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Ender YILMAZ
Assistant Customs Consultant
The regulations on “returned goods” are included in Articles 168 to 170 of the Customs Law No. 4458 and Articles 446 to 453 of the Customs Regulation.
According to Article 168 of the Customs Law No. 4458, goods in free circulation are exempted from import duties if they are exported from the Turkish Customs Territory or another point of the customs union customs territories to which Turkey is a member by agreements and if they are re-entered into free circulation within three years and upon the request of the declarant. The three-year period may be extended due to unexpected circumstances and force majeure. However, the exemption can be applied if the identity of the returned goods is not altered at the time of export, i.e. they arrive in the same condition as when they were exported. This issue is stated in subparagraph (a) of paragraph 2 of article 168, “Except for the case of being in the same condition as exported, no exemption is granted to goods exported from the Turkish Customs Territory within the framework of the outward processing regime” and in subparagraph (b) “Goods whose export is subject to a foreign trade measure”.
Article 170 of the Law states that the exemption in question will also be applied to processed products exported within the scope of the inward processing regime and returned.
According to article 451/1 of the Customs Regulation, in order for goods returned after being exported to enter free circulation exempt from customs duties, a document showing that the rights and benefits benefited due to export have been returned must be attached to the declaration.
According to the parenthetical provision of Article 16/1-b of the Value Added Tax Law No. 3065, in order for goods exported by benefiting from the export exemption but later returned to benefit from the import exemption, the amount of the export exemption used in relation to these goods must be paid to the customs administrations. In other words, in normal exports, if the exporter is the supplier of the final product, the part of the amount calculated by the supplier company on its invoice that is not subject to deduction is the total VAT paid for expense items during the production of the goods, if the exporter is also a manufacturer, and the part of this that is not subject to deduction is returned to the taxpayer. This issue is determined as a result of correspondence with the tax offices. If the VAT charged is completely subject to deduction, the import of the goods is permitted without any VAT collection. In export-registered transactions, since the VAT is not paid to the manufacturer by the exporter, the amount for which the returned goods benefit from the export exemption is the amount calculated according to the manufacturer's sales price but not paid by the exporter.
On the other hand, when we look at the regime decision numbered 2005/8391 and the circulars and notifications published based on this decision, it is seen that what will be done if the returned goods are within the scope of the Inward Processing Regime is explained.
The decision stipulates that the procedures and principles regarding the procedures to be carried out in the event that the goods exported within the scope of the regime are not accepted by the recipient will be determined by the notification to be published pursuant to the Decision. In this context, when the relevant law and articles of the decision are taken into consideration, it is necessary to look at the provisions of the notification for the goods exported through inward processing and returned later. The situation of sending goods back to Turkey for which the export commitment has been fulfilled within the scope of the inward processing regime has been evaluated in two aspects in the notification.
In the event that the goods are returned within the document/permit period; the goods can be re-entered into the country provided that the guarantee of the rights, if any, benefited from due to export within the framework of the export regime and customs legislation and within the scope of the valid document/permit has been proven. This situation is notified to the relevant exporter unions/customs administrations to be evaluated during the closure of the export commitment.
If the goods are returned after the document/permit period has expired and the export commitment has been closed, if the exporter wants to re-export the goods, the goods are allowed to be brought into the country under a new document/permit, provided that the guarantee of the rights, if any, used due to exportation is proven
However, if the exporter does not want to re-export the returned goods, this situation is first reported to the exporters' unions/customs administration. As a result of the evaluation made, if any, tax is paid on the import of the goods used in the production of this product and the rights, if any, used due to exportation are returned. In this way, the import of the processed product by the customs administration is allowed.
It is also useful to touch upon the issue of Returned Goods in terms of Special Consumption Tax. According to Article 7/6 of the Special Consumption Tax Law No. 4760, in order for the returned goods to benefit from the import exemption, it is required that the amount benefited from the export exemption or deferment-cancellation application regarding these goods be paid to the customs administration or a guarantee equal to this amount be provided.
In the “5.1.3 Return of Exported Goods” section of the SCT General Communiqué No. 1, it is stated that SCT will not be applied on imports if the goods exported by SCT taxpayers with an export exemption are returned in accordance with the provisions of the Customs Law.
However, in the event that the goods subject to the export transaction for which exporters benefit from SCT refund or the goods they purchased and exported without paying SCT are returned, SCT must be applied to the returned goods by the customs administration as of the date of import. Therefore, for the returned goods, the customs administration must determine from the tax office to which the exporter is affiliated whether the exporter has benefited from SCT refund or deferment-cancellation application and take action in line with the response received.
If the deferred tax of the taxpayer who delivered with an export record has not yet been cancelled, the deferred tax is cancelled by the tax office without applying the delay interest upon proof that the exporter has paid the SCT to the customs administration.
On the other hand, since the import of goods in List (I) and those subject to registration and registration in List (II) for sale by motor vehicle traders are not subject to tax, it is natural that SCT will not be applied to such goods if they are returned after export.
In the returned goods transactions, which are regulated by various laws, regulations, circulars and communiqués and shaped by the influence of tax laws, there may be occasional disruptions, especially in cases where inward/outward processing regimes are also implemented. However, thanks to the opportunities provided by information technology and inter-institutional data integration, transactions regarding returned goods can be carried out more regularly than before.
In conclusion, while the measures taken by the state to prevent tax losses are respected, it is clear that both parties should make more efforts so that traders are not victimized by unnecessary time losses and additional expenses. In addition to reviewing and simplifying processes for both returned goods and other customs procedures, technological developments should be used more for system simplifications.
References:
Customs Law No. 4458
Customs Regulation
Value Added Tax Law No. 3065
Special Consumption Tax Law No. 4760
Council of Ministers Decision Decision No. 2005/8391
QUESTIONS
Question 1. Is interest charged for the VAT refunded on returned goods?
Answer: If a refund is made to the exporter in cash or by offset regarding the export transaction in question for the goods returned after being exported within the framework of Article 11 of Value Added Tax Law No. 3065, no additional interest should be calculated during the payment of the refund amount corresponding to the returned goods at customs
Question 2. Is KKDF Charged on Returned Goods?
Answer: According to the circular of the Ministry of Finance dated 14/07/2014 and numbered 70903105-165.01.03[208]-74209, if the goods returned after being exported are declared as a payment subject to KKDF, if the defective goods returned within the legal period without any change in the identity of the goods are imported by the said company, there is no need to make KKDF deduction on the import amount to be made within this scope, provided that the situation is proven to the customs administration with documents to be obtained from the buyer or authorized institutions outside the Turkish Customs Territory.
Question 3. Are the provisions of the surveillance notification applied to Returned Goods of Turkish Origin?
Answer: The provisions of the notification will not be applied when the export declaration and other documents regarding the identity determination are submitted.
Question 4. Is KKDF paid for the repair fee of goods exported with an external monitoring permit for returned repair purposes?
Answer: Based on the letter dated 15.02.2007 and numbered 4978 of the General Directorate of Customs, it has been stated that the transfer made as labor cost during the entry of the goods is not the import cost but the expenses made within the scope of invisible transactions, this payment is not counted among the transactions for which fund deductions will be made and therefore KKDF deduction should not be made.
Question 5. Is a Registration Certificate requested from Returned Goods?
Answer: Considering that the returned goods were in free circulation before they were exported, there is no need to present the “Registration Certificate” or the electronic record to the customs administrations for the entry into free circulation of returned textile and apparel products declared under the 4010 regime code.
