Risks and Points to Note in Cases of Not Setting-up an Activity Base (2)

Merhaba! I am Shun Yoshida from Tokyo Consulting Firm Turkey Office.

I hope you all are safe and stay healthy.

I would like to share some more information regarding “Risks and Points to Note in Cases of Not Setting-up an Activity Base” following to the last week by taking another case as an example. This week I am going to explain the risks and points to note in the case that a foreign company such as parent companies and subsidiaries in other countries conducts commercial activities in Turkey without having an activity base.

0.1 Case②: In Case a Foreign Company Conducts Commercial Activities in Turkey without Having an Activity Base

1 ～▶YouTuberになりました！～

Case②: In Case a Foreign Company Conducts Commercial Activities in Turkey without Having an Activity Base

Please let me explain the risks and points when a foreign company such as a parent company or an overseas subsidiary in abroad conducts commercial activities in Turkey by referring to the below figure.

When a foreign company conducts commercial activities in Turkey, one of concerns to be considered is PE Risk. As mentioned in the previous blog last week, even if a foreign company does not actually have an activity base in Turkey, PE Risk always exists when a business traveler stays in Turkey for a long time and engages in business-related activities. As an example, let’s consider the scheme in which a foreign company procures goods from a Turkish company (Company A) and sells those to another company in Turkey (Company B). If the foreign company rents a warehouse in Turkey for a certain period of time or longer in procuring goods, it is possible that tax authority determines it as PE in Turkey.

In addition, there is also a point to note from the perspective of VAT. Should there be an activity base, it can be registered to VAT in Turkey. As a result, it is possible to offset between the input VAT generated when procuring products from Company A and output VAT charged together with selling price when selling products to Company B and the gap amount will be declared in a monthly basis. On the other hand, since a foreign company is not allowed to perform VAT registration in Turkey, Company B which the products are sold to needs to calculate the output VAT on behalf of the foreign company, which will unlikely be welcomed from Company B’s viewpoint. Furthermore, it is highly possible that the company’s burden on VAT will significantly increase because the input VAT paid when procuring goods from Company A is not allowed to be offset with the mentioned output VAT.

As mentioned above, involvement to the commercial activity by a foreign company without setting up an activity base in Turkey might bring some risks and concerns as well as increasing the tax burden even in the same commercia scheme in some cases. Therefore, it is surely better to clarify the potential risks and concerns prior to actually undertaking the business development.

That is all for this week.

We offer free meeting (online/offline) regarding establishment and business development in Turkey.

If you have any question other than the above topic, please do not hesitate to contact us.

Thank you very much for your time to read until the end.

～▶YouTuberになりました！～

弊社YouTubeチャンネル『久野康成の毎日が有給休暇!!』を開設いたしました！

「久野康成の毎日が有給休暇!!」では、代表の久野が作った365の金言を
『久野語録』として日めくりカレンダーにまとめ、内容を毎日解説していきます。

チャンネル名にある通り、「毎日が有給休暇」になるような生き方のツボとコツを発信しておりますので
ぜひ一度ご覧頂ければと思います！

また、代表の久野が執筆した
『国際ビジネス・海外赴任で成功するための賢者からの三つの教え今始まる、あなたのヒーロー』
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東京コンサルティングファーム・トルコ拠点
吉田瞬

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