REVENUE ADMINISTRATION
Ankara Tax Office
Income Tax Laws VAT-Special Consumption Tax Group Directorate
Date: 25.12.2023
Number: -84974990-130[VAT.2/I/Transitional-20-2022/1]-614610
Subject: VAT on Software and Reporting Deliveries and Services by a Company Operating in a Technopark
In your request for a private letter ruling; it is stated that under the contract made between your company operating in the … Technology Development Zone … and the Republic of Turkey Ministry of Health Turkey Health Institutes Presidency (TÜSEB), the “… Clinical Trial” project with the STB code 84221, assessed as research and development (R&D) activities, involves the preparation of web-based application software for data entry, data collection, data management/query creation, volunteer tracking, randomization, clinical trial management system (CTMS), interactive web response system (IWRS), interactive voice response system (IVRS), e-consent, VOIP automated survey calls, vaccine/product tracking, vaccine/product temperature monitoring, material management, laboratory management, and reporting on efficacy and safety analyses, delivered to the research centers specified by TÜSEB. It is requested to know whether these software, data analysis, and reporting deliveries and services are exempt from VAT under Article 20 of the VAT Law No. 3065.
According to the VAT Law No. 3065;
- In Article 1/1, it states that deliveries and services performed in Turkey within the framework of commercial, industrial, agricultural activities, and free professions are subject to VAT.
- In Transitional Article 20/1, it is stated that the earnings of entrepreneurs operating in technology development zones and specialized technology development zones under Law No. 4691 are exempt from income or corporate tax during the specified period, and that the deliveries and services produced exclusively in these areas in the form of system management, data management, business applications, sectoral, internet, gaming, mobile, and military command control application software are exempt from VAT. It is also specified that for these exempt transactions, the provision in Article 30/1(a) of this Law shall not apply, and the Ministry of Treasury and Finance is authorized to set minimum thresholds for the amounts subject to exemption based on program and license types, as well as to define and implement the principles and procedures related to the software programs that will benefit from the exemption.
In the VAT General Implementation Communiqué (II-G/2), it is stated;
“…
According to this provision, the deliveries and services of system management, data management, business applications, sectoral, internet, gaming, mobile, and military command control application software produced by taxpayers in technology development zones or specialized technology development zones until 31/12/2023 are exempt from VAT. The sale of software produced in these areas to different individuals or the sale in CD or electronic format does not prevent the application of the exemption.
Technoparks affiliated with universities are also considered as Technology Development Zones. If the intellectual property rights of the software produced under the provisions of Transitional Article 20/1 remain with the taxpayer operating in these areas, the sale to different individuals at regular intervals or the sharing of the software in virtual environments will also be subject to VAT exemption.
…
However, any purchases of goods and services by entrepreneurs operating in technology development zones or specialized technology development zones for software produced exclusively in these areas are subject to VAT, regardless of whether the software is exempt from tax or not.
Maintenance and support (automation) services provided for software other than updates, network applications, and products, devices, items, etc. that use software to function, as well as services related to this hardware, advertising services provided via a website, and deliveries and services included in R&D activities are not assessed under the exemption.
…”
Based on the provisions and explanations above, it is possible for the web-based application software deliveries and services within the scope of the contract made with TÜSEB regarding the “… Clinical Trial” project coded 84221 to be exempt from VAT, provided they are produced within the Technology Development Zone established under Law No. 4691 and during the period when your corporate income is exempt from corporate tax. However, it is not possible for the analysis and reporting services of the data collected through the use of the mentioned software to be exempt from VAT under Transitional Article 20 of Law No. 3065.
In this context, if the amount related to the software deliveries and services provided by your company is separated from the total amount and shown separately on the invoice, it is possible to benefit from the exemption provision of Transitional Article 20 of Law No. 3065. If the amounts cannot be separated, VAT must be calculated based on the total amount shown on the invoice.
Source: Revenue Administration
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