey has partially aligned its legislation in the field of value added tax and VAT system of Turkey follows the main structure of the legislation of the EU'. The disharmony concerns the 1% and 8% VAT rates. 1% is not in line with acquis (WHY) and 8% for textile products is not allowed under European law. The use of a reduced rate of 1% is not seen as in line with the scope to Which the reduced rates are applied. In addition, each Member State may apply only one reduced rate in relation to the basic rate. Currently, Member States in accordance with the negotiated terms and conditions may apply the transitional rate (parking rate).

D. Conclusion

Unfortunately, the current tax systems in Poland and in Turkey rely both heavily upon the VAT. VAT is recorded as 40% State tax revenue in Poland and 29% in Turkey (158,4 billion TRY as of July 2013). Therefore it is unlikely that any government will abolish and/or replace the application of VAT anytime soon. Although Poland has changed is VAT law to adopt to the EU requirements, it kept its high rates. Turkey is expected to reform its VAT regulations if and when EU accession process requires immediate action.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions