Exporters demand extension as inward processing VAT exemption ends after 27 years

The removal of the VAT exemption on domestic deliveries of goods intended for production under the Inward Processing Regime (IPR) has sparked reactions from exporters. Companies operating under the Inward Processing Permit now face significant financial burdens, as they will be required to pay VAT on their domestic purchases. Business representatives warn that the lengthening of VAT refund procedures could force firms to rely on high-interest loans. They also note that the conditions of the IPR have been increasingly tightened, which is negatively affecting exports.

After 27 Years, Inward Processing VAT Exemption Ends

According to available information, the regulation providing a VAT exemption on domestic deliveries under the Inward Processing Regime (IPR) was introduced with Provisional Article 17, added to VAT Law No. 3065 on July 29, 1998. This provisional article was repeatedly extended in subsequent years through new legislation. Initially, the exemption was set to expire on December 31, 2008, and it was subsequently extended to December 31, 2015, December 31, 2020, and finally, by Law No. 7256, enacted on November 17, 2020, it was extended until December 31, 2025.

The validity of the provision expired as of December 31. However, no official steps have yet been taken to extend the period or introduce a new regulation. As a result, VAT exemptions will no longer apply to domestic sales of goods under the Inward Processing Regime (IPR) as of January 1. Currently, many local suppliers are notifying their exporter clients, sending messages stating:"As no extension has been granted, it will not be possible to make sales under the Inward Processing Permit (DİİB) as of January 1."

Exporters Highlighted Financial Pressure

Ali Bakaner, Board Member of the Istanbul Iron and Non-Ferrous Metals Exporters’ Association (İDDMİB), emphasized the positive impact of the VAT exemption on exports, stating that the failure to extend the period would put exporters at a disadvantage. Bakaner highlighted that companies would face an additional financial burden. He particularly noted that the lengthening of VAT refund processes is causing serious difficulties for firms, saying:"The VAT practice weakens our financial capacity. We request an extension of the VAT exemption period to ensure that exports are not disrupted."

Sourced by: Ekonomim