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EXCISE DUTY SYSTEM AND TAXATION OF TOBACCO IN TURKEY

EXCISE DUTY SYSTEM AND TAXATION OF TOBACCO IN TURKEY. Cüneyt AKSOY Revenue Expert Presidency of Revenue Administration 2011. GOODS WITHIN THE SCOPE. LIST NO: I Energy Products. LIST NO: I I Motor Vehicles. LIST NO: III Alcoholic Beverages And Tobacco Products. LIST NO: IV

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EXCISE DUTY SYSTEM AND TAXATION OF TOBACCO IN TURKEY

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  1. EXCISE DUTY SYSTEM AND TAXATION OF TOBACCO IN TURKEY Cüneyt AKSOY Revenue Expert Presidency of Revenue Administration 2011

  2. GOODS WITHIN THE SCOPE LIST NO: I Energy Products LIST NO: II Motor Vehicles LIST NO: III Alcoholic Beverages And Tobacco Products LIST NO: IV Other Consumption Goods Excise Duty 1

  3. Excise Revenues 2010 *Total Tax Revenues in 2010: 210.532.315 TL (132.410.261 $) Excise Duty 2

  4. TAXATION OF VEHICLES Excise Duty 3

  5. GOODS WITHIN THE SCOPE IN LIST (II) Proportional tax Excise Duty 4

  6. TAXABLE EVENT (VehiclesSubject to Entry and Registration) First acquisitionis the taxable event for vehicles which are subject toentry and registration. • The term “firstacquisition” means; • importation, • acquisition byauction, • acquisition from thepersons trading motor vehicles, • started to be used or capitalized by persons tradingof motor vehicles or registred in the name ofthem, • for the purpose of being used of only thosegoods whichhavenotalreadybeenentered and registered in Turkey There is no liability on the importation of vehicles with commercial purposes, but liability arises on delivery of motor vehicles to buyers who will use these vehicles in Turkey. Excise Duty 5

  7. TAXABLE EVENT (Vehicles not Subject to Entry and Registration) Taxable event for motor vehicles not subject to entry and registration is, their importation, delivery by manufacturers, sale by auction before excise duty is applied. Excise Duty 6

  8. DECLARATION, ASSESSMENT and PAYMENT OF DUTY Vehicles Not Subject To Entry and Registration Tax return is submitted to the tax office in place of thetransaction before completion of transaction related to firstacquisition Duty is paid on the same day on which return is submitted. Vehicles Not Subject To Entry and Registration Taxation period is each monthly period of calendar year Tax return is submitted to the tax office until15th day of the month following the end of thetaxation period. The duty is paid within the period of submission. Excise Duty 7

  9. GOODS WITHIN THE SCOPE IN LIST (II) Excise Duty 8

  10. Vehicles principally designed for transport of persons: CN CODE NOType of Vehicle 87.02 Bus, Midi bus, Mini Bus 87.03Motor cars 8703.10.11.00.00Specially designed for travelling on snow 8703.10.18.00.00Golf cars and similar vehicles 87.11Motorcycles 88.02 Helicopters, Aeroplanes,Spacecraft 8901.10.10.00.11Cruise ships not exceeding 18 gross tonality 8901.10.90.00.11Traveller and tour ships 89.03Yachts and other vessels for pleasure or sports, rowing boats and canoes Vehicles principally designed for transport of goods: CN CODE NOType of Vehicle 8701.20Wreckers for semi-trailers 87.04Motor vehicles for the transport of goods 87.09 Self-propelled vehicles, not fitted withlifting orhandling equipment, of the type used in factories,warehouses Motor vehicles for special purposes: CN CODE NOType of Vehicle 87.05 Motor vehicles forspecial purpose breakdown lorries, crane lorries, concrete-mixer lorries, roadsweeper lorries, e.t.c. (Only for those subject to entry and registration) (Other than fire-fighting vehicles) Excise Duty 9

  11. TAX RATES CarsRates Of a cylinder capacity not exceeding 1600 cm3 37 % Of a cylinder capacity exceeding 1600 cm3 but not exceeding 2000cm3 80 % Of a cylinder capacity exceeding 2000 cm3 130 % Cars with only electric engine Of a engine power not exceeding 85 Kw 3 % Of a engine power exceeding 85 Kw but not exceeding 120 Kw 7 % Of a engine power exceeding 120 Kw 15 % Of a cylinder capacity not exceeding 3200 cm3 having 9 seats including the driver 15% Only with electric engine 10% Minibus 9 % Midibus 4 % Bus 1 % Excise Duty 10

  12. TAX RATES Trucks 4% Motorcycles Of a cylinder capacity not exceeding 250 cm3 22% Of a engine power not exceeding 20 Kw 3% Of a cylinder capacity Above 250 cm3 37% Of a engine power exceeding 20 Kw 37% Airplane-Helicopter 0,5% Traveller and tour ships 6,7% Yachts 8% Golf cars and similar vehicles 6,7 % Vehicles specially designed for travelling on snow 6,7 % Jet-ski and similar vehicles not subject to entry and registration 8 % Excise Duty 11

  13. TAXATION OF TOBACCO PRODUCTS AND ALCOHOLIC BEVERAGES Excise Duty 11

  14. GOODS WITHIN THE SCOPE IN LIST (III) Excise Duty 12

  15. CN CODES OF TOBACCO PRODUCTS CN CODESType of Product 2402.10.00.00.11Cigarscontainingtobacco 2402.10.00.00.12 Cherootscontainingtobacco 2402.10.00.00.19 Cigarilloscontainingtobacco 2402.20Cigarettes containing tobacco 2402.90.00.00.00Others(Cigars made of ingredients deemed as a tobacco, cigars, cheroots and cigarillos) 2403.10 Smoking tobacco (whether or not containing tobacco substitutes in any proportion) 2403.10.10.00.19 Others (in immediate packings of a net content not exceeding 500 g) 2403.10.90.00.19 Others (in immediate packings of a net content exceeding 500 g) 2403.99.10.00.00Chewing tobacco and snuff * Leaf tobacco is not subject to excise duty. Excise Duty 13

  16. TAXATION OF CIGARETTES AND OTHER TOBACCO PRODUCTS Proportional taxation method is used in calculating excise duty on cigarettes and other tobacco products. Tax on cigarettes and other tobacco products calculated on proportional basis can not be less than tax amount calculated according to minimum specific tax amounts. Excise Duty 14

  17. Units for minimum specific tax amount Cigarettes Other tobacco products each piece of cigarettes taking place in a unit of a pack supplied to market each gram of product in a unit of a pack supplied to market Excise Duty 15

  18. CIGARETTES Proportional Tax Rate 65 % Minimum Specific Tax Amount 1 piece of cigarette 0,1450 TL (≈ 0,076 $) 1 package (20 piece) 2,90 TL (≈ 1,526 $) Excise Duty 16

  19. OTHER TOBACCO PRODUCTS Proportional Tax Rate 65 % Minimum Specific Tax Amount 1 gram 0,1450 TL (≈ 0,076 $) or 0,0375 TL (≈ 0,197 $) Excise Duty 17

  20. LIST (III) TABLE (B) ANNEXED TO LAW CN CODESType of ProductRate%Min. Sp. Tax(YTL) 2402.10.00.00.11Cigarscontainingtobacco 65 0,1450 TL (≈ 0,076 $) 2402.10.00.00.12 Cherootscontainingtobacco 65 0,1450 TL (≈ 0,076 $) 2402.10.00.00.19 Cigarilloscontainingtobacco 65 0,1450 TL (≈ 0,076 $) 2402.20Cigarettes containing tobacco 65 0,1450 TL (≈ 0,076 $) 2402.90.00.00.00Others(Cigars, cheroots andcigarillos, and cigarettes made of ingredients deemed as a tobacco ) -Cigars, cheroots andcigarillos made of ingredients 65 0,1450 TL (≈ 0,076 $)deemed as a tobacco, -Cigarettes made of ingredients deemed as atobacco 65 0,1450 TL (≈ 0,076 $) 2403.10Smoking tobacco (whether or not containing tobacco substitutes in anyproportion) 65 0,1450 TL(≈ 0,076 $) 2403.10.10.00.00 Others 65 0,0375 TL (≈ 0,197 $) (in immediate packings of a net content not exceeding 500 g) 2403.10.90.00.00 Others 65 0,0375 TL (≈ 0,197 $) (in immediate packings of a net content exceeding 500 g) 2403.99.10.00.00 Chewing tobacco and snuff 65 0,1450 TL (≈ 0,083 $) Excise Duty 18

  21. TAXABLE EVENT, TAXPAYER, EXEMPTION • Taxable Event for tobacco products is their • importation, • delivery by manufacturers, • sale by public auction before implementing excise duty. • Taxpayer of duty for tobacco products is their • importers, • manufacturers, • sellers by public auction before applying excise duty. EXEMPTIONS • No specific exemption to tobacco products. Excise Duty 19

  22. TAX BASE ANDAUTHORITY OF THE COUNCIL OF MINISTERS • TAX BASE • Tax base for tobacco products is retailselling price of these goods to final customers including VAT. • Tax base for duty to be paid to customs office on importation oftobacco products is also retail selling price of thesegoods. AUTHORITY OF THE COUNCIL OF MINISTERS REGARDING TAX RATES • The Council of Ministers has the authority to; • decrease rates down to zero for each products, • increase up to 50% of the determined rates, • decrease minimum specific tax amounts determined by Law down to zero for each products, • increase up to one fold for tobacco products. Excise Duty 20

  23. DECLARATION AND PAYMENT • Taxation period is each one monthly period of calendar year, Tax return is submitted to the tax office until the 15th day of the month following the end of the taxation period. The duty is paid within period of submissionofthe return. Excise Duty 21

  24. EXAMPLE • Retail selling price for a pack of cigarettes including 20 pieces of • cigarettes is 4 $. Excise duty to be paid for 2000 packs of • cigarettes: • Proportional Tax Rate :65 % • Specific Tax Amount for each piece of cigarettes :0,076 $ • Specific Tax Amount for2000 packs of cigarettes :3040 $ • (20 X 0,076 $ X 2000= 3040 $) • Tax amount calculated on proportional basis :5200 $ • (4 $ X 0,65 X 2000=5200 $) • 5200 $ > 3040 $ excise duty to be paid :5200 $ Excise Duty 22

  25. EXAMPLE • Retail selling price for a pack of cigarettes including 20 pieces of • cigarettes is 2 $. Excise duty to be paid for 2000 packs of • cigarettes: • Proportional Tax Rate :65 % • Specific Tax Amount for each piece of cigarettes:0,076 $ • Specific Tax Amount for2000 packs of cigarettes :3040 $ • (20 X 0,076 $ X 2000= 3040 $) • Tax amount calculated on proportional basis :2600 $ (2 $ X 0,65 X 2000=2600 $) 3040 $> 2600 $ excise duty to be paid :3040 $ Excise Duty 23

  26. EXAMPLE • Retail selling price for a pack of cigar including 10 pieces of 5 gram • of cigars is 10 $. Excise duty to be paid for 2000 packs of cigars: • Proportional Tax Rate : 65% • Specific Tax Amount for each gram of • cigar containing tobacco: 0,076 $ • Specific Tax Amount for2000 packs of cigars: 7.600 $ • (5 X10 x 0,076 $ X 2000= 7.600 $) • Tax amount calculated on proportional basis : 13.000 $ • (10 $X 0,65 X 2000=13000 $) • 13000 $ > 7.600 $ excise duty to be paid : 13.000 $ Excise Duty 24

  27. SHORT HISTORY OF TOBACCO TAXATION Excise Duty 25

  28. MINIMUM SPECIFIC TAX OF A PACK (20 CIGARETTES)SINCE 2005 ≈ 1,667 $ 58% 58% 58% 58% 58% 63% Proportional Tax Rate Excise Duty 26

  29. CIGARETTES SALES Excise Duty 27

  30. EXCISE REVENUE FROM TOBACCO TAXATION Excise Duty 28

  31. TAX BURDEN AND PRICES • Tax Burden on Tobacco Products • VAT : % 18 (0,1525 of retail price) • Excise Duty : % 65 • TOTAL : % 80,25 • Total Excise Duty Burden for 1000 cigarettes (50 package) is minimum 145 TL (≈ 76,31 $) Average price of a pack of cigarette is aprx. 5,4 TL (≈ 2,84 $) Average excise duty for a pack is aprx. 3,4 TL (≈ 1,78 $) in 2010. Excise Duty 29

  32. TAXATION OF ALCOHOLIC BEVERAGES AND COLA SODA POPS GOODS WITHIN THE SCOPE LIST NO: (III) TABLE (A)TABLE (B) - Cola Soda Pops (1 CN Code) - Tobacco Products - Alcoholic Beverages (18 CN Code) Excise Duty 30

  33. TAXATION OF ALCOHOLIC BEVERAGES AND COLA SODA POPS 2203.00Beers (made from malt) 22.04Wine of fresh grapes 2204.10Sparkling wine 22.05Vermouth and other wine of fresh grapes 2206.00Other fermented beverages(e.g: cider, perry, mead) mixture of fermented beverages and mixture of non-alcoholicbeverages with fermented beverages 22.08Undenatured ethyl alcohol of an alcoholic strength by volume of less than 80% vol. 2208.20 Beverages acquired from distillation of grapes. 2208.50 Gin 2208.60 Vodka 2208.70 Liqueurs 2208.90 Others 2208.90.48.00.11 Rakı 2208.90.71.00.11 Rakı * Pure ethyl alcohol is not subject to excise duty Excise Duty 31

  34. TAXATION OF ALCOHOLIC BEVERAGES AND COLA SODA POPS Minimum Specific Tax For alcoholic beverages, minimum specific tax amounts are determined in 3 different categories. These are; 1st category per alcohol degree in 1 liter of product 2nd category 1 liter of product 3rd category per liter of pure alcohol contained. Proportional Tax ; On cola soda pops 25 % On beer 63,3 % On others 0 % - Proportional Tax > Minimum Specific Tax Tax to be paid Proportional Tax - Proportional Tax < Minimum Specific Tax Tax to be paid Minimum Specific Tax Excise Duty 32

  35. EXAMPLE 1000 bottles of 33 cc beer is sold with a price of 3 TL for each bottle. Alcohol degree of beer is 4. Excise duty to be paid is: Minimum specific tax for beer: 0,53 TL (0,27 $) 4 x 0,53 x (1000*0,33) = 699,6 TL Proportional tax for beer : 63% 3x1000x0,63 = 1890 TL Tax to be paid is 1890 TL EXAMPLE 1000 bottles of 70 cc wine is sold with a price of 20 TL for each bottle. Alcohol degree of wine is 12. Excise duty to be paid is: Proportional tax for wine : 0 % Minimum specific tax for wine: 2,94 TL (1,54 $) 1000 x 0,70 x 2,94 = 2060,94 TL Excise Duty 33

  36. EXAMPLE 1000 bottles of 70 cc vodka is sold with a price of 20 TL for each bottle. Alcohol degree of beer is 40. Excise duty to be paid is: Minimum specific tax for beer: 70,35 TL (37 $) 0,40 x (1000 x 0,70) x 70,35 = 19698, TL Proportional tax for beer : 0 % Tax to be paid is 19698 TL EXAMPLE 1000 bottles of cola with 33 cc is sold with a price of 3 TL for each bottle. Excise duty to be paid is: Proportional tax for cola soda pops : 25 % 3 x 1000 x 0,25 : 750 TL Minimum specific tax for wine: 0 TL Excise Duty 34

  37. TAXATION OF OTHER CONSUMPTION GOODS Excise Duty 35

  38. Application of proportional excise duty (Tax rates applied are 6,7%, 20% and 25%) • Some of other consumption goods laid down in List No (IV) are: • Caviar, Furs, Precious stones, Cosmetics, White Goods and Other Electrical Household Machines, • Mobile phones , Revolvers There are 107 CN Codes in List No: (IV). One application of minimum specific tax for CN Code 8517.12.00.00.11(mobile phones) with a temporarily provision added to Law. (100 TL [52$] for each) LIST (IV) Excise Duty 36

  39. Thank you Cüneyt Aksoy Revenue Expert Tel: 0312 415 33 76 e-mail: caksoy@gelirler.gov.tr

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