The letter dated May 13, 2024, addresses several tax-related inquiries concerning a cooperative. The cooperative, which has been subject to corporate tax since its establishment, has decided to collect monthly dues from its members to cover expenses and to engage in soap production using goat milk sourced from local farmers. The letter seeks guidance on the following:
- Whether the dues collected from members and any in-kind or cash donations should be included in the cooperative’s taxable income and if VAT should be applied to these dues.
- Whether VAT should be calculated for dues collected and whether invoices should be issued for these transactions.
- Whether e-production receipts are required for purchases of goat milk from non-registered local producers.
- How to record in-kind donations in the cooperative’s books and records.
Corporate Tax Law Perspective:
- According to Article 1(b) and Article 4(k) of the Corporate Tax Law, cooperatives’ profits are subject to corporate tax, and the dues collected from members and in-kind donations should be considered in determining taxable corporate profits.
- Detailed guidelines are provided in the 1st series of the Corporate Tax General Communiqué, specifying that dues and donations should be included in taxable income.
Value Added Tax (VAT) Law Perspective:
- Article 1 of the VAT Law indicates that transactions in Turkey related to commercial, industrial, agricultural activities, and professional services are subject to VAT.
- Article 20/1 and 20/2 specify that the tax base is the consideration for goods and services, while Article 24/c includes various income types like interest and commissions in the tax base.
- According to Circular No. 60, membership dues are not subject to VAT if they are not in exchange for goods or services. However, dues that are part of commercial transactions and constitute a source of corporate income are subject to VAT.
- Donations and aid that are not in exchange for goods or services are not subject to VAT, but in-kind donations from VAT payers are subject to VAT.
Tax Procedure Law Perspective:
- According to Articles 227, 229, 231, and 232 of the Tax Procedure Law, issuing invoices and receipts is required for commercial transactions and expenditures.
- Provisions related to the valuation of economic assets and the application of the Turkish Commercial Code to cooperatives are also outlined.
Requirements for Electronic Receipts:
- The implementation of electronic receipts (e-Müstahsil) is required for transactions with non-registered local producers if the cooperative is subject to e-invoicing regulations.
In summary, the cooperative must comply with corporate tax and VAT regulations concerning membership dues and donations, issue invoices or receipts as appropriate, and adhere to specific rules for transactions with local producers.
Source: Revenue Administration
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