322 NEWSLETTER 2021 The Law Amending Certain Laws to Improve the Investment Environment Law No. 6728 (“Law No.6728”)5 Law No. 6728 states that the VAT deduction prohibition regarding expenses will not be applied to disguised profit distributed through transfer pricing, VAT paid on imports related to the differences against the corporations, and VAT paid by responsible in accordance with Article 41(1)(5) of Income Tax Law No.193. Law No. 7104 Amending Value Added Tax Law and Some Laws and Decree Law No. 178 (“Law No. 7104”)6 VAT deduction pertaining to VAT paid in import or paid as a tax responsible relating to disguised income distributed through transfer pricing and also VAT deduction declared and paid on time by taxpayers who deliver goods or perform services in domestic transactions has been accepted. As a result, the deduction of VAT, which is an unaccepted expense and calculated over the disguised income, has been accepted. Although these amendments have resolved the VAT deduction problem, the effective date of the last revision, 06.04.2018, is very crucial. In this context, the aforementioned confusion continues in terms of tax inspections before 06.08.2018 and disputes at the litigation stage. Views on the Deduction of VAT on Disguised Earnings Through the latest regulations, it has been clarified that VAT corresponding to the disguised income distributed through transfer pricing can be deducted. However, it is not clear that the VAT corresponding to the distributed earnings can be deducted in the period before the legal changes The prevailing opinion in the doctrine and practice is that the deduction of VAT corresponding to the said income should be accepted 5 OG, No.29796, 09.08.2016. 6 OG, No.30383, 06.04.2018.
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