Page 3 - Newsletter (Increased Housing Price Thresholds for VAT Exemptions)

DDTC Newsletter Vol.01 | No.08 I June 2019 Page 3 of 7

Increased Housing Price Thresholds for VAT Exemptions

housing divided into two categories, namely workers’ • the import duty is calculated based on customs value
homes and buildings intended for victims of natural according to the selling price and the classification
disasters financed by the government, private sector, of goods produced in the free trade zone (when the
and/or non-governmental organizations. goods produced are exported from the free trade
zone to another place in the customs area) and based
Workers’ homes are single-story or multi-story buildings
on applicable charges (upon the registration of the
residences that are built and financed by a company,
customs and excises declaration for the export of
intended for their own employees and are non-
goods from the free trade zone to another place in
commercial.
the customs area).
Workers’ homes entitled to VAT exemptions must meet • the excise is calculated based on the legislative
certain requirements. The building area of a single-story provisions in the excise sector.
building must not exceed 36 m2 and the land area is not • VAT is calculated based on the applicable rate
less than 60 m2. multiplied by the selling price or arm’s length price
in accordance with taxation laws and regulations.
As for multi-story buildings, the binding provisions are
• Article 22 income tax is calculated based on the
regulated separately in the finance minister regulation
applicable rate of customs value plus import duty
regarding simple flats. Both single-story buildings and
when the goods produced in the free trade zone are
multi-story buildings are not to be disposed of in 4 years
exported from the free trade zone to another place in
since the acquisition.
the customs area.
On a side note, the regulation that came into force 15
However, the exports of goods produced in the free
days since its promulgation revokes a number of the
trade zone may be exempted from the import duty,
previous regulations, namely MoF Regulation No. 113/
excise, VAT, and article 22 income tax provided that the
PMK.03/2014, MoF Regulation No. 125/PMK.011/2012,
goods produced in the free trade zone are exported by
MoF Regulation No. 31/PMK.03/2011, MoF Regulation
entrepreneurs with clear, measurable, and consistent
No. 80/PMK.03/2008, and MoF Regulation No. 36/
conversion of the use of goods or raw materials from
PMK.03/2007.
outside the customs area. In addition, exemptions apply
if the sale and purchase transaction has occurred during
Taxation Aspects of Free Trade Zone the imports into the free trade zone.
Products Clarified The calculation of state levies entitled to exemptions is to
meet the following requirements:
The government provides certainty regarding the
taxation aspects of goods produced in the free trade zone. • the import duty is calculated based on the
This is stated in MoF Regulation No. 84/PMK.04/2019 classification and customs value in effect when
concerning the Second Amendment to MoF Regulation the raw materials are imported into the free trade
No.47/PMK.04/2012 concerning Procedures for the zone. The calculation of import duty is also based
Imports and Exports of Goods to and from the Free Trade on the applicable charges upon the registration of
Zone and Free Port and Exemption of Excise. the customs and excises declaration for the export
of goods produced in the free trade zone to another
The issuance of MoF Regulation 84/2019 is aimed at
place in the customs area
encouraging national trade and industry activities,
• the excise is calculated based on the legislation in the
strengthening the competitiveness of companies, and
excise sector.
increasing investment. There exist a number of additional
• VAT is calculated based on the applicable rate
provisions in the regulation, one of which is Article 59
multiplied by the selling price or arm’s length price
paragraph (3a) concerning the customs value for the
in accordance with taxation laws and regulations.
calculation of import duty and article 22 income tax in
• Article 22 Income Tax is calculated based on the
the context of the exports of goods produced in the free
applicable rate and customs value plus the import
trade zone.
duty upon the import of raw materials into the free
The customs value of the goods from the free trade zone trade zone.
to another place in the customs area is in accordance with
This provision has come into effect as of its promulgation
the selling price upon the export of goods produced in
date, 29 May 2019.
the free trade zone. There exist several provisions related
to the calculation of state levies on the export of goods
produced in the free trade zone, namely: