Turkey: Latest Practices In Solar (Photovoltaic) Panel Imports

New regulations within scope of the Communiqué No. 2015/9 on Implementation of Import Surveillance (published in the Official Gazette dated November 19, 2015 and numbered 29537) ("Communiqué") in respect to surveillance measures in solar panel imports are examined within our current information note. 

The Ministry of Economy of the Republic of Turkey has initiated a surveillance measure for the goods with the HS Code (Harmonized System Code) 8541.40.90.00.11 as defined in the table below in respect to the solar (photovoltaic - PV) panel imports.  The Communiqué's entry into force has been decided as 30th day from the date of promulgation. Accordingly, the Communiqué is in force since December 19, 2015.

With the Communiqué, the goods defined therein as "Solar cells (merged as a module or arranged over boards or otherwise) (only solar panels)", which we will name as "Solar Panels" hereinafter, can only be imported to Turkey through obtainment of the "Surveillance Certificate" issued by the Ministry of Economy or through taxation (i.e. 18% VAT) over a customs value per unit of USD 35/kilogram if no such certificate is obtained.

The documentation required for obtainment of a Surveillance Certificate is provided under the annexes of the Communiqué. When such documentation is checked, it can be noted that obtaining a Surveillance Certificate is quite challenging; even close to impossible. Furthermore, what is requested from those who want to obtain a Surveillance Certificate is almost reaching up to the level of commercial secrets (e.g., product cost per unit, labour costs, detailed information on financial indicators of the manufacturing firm, etc.).  

Considering that the solar panels were imported to Turkey for USD 10/kilogram or lesser amounts before the implementation of the surveillance measure,  the amount of extra tax burden may very clearly be observed.

As a basic and clear example; hypothetically speaking, a solar panel type whose customs price has been USD 4/kilogram before the measure is now have to be priced over USD 35/kilogram after the Communiqué. Previously, a 25 kilogram solar panel bought for USD 100 (25 kg x USD 4=USD 100) would have been subject to a 18% VAT payment and the total panel cost would then be USD 118 (USD 100+18% VAT). However now, subsequent to the Communiqué, the importer would have to pay 18% VAT over an increased unit price calculation (e.g. 25 kg x USD 35 = USD 875), causing an extreme rise in the VAT. In this scenario, the 18% VAT is to be calculated over USD 875, amounting to USD 157.5 and the total cost would rise up to USD 257.5 (actual price of USD 100 + 18% "inflated" VAT amount of USD 157.5).  The sector representatives also indicate that this practice would raise the prices over 100% at the end. However, those who have an investment promotion certificate under the scope of State Aids in Investments (Council of Ministers decision no. 2012/3305, published in the Official Gazette dated June 19, 2012 and numbered 28328) would be able to overcome the effects of the Communiqué due to the VAT exemption provided under Article 13(d) of the Law on Value Added Tax (Law No. 3065, published in the Official Gazette dated December 15, 1984 and numbered 18563) to the extent of the capacities inscribed on the promotion certificate. In line with the abovementioned, such taxation practices will be applicable from standpoint of the importers who do not own an investment promotion certificate or a Surveillance Certificate.

Should the importer want to take solar panels into Turkey for a unit amount below USD 35, then he/she/it has to obtain a Surveillance Certificate as set forth under the Communiqué. General properties of a Surveillance Certificate are as below:

• As per Article 6 of the Communiqué, its validity is 6 months.
• Surveillance does not affect application of general provisions of the Customs Law (Law No. 4458, published in the Official Gazette dated November 4, 1999 and numbered 23866) on customs value of the goods.
• If the values or amounts determined and accepted by the customs during the registration of the customs declaration differs from the total values or amounts inscribed under the Surveillance Certificate by 5% (five percent) at the most, this would not bar the import.
• Surveillance Certificate cannot be transferred to third parties.
• Surveillance Certificate shall be obtained per each customs declaration. In other words, for each import connection this certificate shall be obtained. However, for the goods declared under the same declaration which will be coming in various shipments, a single Surveillance Certificate will suffice. 

In consideration of the general international trade practices, it is thought that such surveillance measures may be followed by anti-dumping measures.

Assessment and Result: Implementation of the Communiqué will be bringing a serious tax burden in respect to the solar panels to be imported to Turkey.  Turkey is having numerous issues with creating product lines in local solar panel manufacturing and providing technological progress. In light of this, such measures would be expected to create a slowdown in solar energy sector and restrict its growth. By these measures, the public authority, which actually tries to promote investment on one hand, is now creating a serious obstacle for the investors on the other hand.  Furthermore, it is indicated by the sector representatives that the relations with the European Union as well as international economic agreements have not been taken under sufficient consideration. We believe that promoting manufacturing and R&D (research & development) would be a much more efficient and competition-friendly idea for promoting the local manufacturing instead of establishing additional taxes for imports with a view to promote local manufacturing. 

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.