Principles and procedures have been published for implementing tax exemptions related to financial assistance granted for the 2014 – 2020 period within the European Union’s pre-accession financial assistance package to Turkey. Accordingly, Union Contractors operating within the scope of the financial assistance program can receive tax exemptions, provided certain conditions are met.

The Framework Agreement Between the Republic of Turkey represented by the Government of the Republic of Turkey and European Commission on the Arrangements for Implementation of European Union Financial Assistance to the Republic of Turkey under the Instrument for Pre-Accession Assistance (“IPA II”) was signed on 11 February 2015.

Accordingly, the General Communiqué (Rank No: 1) (“Communiqué”) related to Framework Agreement on Instrument For Pre-Accession Assistance (IPA II) Between Turkey and European Union, was published in Official Gazette number 29623 on 13 February 2016.

The recent Communiqué covers:

  • Joint financing of Sectoral agreements and financing agreements executed between Turkey and the European Union.
  • Agreements executed between Contract Authorities and Union Contractors.

Contract Authorities are defined as the European Commission and entities entrusted by European Commission to make use of European Union financial assistance.

Union Contractors are defined as natural or legal persons rendering service, supplying goods, executing works and/or running business under a Union Contract. Union Contractors can be either financed solely by the European Union or jointly by the European Union and Turkey.

Union Contracts are defined as any grant or contract which involves an activity financed by the IPA II (including co-financing by the beneficiary of IPA II assistance) and which is signed by the European Commission, IPA II beneficiary or grant beneficiary. Union Contracts also include sub-grant contracts and delegation agreements under indirect management.

According to the Communiqué, provided certain certificates and approvals and conditions are met, Union Contractors can be exempt from:

  • Value Added Tax.
  • Special Consumption Tax.
  • Income and Corporate Tax.
  • Inheritance and Transfer Tax.
  • Stamp Duty.
  • Special Communication Tax and Motor Vehicle Tax.
  • Import Taxes.

Suppliers to Union Contractors can also deduct Value Added Tax for any goods, service, or work provided.

Please see this link for the full text of the Communiqué (only available in Turkish).

Information first published in the MA | Gazette, a fortnightly legal update newsletter produced by Moroğlu Arseven.