VAT Withholding Application for Feasibility, Planning-Project, Consultancy, Audit, and Similar Services
In Section (3.2.2) of the VAT General Communiqué No. 117, it is stated that a 9/10 VAT withholding will be applied by the recipients for feasibility, planning-project, consultancy, audit, and similar services rendered to those listed in section (3.1.2/b) of the Communiqué.
This includes:
- Market feasibility studies and research,
- Appraisal,
- Planning-project,
- Consultancy, auditing, and advisory services in technical, economic, financial, and legal fields, among others.
Architectural, engineering, feasibility, planning, project, mapping (including cadastral maps), cadastre, zoning implementation, and other services provided independently and separately from construction works are considered within this section.
Educational services, provided as part of or a continuation of another delivery or service, where the fee is determined separately, are regarded as consultancy services.
Legal services provided by lawyers regarding legal disputes before judicial authorities or concerning the outcomes of judicial decisions (such as execution proceedings) within the framework of a power of attorney contract are generally not subject to withholding. However, consultancy services provided by lawyers are subject to withholding.
If a contract with a lawyer includes both legal representation and consultancy services, and these two elements are not separately priced, withholding will be applied on the total contract amount.
Supervision services provided by international inspection companies and services related to the quality control and testing of vehicles, machinery, equipment, and similar items are also subject to withholding.
However, written and visual media tracking services, as well as advertising, publicity, and similar services, are not considered consultancy or audit services and are not subject to withholding.
The following examples illustrate the application of VAT withholding in this context:
- Customs brokerage services provided by customs brokers as authorized representatives for the import and export of goods are not subject to VAT withholding, as these services do not fall under consultancy, advisory, or audit services. However, consultancy and advisory services provided by customs brokers to those listed in section (3.1.2/b) of the Communiqué, such as consultancy on applicable legislation in customs procedures, foreign country practices, or determining a product’s customs tariff statistical position, are subject to 9/10 VAT withholding.
- Services provided by certified public accountants (CPAs) that involve bookkeeping, preparing and submitting tax returns for their clients are not considered consultancy, advisory, or audit services and are therefore not subject to VAT withholding. However, consultancy and advisory services provided by CPAs to the clients listed in section (3.1.2/b) regarding tax legislation or other regulations are subject to 9/10 VAT withholding. Similarly, services such as economic consultancy and investment consultancy provided by an economist to the designated recipients listed in section (3.1.2/b) are subject to withholding.
Furthermore, services provided by sworn-in certified public accountants (SCPAs) to the designated clients listed in section (3.1.2/b), such as issuing full certification reports or VAT refund certification reports after conducting audits, are subject to 9/10 VAT withholding as part of audit services.
- (K) Holding A.Ş., whose shares are traded on the Istanbul Stock Exchange (ISE), receives consultancy services from (JK) company and passes these services to its group company, (NL) A.Ş.
Since (K) Holding A.Ş. is among the designated recipients, the consultancy service it receives from (JK) company is subject to withholding according to section (3.2.2) of the Communiqué. The VAT calculated on the invoice issued for the transfer of this service by (K) Holding A.Ş. to (NL) A.Ş. will not be subject to withholding.
If (K) Holding A.Ş. is not among the designated recipients, the consultancy service provided by (JK) company to (K) Holding A.Ş. will not be subject to withholding. Similarly, the intermediary service provided by (K) Holding A.Ş. to (NL) A.Ş. regarding the consultancy service will not fall under the scope of withholding.
Source: VALUE ADDED TAX CIRCULAR/60
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