Tax and VAT Exempt Software Export From Turkey
04 Mart 2022, 22:07
Tax and VAT Exempt Software Export From Turkey
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According to the decree published in the Official Gazette, Turkey increased its VAT rates from 18% to 20% and from 8% to 10%.
Things to Know About Software Export
Are there any tax advantages? How can I benefit?
Although I try to touch on tax issues from time to time in the field of software, I think it would be useful to provide information about software exports abroad from the questions I received.
Corporate tax/Income Tax Advantage
I see that many software companies do not take advantage of this advantage due to the lack of communication with their financial advisors. If you are providing software services abroad, you have a 50% income/corporate tax advantage.
I think it will be clearer from the table below. While applying this advantage, the type of company does not matter, so it does not matter whether you are a sole proprietorship or a limited liability company.
As you can see above, half of your income and expenses are not taxable.
Value Added Tax Advantage
When you provide software services abroad, there will be no value added tax on the invoice you issue first, that is, you do not need to calculate and pay value added tax on the amount you collect.
While issuing the invoice, you may note that “Value added tax has not been calculated within the scope of service exports” on the invoice. In my opinion, if an invoice is issued without added value tax outside of the routine, an annotation/note should be written on the invoice as to why it was issued in this way.
There are some conditions in the law for you not to pay value added tax, these are;
- You need to issue the invoice on behalf of the customer abroad (You can ask at this point, to whom will we issue it anyway, the reason for this article is from time to time, it is issued to the domestic representative or company of the foreign company, it is not like that)
- The invoice amount must come to your accounts in Turkey in foreign currency. (Additional information, you do not need to return this incoming software service fee to Turkish lira within 180 days, like other export costs)
- The software service you provide must be used abroad. (It's an abstract concept, but when you think about not only software but also other service export items, for example, if you are sending domestic market data to a company abroad and they sell products to TR, then you need to show the value added tax on the invoice. Also, when you make your contract, you need to show it to the regions you will serve. I suggest you pay attention. MENA, CIS, EMEA, FARIS, Central Asia etc.)
The fact that the service is provided for a customer abroad is proven with an invoice or similar document issued on behalf of the customer abroad.
Benefiting from the service abroad means that the service provided in Turkey for the customer abroad is related to the customer's business, transactions and activities abroad; It has nothing to do with its activities in Turkey.
Since the goods and services that foreign companies send to Turkey are consumed in Turkey, consultancy, brokerage, surveillance, customer finding, market research etc. provided to these companies in Turkey for the said goods and services. services are not considered within the scope of service export exemption and are subject to VAT.