In an effort to invigorate the economy in certain sectors, the Council of Ministers has determined new reduced tax rates on special consumption tax, VAT and stamp tax through its Decision No. 2017/9759 published in the Official Gazette on 3 February 2017 (Decision), affecting certain sectors. Taxpayers who are active in the sectors of consumer appliances, ships, and real estate sectors should be aware of the new tax rates. These new tax rates are detailed as follows: New special consumption tax rates:
1. According to the Decision, the special consumption tax rate applying to air conditioners, refrigerator, deep freezer, water heater, dish washer, washing machine, cloth drier, vacuum cleaner and some small household electrical appliances has been temporarily reduced to 0% until 30 April 2017.
2. Moreover, for cruise ships, excursion boats, yachts and other vessel for pleasure or sports, rowing boats and canoes, the special consumption tax rate has been reduced to 0% without being subject to any time limit.
New VAT rates:
1. According to the Decision, the VAT rate applying to the deliveries of yacht, cruiser and excursion boats has been reduced to 1%.
2. The VAT rate applying to the deliveries of certain furniture has been temporarily reduced to 8% until 30 April 2017.
3. As reported in a prior legal alert on 9 September 2016, the VAT rates for real property sales defined in the related Council of Ministers Decision that were subject to VAT at 18% had been reduced to 8% until 31 March 2017 through Council of Ministers Decision No. 2016/9153. The Decision now extends this reduced VAT period until 30 September 2017.
4. The residential construction projects whose construction permit were obtained after 1 January 2017 and residential construction projects that will be put in a tender by public institutions and organizations and their subsidiaries as of 1 January 2017, the VAT that will apply are as follows:
• 8% if their unit tax value per square meter is between TRY 1,000 and TRY 2,000 (including TRY 2,000) at the date on which their construction permit was obtained.
• 18% if their unit tax value per square meter is over TRY 2,000. However, the 18% VAT rate will be applicable only after 30 September 2017, as the VAT rate applying to the sale of real property units with a land unit square meter tax value above TRY 1,000 was determined by the Decision as 8% until 30 September 2017.
5. For residential construction projects whose construction permit were obtained between 1 January 2013 and 31 December 2016 and residential construction projects that will be put in a tender by public institutions and organizations and their subsidiaries as of 1 January 2013, the following VAT rates will apply:
• 8% if their unit tax value per square meter is between TRY 500 and TRY 1,000 (exclusive of TRY 1,000).
• 18% if their unit tax value per square meter is over TRY 1,000. As mentioned above, this 18% VAT rate will be applicable only after 30 September 2017.
New stamp tax rates: The Decision also reduced the stamp tax to 0% for certain types of real estate agreements:
1. Promissory agreements to purchase real estate that are concluded in official form.
2. Prepaid real estate sales agreements concluded within the scope of the Law on Protection of Consumers.