Chapter 16- Taxation

Content of the Chapter

The chapter consists of approximation of Türkiye’s tax legislation with that of the EU on direct taxes (Personal Income Tax and Corporate Income Tax); harmonization of indirect taxes (Value Added Tax-VAT and Excise Duties); elimination of double taxation and prevention of tax evasion as well as administrative cooperation on tax matters.

Regarding indirect taxation; a non-cumulative general tax system is established on consumption with the introduction of legislation in the field of VAT. VAT is collected on the goods and services that are consumed or used within the EU. The exported goods are not subject to VAT unlike imported ones and the same VAT rate is applied to both domestic and imported goods. According to the EU tax legislation, the reduced VAT rate has to be minimum 5 % and the standart rate is 15 %.  Excise duties containing legislation on energy products, tobacco products and alcoholic beverages fall under the acquis in the field of indirect taxation. EU legislation on excise duty comprises the definition of goods categories that are subject to excise duty, their production, storage and circulation within the EU, method of taxation, minimum excise duty rates and scope of exemptions.

As regards direct taxation, the legislation in the field of corporate income tax covers taxes on income and capital. In the field of personal income tax, main focus of the legislation is taxation of interest, pension and dividend payments made to individuals. Member States are expected to approximate their taxation systems. Direct taxation legislation mainly focuses on cooperate income tax. 

In the field of administrative cooperation and mutual assistance, legislation contains rules that permit exchange of information between tax and revenue authorities of the Member States to combat tax evasion and avoidance. Member States have to comply with the European Council Code of Conduct Group principles to avoid unfair taxation practices. Türkiye also takes the necessary steps to align with those principles. Türkiye is under the observation of the EU Council- Group of Good Conduct only for criteria  No: 1.1 of “Automatic exchange of  financial information”.

The acquis in area of operational capacity and computerisation covers different areas of taxation. In order to exchange information between national tax administrations, the EU acquis requires various IT systems to be established. These are Value Added Tax Information Exchange System (VIES) in the field of VAT, a specific IT system (VoeS) for e-Services provided by non-EU traders to EU citizens and EMCS in the field of excise duties. Also, in the area of direct taxation Member States are required to establish an IT system for automatic exchange information on interest payments through an electronic standardised format.

Current Stage of the Negotiations on the Chapter

The explanatory screening meeting for the taxation chapter was held on 6-7 June 2006 and the detailed screening meeting was conducted between the dates 11-12 June 2006. European Council officially communicated a benchmark for the opening of the chapter on 18 April 2007. The opening benchmark for the chapter is as follows: “Türkiye should take concrete steps leading to a substantial reduction in discriminatory taxation of alcoholic products, imported tobacco and imported cigarettes and present a plan with clear milestones and agreed with the Commission for rapid elimination of any residual discriminatory taxation.”

As a result of fulfillment of the opening benchmark in the first half of 2009, the chapter was opened to negotiations at the Intergovernmental Conference on 30 June 2009.

For the provisional closure of the negotiations on the chapter, there are 3 closing benchmarks to be met in addition to obligation of full non-discriminatory implementation of the Additional Protocol to the Association Agreement. These are:

1. Türkiye makes significant progress towards alignment in the fields of VAT and excise duties, and presents a detailed timetable to reach full compliance with the EU acquis in the remaining areas; Türkiye fully eliminates the discriminatory taxation of alcoholic beverages, imported tobacco and imported cigarettes, in line with its obligations, by implementing the Action Plan of the Republic of Türkiye of 18 May 2009, including the additional information annexed to this Action Plan in accordance with the commitments taken and the timetable set or by fully eliminating this discriminatory taxation earlier than by the dates indicated in this Plan.

According to this plan; Türkiye eliminated the difference in the excise duty tax rates applied to imported and domestic alcoholic beverages in May 2018. The tobacco fund was removed in 2009 and 2018 for processed tobacco and for bulk tobacco respectively.

2. Türkiye demonstrates that it has adequate administrative capacity to implement and enforce its tax legislation and to effectively collect tax dues and control its taxpayers with the required infrastructure in its central and local tax offices; in particular, Türkiye shall have in place all arrangements to have the Central Liaison Office and the Excise Liaison Office established, sufficiently staffed and operational upon accession.
3. Türkiye presents to the Commission a comprehensive and coherent strategy towards IT Interconnectivity, and reaches sufficient progress in developing all related IT interconnectivity systems, in particular for the VAT Information Exchange System (VIES) and the Excise Movement Control System (EMCS).

Relevant Subcommittee Meetings

Subcommittee N° 8 on Customs, Tax, Drugs and Money laundering

Useful Links

Detailed information on EU tax policy:  http://ec.europa.eu/taxation_customs/index_en.htm

Screening Process

Presentations - Explanatory Screening Meeting (6-7 June 2006)

Presentations - Bilateral Screening Meeting (11-12 July 2006)

Answers to the questions of European Commission during Screening Process
- Corporate Tax 
- Savings Taxation 
- Excise Duties 
- Annex 

Screening Report