Republic of Türkiye
Revenue Administration
Tekirdağ Tax Office
VAT and Special Consumption Tax Department
Date: 25.12.2023
Number: E-25253958-130[11-2021-74]-96115
Subject: The situation of the tax laws regarding the fire of exported goods in the customs warehouse and the subsequent transactions
Upon reviewing your special request form, it is noted that:
- Your company is engaged in low-voltage cable manufacturing.
- 60% of your company’s sales are exports.
- An invoice was issued to a foreign company for export on a specified date, and a customs exit declaration was opened. Due to a fire in the customs warehouse where the goods were stored, the exported goods were burned, leading to the cancellation of the customs exit declaration.
- According to the agreement with the foreign company, the delivery terms were set as factory delivery (EXW), and the responsibility for the burned goods lies with the foreign company. The payment for the goods has been made by the foreign company, and they are responsible for the insurance processes for the burned goods.
It is requested to clarify whether the sales should be classified as exports or domestic sales, given that the goods did not leave the customs area and the payment was made by the buyer. Additionally, it needs to be determined whether the burned goods should be recorded as expenses and the incoming payment as income for tax purposes, as well as the application of value-added tax (VAT) regarding these transactions.
Regarding Corporate Tax:
According to Article 6 of the Corporate Tax Law No. 5520, corporate tax is calculated on the net corporate income obtained by taxpayers during an accounting period, applying the provisions of the Income Tax Law concerning commercial income.
Article 37 states that income from all commercial and industrial activities is considered commercial income, while Article 38 describes how to calculate commercial income based on the positive difference between the equity values at the beginning and end of the period.
As the responsibility for the burned goods lies with the foreign company, and ownership has passed to them, the sales revenue should be included in the taxable income of the relevant period. The cost of the burned goods can also be considered in determining your corporate income. Additionally, if the insurance compensation is paid to your company, it should be considered as income for the period it is accrued, and if paid to the foreign company after collection, it should be recorded as an expense for the period of payment.
Regarding Value-Added Tax (VAT):
According to the VAT Law No. 3065:
- Deliveries and services performed in Turkey in the context of commercial, industrial, agricultural activities, and professional services are subject to VAT.
- Article 11(a) states that export deliveries are exempt from VAT.
- For a delivery to be considered an export, it must leave the customs territory of Turkey.
Given that the goods were not removed from the customs area and were burned in the customs warehouse, they cannot be considered export deliveries. Therefore, VAT should be calculated based on the invoice issued by your company and reported in the relevant period’s VAT return.
Source: Revenue Administration
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