VAT Rate Reductions for Certain Sectors

Due to the coronavirus (Covid-19) pandemic, many sectors have faced serious economic losses and risk of economic loss. In order to minimize this risk, steps have been taken to provide financial support to almost all sectors. In relation to the VAT rate reductions which are of particular concern to the business life within this context, under the Presidential Decree numbered 2812, “the Decree on Making Amendments to the Decree Determining the Value Added Tax Rates Applicable to Goods and Services” (shortly “the VAT Reduction Decree” or “the Decree”) has been entered into force as published in the Official Gazette dated 31.07.2020 and numbered 31202.

Within the scope of the Decree, VAT rate reductions are provided to many sectors and particularly for workplace rental service, congress, conference, seminar, concert, fair and funfair entrance fees, organization services provided in weddings, ballrooms and cocktail lounges, barbering and hairdressing services as well as the services provided in beauty salons, and tailoring services.

Sectors for which VAT is reduced from 18% to 8%

Pursuant to the VAT Reduction Decree, the value added tax rate which is 18% for various sectors and services, is reduced to 8%, to be effective by the end of the year. These sectors and business lines are as follows:

Workplace rental service;
Congress, conference, seminar, concert, fair and funfair entrance fees;
Organization services provided in weddings, ballrooms and cocktail lounges;
Barbering and hairdressing services as well as the services provided in beauty salons;
Tailoring and repair of wearing apparels and home textile products;
Repair of shoes and leather goods and shoe dyeing services;
Ironing services for dry cleaning, laundry, wearing apparels and other textile products and
Carpet and rug washing services;
Maintenance and repair of bicycles, motorcycles and motor bikes (except for materials);
Maintenance and repair of electric appliances used at homes (refrigerator, oven, washing machine, dish washer, air conditioner, etc.) (except for materials);
Maintenance and repair of consumer electronics products (TV, radio, CD/DVD players, home video cameras, etc.) (except for materials);
Maintenance and repair of heating products used at homes (water heater, bath boiler, combi, etc.) (excluding central heating boilers) (except for materials);
Maintenance and repair of home and garden equipment (except for materials);
Maintenance and repair of furniture and home furnishings (except for materials);
Maintenance and repair of computers, communication tools and equipment, clocks (except for materials);
Maintenance and repair of musical instruments;
Locksmithing and key duplication services and porterage services;
Lubrication, washing, polishing services for motor land vehicles, and maintenance and repair of their seats and upholstery (except for materials);
House maintenance, repair, painting and cleaning services provided to householders (except for materials);
Food-beverage services (services provided in restaurants, restaurants serving alcoholic beverages, kebab shops and similar places, places selling food in the package or providing food service in other ways, places where food is consumed on foot, patisseries, cafeterias, coffee houses, tea houses, tea gardens, rural coffee houses, cafes serving only coffee, tea or soft drinks, with the exception of refreshment bars, clubs, outdoor clubs, bars, dance halls, discotheques, night clubs, taverns, beerhouses, cocktail halls and similar places; except for the portion of the services provided in these places that correspond to alcoholic beverages);
Passenger transportation services;
Ornamental plants and flower deliveries (the exceptions are indicated in the Decree).

Tourism-related sectors for which 1% VAT is applicable

In addition to the VAT rates reduced from 18% to 8%, the Decree states that VAT shall apply at the rate of 1% for the sectors related to tourism. As is known, tourism is one of the business lines most affected by the pandemic. Accordingly, the 8% VAT rates are reduced to 1% temporarily by the end of the year, for the entrance fees of the cultural activities such as cinema, theater, opera, operetta, ballet and museum, as well as the services provided in the food-beverage sector and accommodation services, which are directly and indirectly related to tourism.

Conclusion

The VAT rate reductions have been put into effect in order to mitigate the effects of the Covid-19 pandemic and to provide convenience to the economy.

While the VAT rate is reduced from 18% to 8% for various sectors and business lines stated above in detail, the VAT rate is reduced from 8% to 1% for the sectors which are in connection with tourism namely one of the service types most affected by the pandemic.

All the VAT rate reductions specified in the Decree shall start to apply as from 31.07.2020, and these reductions shall continue remaining in force until 31.12.2020.

Reference:

https://www.resmigazete.gov.tr/eskiler/2020/07/20200731-4.pdf