Refund applications of tax-exempt transactions in value added tax legislation

Significant changes have taken place on the tax legislation in line with the rapid changes in Turkish economy. The Value Added Tax system, which envisages a single taxation application instead of the eight indirect taxes that used to be levied from the phase at which goods and services are produced to the phase they are delivered to consumers, has been put into force.The Value Added Tax is generated by being reflected from the present to next stage in every stage of the production of goods and services, and is borne ultimately by the final consumer.While the Value Added Tax is applicable for all goods and services in the economy, there are certain exemptions in the Value Added Tax Legislation also as in all tax applications due to increased competition conditions caused by globalization, social, cultural and economic reasons.The VAT is not calculated for tax exempt transactions in accordance with the Value Added Tax Law. As a result, cost of the relevant good is reduced in proportion to the amount of VAT and the said tax is not charged to the final consumers.While the producers of the goods and services are responsible for payment of the Value Added Tax, actually the taxpayer of this type of tax is the final consumer. Therefore, since VAT is not collected with respect to tax-exempt transactions from the final consumer, the Value Added Tax left at the final person or the organization has to be refunded.Due to exploitations experienced in refunds, Tax Administration has significantly increased the bureaucratic operations particularly in cash refunds. This situation has complicated even more the already complex system. New regulations are needed to simplify the system with which the taxpayers currently lose time and bear additional costs.In this study, the procedures followed in relation to refund applications with respect to tax-exempt transactions in the Value Added Tax Legislation are explained based on laws, general communiqués, internal circulars and tax rulings.Key Words: Refund in Value Added Tax, Legislation