Exclusion of Solar Panels from Investment Incentive Certificates’ Scope

Recent Changes in the investment incentive regime with regards to solar panels

The Communiqué regarding the Implementation of the Council of Ministers’ decision (“Communiqué No:2012/1”) setting forth the principles and procedures regarding investment incentive certificates was amended with the Amendment Communiqué published in the Official Gazette dated 25 June 2015 and numbered 29753 (“Amendment Communiqué”). The Amendment Communiqué made significant changes in the investment incentive regime with regards to solar panels. Investment incentive regime in Turkey provides general, regional, large scale or strategic investment support schemes for the investments provided that they do not fall within the investment categories which are not supported by the incentive regime. The Communiqué No: 2012/1 regulates specifically which investment catogories and items cannot benefit from the supports granted under investment incentive regime. Under the general incentive scheme, investors are granted with customs duty exemption and VAT exemption in their investments provided that they obtain an investment incentive certificate. Under the Amendment Communiqué “imported solar panels” are listed among the items that cannot benefit from the investment incentive regime. As per Article 8/2(a), “intermediate goods” cannot benefit from the supports granted by the investment incentive regime neither. We understand that solar cells and other components constituting solar panels would qualify as “intermediate goods” of the investments, therefore, cannot be included in the investment incentive certificate to be obtained for a solar power plant. Accordingly, we believe that, it is not possible for a solar power plant investment to benefit from investment incentives when importing a solar panel altogether or solar cells/other components constituting the solar panels.

Under the customs tariffs, solar cells and panels are exempt from customs duty regardless of whether the relevant power plant project has an incentive certificate or not. On the other hand, if there is no incentive certificate, the Value Added Tax (“VAT”) shall apply both to solar cells and solar panels. As no incentive based on investment incentive certificates shall apply to solar cells or panels after the entry into force of Amendment Communiqué, we understand that the VAT that the solar cells/panels will be subject to shall be determined as per the Import Survey Communiqué No 2015/9 (“Import SurveyCommuniqué”) published in the Official Gazette on 19 November 2015, which sets forth a reference unit customs’ value for solar cells/panels as 35 USD/net Kg.

Accordingly, if the unit customs’ value of a solar cell/panel is equal to or above 35 USD/kg, the VAT shall be based on the unit price declared as higher than 35 USF/kg. On the other hand, in order to import solar cells/panels, the unit customs’ values of which are lower than 35 USD/kg, a survey certificate (“Survey Certificate”) is required to be obtained from the Ministry of Economy, General Directorate of Import. If a solar cell/panel, the unit customs’ value of which is below 35 USD/kg obtains a Survey Certificate, its VAT shall be calculated on its unit customs’ value. On the other hand, if a solar cell/panel, the unit customs’ value of which, is declared to be below 35 USD/kg cannot obtain the Survey Certificate, then the VAT shall be calculated based on 35 USD/kg as if its unit customs’ value is 35 USD/kg. Accordingly, in the event that the solar cell/panel’s unit customs’ value is less than 35 USD/kg, it will be important to obtain the Survey Certificate in order not to be subject to a higher VAT.

However, please note that solar panels listed as part of the investment items in the investment incentive certificates that are already obtained prior to the entry into force of the Amendment Communiqué shall not be affected by the Amendment Communiqué and continue to benefit from the incentives provided under the investment incentive certificates.

We would like to underline that this is our general understanding based upon our high level analysis, and as this is a very specific issue regarding the customs regulation, it would be advisable to refer to a customs consultant in order to obtain more detailed information on the results of the Amendment Communiqué.

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