Withholding Tax Rate for Construction Works Has Been Adjusted

Regarding to the statement in General Communique on Value Added Tax (VAT) with the serial number 117, which reads “The buyers shall apply VAT Withholding in the ratio of (2/10) for the construction works and the engineering-architecture and survey-project services conducted within the scope of these works, conducted against those listed in Article (3.1.2/b) of the Communique.”, the ratio of (2/10) has been amended to become (3/10).

The amendment was published in the Official Gazette dated 27.09.2017 and the enforcement will apply as of 01.10.2017. The applicable withholding shall be (3/10) for the deliveries made as of October 2017.

3.1.2/b - The specified buyers (whether VAT responsible party or not) are:

• Administrations,
• Organizations and institutions,
• provincial special administrations and the unions organized by these institutions,
• unions organized by municipalities and unions for provision of services to villages, as listed in the schedules attached to Law No 5018
• Public organizations and institutions established under law; other than those listed above,
• Institutions with floating capital,
• Public professional organizations, retirement and provident funds established under law or vested with public legal personality,
• Banks,
• Public Economic Enterprises (Public Economic Organizations, State-Owned Economic Enterprises),
• Organizations within the scope of privatization,
• Organized industrial zones and all exchanges including stock exchanges and futures exchanges,
• Organizations, institutions and enterprises, more than half of whose shares are directly owned by the above listed administrations,
• Organizations and institutes (either individually or collectively),
• Companies whose shares are traded in Istanbul Stock Exchange.

Please click here to view the Communique that includes the relevant regulation. Please contact your client representative or an expert for further information.