The latest decisions made by the Council of State continue to produce effective results. Apart from the disputes arising from the regulations made by the Ministry of Finance, many tax problems encountered in daily transactions began to be resolved and clarified within the scope of these decisions.
One of these problematic issues is the one that has been controversial in the public for 10-12 years. “Sales of immovables shown as offices in the license or title deed”Regarding the VAT rate to be applied in
What exactly is the controversial topic?
The final decision of the Council of State, which destroyed all hopes of those who sold the office as a residence, “Sales of immovables shown as offices in the license or title deed”Regarding the VAT rate to be applied in However, the issue is not limited to the VAT rate, but also initiates a very important process leading to the withdrawal of VAT refund. Because the immovables that were listed as workplace-office-shop in the license and title deed in the past were sold as residences and VAT refund was received on them.
How could such an event happen?
Yes, it is really interesting that immovables registered as workplace – office – shop in the license and title deed are sold as residences and VAT refund is received on them. It’s not even understandable. Under normal circumstances, such a sale should not be made. However, something like this has happened in the past!
Everything started with the Circular of Finance!
Everything started with the Finance’s change of opinion. How Does? Here is the process
VAT rates to be applied to residential and business sales since 1985, when VAT entered into force, permit and land registry records VAT was calculated on the basis of 1-8 percent VAT on house sales with a net area of up to 150 m2, and 18 percent on sales of residences with a net area of up to 150 m2, as well as workplace-office-shop sales.
However, with a circular it published in 2011, the Ministry of Finance changed its view and practice, which has been going on for many years, by going through a game changer. What is the VAT rate on immovables in the building permit and land registry records? It should be determined by looking at what it is actually used/will be used for, rather than as shown in the figure. announced (VAT Circular No. 60 dated August 8, 2011).
Based on this Circular, the Ministry of Finance has also given many decrees in the past. (Treats of GİB dated 23.08.2013 and 1259, Ankara VDB dated 05.09.2013 and 2851, dated 03.07.2013 and numbered 20361)
The change of opinion caused the office to be sold as a residence!
Yes, this change of opinion means that immovables with a net area of not exceeding 150 m2, which are listed as a workplace, office, shop, office in the building permit or title deed, are sold for use as residences, and these sales are subject to VAT at a discounted rate (1.8 percent). This resulted in the fact that the VAT that could not be charged and discounted due to these sales was requested as a cash or deductible refund. In this context, the Ministry of Finance also made a large number of VAT refunds.
Towards the end of 2014, the Ministry of Finance abandoned this view!
Realizing its mistake, the Ministry of Finance abandoned this view towards the end of 2014 and returned to its first correct view and practice, and announced that the VAT rate in real estate sales would be determined on the basis of title deeds and license records. (GIB. İzmir VDB. dated 8/4/2015 and 21152195-35-02-174, Sivas Revenue Office dated 16/3/2015 and 67630374-130[2014-41]-1 specifications).
The application is still carried out within the framework of this view.
Finance demanded his VAT refunds back with penalty!
Based on the rulings given between 2011 and 2014, the Ministry of Finance made penalty assessments on behalf of the taxpayers who sold the immovables that appear as workplaces and offices in the license or title deed as residences and applied the wrong VAT rate, due to the VAT they accrued incompletely. demanded the refund amount with penalty within the scope of unfair return.
Taxpayers brought the case to the Judiciary!
According to the previous opinion of the Ministry of Finance, taxpayers who sold the immovables that appear as workplaces and offices in the license or title deed as residences and applied low VAT rates and/or received VAT refunds, brought the penalty assessments made against them to the judiciary.
Tax Courts found the Finance justified!
Tax Courts found the Finance justified in this regard.
The justification for court decisions is The criterion that should be taken as a basis in the delivery of real estate is that the construction permit and title deed records should be taken as a basis, the purpose for which people sell or the purpose of the areas used is not important in terms of the VAT rate to be applied, the usage preferences of the buyers are not important, otherwise, the legal characterization of the independent sections will be left to the users’ preference. that this will constitute a situation contrary to the taxation technique. shaped (Decision of Ankara 2nd Tax Court dated 16/5/2017 and numbered E.2016/1920, K.2017/686).
The first decisions of the Council of State were in favor of the Finance!
The Council of State put an end to this problem after a long process! The two chambers of the Council of State that deal with tax cases (4th and 9th Chambers) gave two decisions in the same direction.
The 4th Chamber of the Council of State decided that whether the immovable being sold is a workplace or a residence should be decided on the basis of land registry records and the VAT rate should be determined accordingly. (Decision of the 4th Chamber of the Council of State, dated 08.06.2021 and numbered E.2021/2180, K.2021/3054). With this Decision of the 4th Chamber of the Council of State, it has put an end to the debates by clarifying how to determine whether the real estate sold is a workplace or a residence!
The 9th Chamber of the Council of State made a similar decision on the subject! In the decision of the 9th Chamber of the Council of State, It is not possible to sell the independent sections shown as offices in the license and title deed as residences, that it is not important to decide on the use of offices as residences in the floor management plan, that official land registry records should be taken as a basis in this regard, that the percentage levied due to the immovable sold by applying 1 percent VAT as a residence. That there is no violation of the law and the law in the VAT of 17 stated (Decision of the 9th Chamber of the Council of State, dated 07.10.2021 and numbered E.2018/2060, K.2021/4580).
The final decision of the Council of State dated 2022 has exhausted all hopes!
Despite the above-mentioned decisions of the Council of State, the hope of the taxpayers who sold the immovables that appear as workplaces and offices in the license or title deed, as residences, applying a low VAT rate and/or receiving VAT refunds, still continued.
However, the 2022 decision given by the 4th Chamber of the Council of State, again in favor of Finance, destroyed these hopes. This is the final decision; It is stated that the basis for the delivery of real estate is the construction license records, for what purpose people sell or for what purpose the areas are used does not matter in the determination of the VAT rate to be applied, otherwise the legal characterization of the independent sections will be left to the discretion of the users and this situation is contrary to the tax technique. It is undisputed that it is named as a workplace, therefore there is no illegality in the transaction regarding the rejection of VAT refund arising from the delivery of independent sections as residences, which are licensed as workplaces and have a building use permit as workplaces. shaped (Decision of the 4th D. of the Council of State, dated 18.04.2022 and numbered E.2018/6540, K.2022/2618).
As a result;
This latest decision of the Council of State has completely ended the expectations of taxpayers who sell immovables that appear as workplaces and offices in the license or title deed, as residences, apply low VAT rates and/or receive VAT refunds, that the lawsuits will result in their favor.
In other words, in the sale of immovable properties that are shown as offices in the license or title deed, the title deed records must be taken as a basis and 18 percent VAT must be calculated. It does not matter for what purpose the buyers purchase these immovables or for what purpose they will use them. If the real estate sold is listed as a residence in the land registry, at the VAT rate to which the residence is subject; If it is registered as a workplace, VAT must be calculated at the rate that the workplace is subject to.
In our opinion, real estate sales should be based on land registry records and the VAT rate should be determined according to the land registry records, not the use of the buyers or the purpose of purchase. There is no other remedy or way other than taking the title deed records as a basis for the sale of real estate.