Since January 1ST, 2007, European Union invests in EU candidate countries such as Albania, Bosnia and Herzegovina, the former Yugoslav Republic of Macedonia, Kosovo, Montenegro, Serbia as well as in Turkey to achieve EU Standards in order to facilitate their accessions into the EU. For this purpose; by its cooperation with the related candidate countries' authorities, EU provides procurement, contracting and funds to the abovementioned candidate countries within the scope of the Council Regulation (EC) No 1085/2006 of 17 July 2006 establishing an Instrument for Pre-Accession Assistance ("Regulation IPA-I").
The eligibility for grants, the rules of participation and origin have been stated under the Article 19 of this Regulation IPA-I. The most significant factor for eligibility is that the tenders for EU EuropeAid External Aid Projects are open to all natural persons who are nationals of and to legal persons who are established in a Member State, in a country which is a beneficiary of this Regulation as well as in a country which is a beneficiary of the European Neighbourhood and Partnership Instrument, or in a Member State of the European Economic Area.1
Mostly, the proposals are also be submitted in the name of a duly established Business Partnership or Consortium. The calls for all tenders are announced on the web site of European Community and of Central Finance and Contract Unit of the Republic of Turkey.
By awarding this EuropeAid Tenders; during the whole project, right along with the "tax exemption certificate" as an important and significant financial advantage; the European Community ("EC") Contractor and its suppliers will be entitled to several administrative advantages for granting of facilities during the implementation of the related EuropeAid project.
To sum up; the Instrument For Pre-Accession Assistance ("IPA") is an investment of the EU by which EU supports in concrete perspective the "enlargement countries" and mostly "current EU candidate countries and potential EU candidate countries" to provide the stability and prosperity with its closest neighbours as well as to achieve a sustainable economic recovery and a competitiveness by means of the public administration reform on the environment and climate change, transport, energy supply, competitiveness and innovation, education, employment and social polices, agriculture and rural development, regional and territorial cooperation.
In this regard, under the IPA – I Regulation; IPA fund is divided in to 5 components within the scope of;
- Transition Assistance and Institution Building,
- Regional and Cross-Border Co-operation
- Regional Development
- Human Resources Development,
- Rural Developments.
Last year, upon the expiration of the effective period of IPA-I Regulation, the second part of EU Funding Instruments, the IPA-II Regulation has been adopted on May 2, 2014 for the period 2014-2020.
For all EU candidates, the total allocations for the first period were 11.5 billion and, 11.7 billion has been dedicated for the second period.
The Reforms in Preparation for EU Membership and Socio-Economic and Regional Development have the lion's share of this Euro._4.4 billion and the Agriculture and Rural Development is the succeeding component of the said allocation for all EU candidates.
By a wide margin Turkey has highest amount of allocation as Euro._4.4 billion for the second stage of EU enlargement policy.
As aforementioned said; the most important and significant financial advantage is to be beneficiary of a large tax exemption throught a tax exemption certificate acquired within the scope of any service rendered and/or goods supplied and/or works executed under the EC contract. It is certain that, such an exemption shall only be applied to the goods supplied or services rendered or works executed under the scope of the related EuropeAid contract.
Pursuant to the Article 26 of the Framework Agreement between Turkey and EU; it has been clearly stated that any taxes, customs and import duties and levies and/or taxes of equivalent effect are not eligible under IPA; hence the contractor should be relieved from any taxes, duties, levies imposed in Turkey during the whole project limited with the project's budget including the co-financing provided by the Republic of Turkey.
In accordance with the said Article of the Framework Agreement, a General Communiqué numbered 1 of the Framework Agreement between Turkey and European Union for Assistance under the Instrument For Pre-Accession has been published in Turkey and came into the force on 24.12.2008 ("Communiqué). Under this Communiqué and following five related Communiqués; the contractor will be entitled to have a "Tax Exemption Certificate" which covers the Income and Corporate Tax, Special Communication Tax, Special Consumption Tax and Motor Vehicle Tax, as well as Stamp Duty.
Meanwhile, not to be taken out of context, it should be also noted that nowadays Turkey improves reforms in taxation in compliance with the economic adjustment programme of Turkey; on the other side, the Draft Income Tax Law is pending before the Parliament of Turkey in order to achieve legislative alignment with EU and mostly to rule out the unnecessary frustrating repetition of paperwork by simplifying the procedures of current Turkish Tax Administration taxation system which is based mainly on indirect taxation.
In addition, a valid work permit or a permit exemption certificate should be facilitated for key experts or for people staying in Turkey within the scope of the related EC contract.
1 The ENPI's beneficiary countries are Russia and the ENP partner countries such as Algeria, Egypt, Israel, Jordan, Lebanon, Libya, Morocco, Palestine, Syria, Tunisia, Armenia, Azerbaijan, Belarus, Georgia, Moldova, Ukraine. EU Cooperation with Syria is currently suspended due to political situation. European Economic Area includes EU countries and also Iceland, Liechtenstein and Norway.
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