TAX NEWS NO: 2018/9
September 5, 2018
Subject: Proceeds from Export of Goods Must Be Brought Into To Turkey And A Minimum Of 80% Of The Said Proceeds Are Required To Be Sold To The Banks.
Communiqué No. 48 regarding the Decree No. 32 on the Protection of the Value of the Turkish Currency is published in the Official Gazette on September 4th, 2018 and entered into force on the same date. The changes will be in effect for a period of 6 months as from the date of its entry into force.
As per Article 8 of the Decree, the exporters are free to use the proceeds received from their export activities, however the Ministry is given the authority to make legislative changes regarding imposing measures for bringing the export proceeds into Turkey.
With the announcement of Communiqué No.48, the Ministry has used its authority and imposed new rules on the exporters to bring their export proceeds into Turkey. Accordingly, the proceeds derived from the export transactions realized by the residents in Turkey, are required to be brought directly and without any delay into Turkey following the payment of such amounts by the importer, i.e. the export proceeds can be either transferred to the intermediary bank or brought into Turkey. The export proceeds are required to be brought into Turkey within a maximum of 180 days as from the date of physical export. Additionally, minimum of 80% of such proceeds are required to be sold to a bank.
The exports proceeds are primarily required to be brought into Turkey based on the TRY or foreign currencies as declared, but it is possible that they are brought in foreign currency even the export has been realized in TRY. If the export proceeds are effectively (physically) brought into Turkey, a declaration is required to be made by the passenger to the Customs Office.
The requirement on bringing the export proceeds into Turkey can be realized via several different payment methods such as credits against documents, cash against goods etc.
The export has to be realized within 24 months in return of foreign currencies received in advance.
The proceeds stemming from the export activities of the contracting companies is required to be brought into Turkey and sold to a Turkish bank within 365 days.
The proceeds stemming from the export of consignment stocks is required to be brough into Turkey and sold to a Turkish bank within 180 days as from the date of the actual sale.
If the goods are exported for an international fair, exhibition etc with the aim to sell such goods, the sales proceeds will be brought into Turkey and sold to a Turkish bank within 180 days as from the closing date of such fair, exhibition.
If the goods that have been temporarily exported out of Turkey are not brought back into Turkey within the specified periods or if they are sold within the specified periods, the sales proceeds are required to be brought into Turkey and sold to a Turkish bank within 90 days as from the end of the specified time period or from the date of the actual sales.
If the export is realized on credit or via financial leasing, the export proceeds are required to be brought into Turkey and sold to a bank within 90 days following the due dates mentioned on the relevant agreements.
The exporters are held responsible for bringing their export proceeds into Turkey within the specified time periods, selling the foreign currencies to the banks and the closing of the export accounts in time. On the other hand, the intermediary banks are held liable to monitor that the export proceeds are brought into Turkey and are sold to the banks.
In case the export of goods are realized with commercial purposes, the banks will close the accounts regarding the exports whose proceeds are brought into Turkey within the specified periods. In case the relevant accounts are not closed within the specified periods, the banks are required to notify the Tax Authority within 5 business days. Within 10 business days following the notification of the banks made to the tax authority, the tax authority sends a notice to the exporter for closing the export accounts in 90 days. Within 90 days, it is required that the accounts are closed or the force majeure of the exporter is documented.
Certain deductions are allowed from the export amount, such as freight, insurance premiums, commissions, storage, warehouse, discounts etc. which will be analyzed and concluded by the banks.
The export proceeds that are brought into Turkey within the specified period of time, can be offset against the import amouts of the exporters, their payments in relation to the capital movements, the expenditures relating to the invisible transactions and the purchase price of the transit trade by the banks.
In relation to the export and import of goods that are realized in accordance with the Foreign Trade regulations, the export and import amounts can be offset against each other by the banks provided that the parties are the same and it is realized during the period when the export proceeds are required to be brought into Turkey. Under the conditions where the offsetting against the export proceeds is allowed, the export proceeds are deemed to be brought into Turkey in time. For the amount that is offset, the purchase and sales document of the foreign currency is issued based on the buying rate that is in effect on the date the offset is realized.
Accordingly, the highlights of the said Communiqué can be summarized as below;
In general, it is understood that the export proceeds of the residents in Turkey are required to be brought into Turkey within 180 days as from the date of the physical export, at the latest,
The period of 180 days changes depending on the nature of the underlying transaction,
Minimum of 80% of the foreign currencies that are brought in Turkey are required to be sold to a bank, i.e. converted into TRY. However, it is not clearly mentioned in the Communique when such amounts are required to be converted into TRY. In other words, whether or not the conversion will take place at the end of the 180 days period, or at the time when the proceeds are brought into Turkey or at the time when the proceeds in foreign currency are used etc,
It is understood that after the export proceeds in foreign currency is brought into Turkey within the specified time period and the minimum conversion into TRY is satisfied, the exporters are free to purchase foreign currency again based on the applicable fx rates, i.e. no restriction is currently applicable in relation to the export proceeds that are converted into TRY,
The regulation relates to the proceeds derived from the export of goods. In other words, the export of services are not addressed/covered in the said Communiqué,
Given that the computation of 180 days starts from the date of the physical export, proceeds from transit trade should not be subject to the regulations in the said communiqué,
The exporters are primarily held responsible for the correct application of the new regulation, whereas the banks are held liable for monitoring the application of the exporters, and reporting to the tax authority,
It is understood that the export proceeds can be offset against certain transactions by the banks. However, it is not clearly explained how such offsetting by the banks will be realized i.e. whether or not the export proceeds has to be firstly brought into Turkey and whether or not an actual conversion of the foreign currency is required to be realized by the banks. We are of the opinion that under the case where export and import amounts are offset against each other provided that the parties are the same and it is realized during the period when the export proceeds are required to be brought into Turkey, the amount to be offset against the import amount is not required to be brought into Turkey, thus the requirement to bring the export proceeds to Turkey and the minimum 80% conversion of the amount should be limited to the remaining amount after offsetting. However, apart from the offsetting of export and import amount that is taking place between the same parties during the period when the proceeds are required to be brought into Turkey, the exports proceeds are understood to be required to be firstly brought into Turkey and the conversion into TRY shall be realized based on the remaining amount after offsetting. Further clarifications on the subject by the Ministry should be followed up given that the explanations in the said communigué are not clear,
The Communiqué has entered into force on September 4th, 2018 and will be in effect until March 4th, 2019. It is stated that if the physical export of the goods is realized during the period when the said Communiqué is in effect, the provisions of the Communiqué will still be relevant even the payment terms are after March 4th,2019. On the other hand, although it is not explicitly mentioned whether or not the provisions of the Communiqué will be applicable for the exports that are realized prior to September 4th, 2018, it can be interpreted that the such export of goods does not fall within the scope of this communiqué.
The residents who do not bring their export proceeds into Turkey within the specified periods will be subject to an administrative penalty for an amount equal to 5% of the fair market value of the values that are required to be brought into Turkey. However, if the export proceeds are brought into Turkey until the decision of the penalty has become definite, an administrative fee in the range of TRY 3.000-TRY25.000 will be applicable. However, the penalty amount cannot exceed 2,5% of the export proceeds that are required to be brought into Turkey.
For further information with respect to this subject, please contact Arzu Akçura Değer.
Director – International Tax
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