NEWSLETTER-2019-metin

322 NEWSLETTER 2019 The Period before Law No. 7161 Prior to the promulgation of Law No. 7161, Article 24 of the VAT Code listed the items that are included within the scope of the VAT base, as follows: • The transportation, loading and unloading expenses made by the seller till the delivery place shown by the customer. • The packaging expenses, insurance, commission, and simi- lar expense accruals, taxes, duties, fees and funds paid by the seller. • Delay charges, price differences, interest, premiums and si- milar revenues, all kinds of benefits, services and values. Therefore, there was no specific law provision in the VAT Code stating that exchange differences were also included within the scope of the VAT base. The lack of certainty concerning the taxation of ex- change differences in terms of VAT has caused controversy amongst the Revenue Administration and taxpayers. The ongoing view of the Administration also stated in VAT Communiqué Serial No. 105 and the VAT General Application Communiqué was that the exchange rate differences were subject to VAT. Pursuant to the Tax Administration’s view; during the transactions in which the price is defined in foreign currencies or as indexed to a foreign currency; in case the price is paid completely or in part following the date on which the taxable event occurs, since the exchange rate difference that emerged in favor of the seller is essentially in nature of a delay interest, it had to be taxed as an element of the tax base. The Judicial Approach In general, during the tax cases initiated in relation to the VAT ap- plication on exchange differences, the tax courts adjudicated in favor of taxpayers on the following grounds: • The tax legislation does not include a clear and specific provision stating that VAT should be applied with respect to exchange differences;