Destruction Rate Application Form

The Destruction Rate Application Form is EK 1 of the Tax Procedure Law General Communiqué (Series No: 496) under Law No. 213, published in the Official Gazette dated 25 May 2018, No. 30431. The form is used in an application to the Revenue Administration to benefit from Article 278/A of the Tax Procedure Law and to have a destruction rate determined (Article 12). An application may also be made without using the form, but it must contain at least the information in the form.

What is entered in the form?

The sample form contains these fields: the applicant taxpayer’s name or title, tax office and tax identification number, address and telephone number; the taxpayer’s main field of activity and sector; the type of application (new application, or renewal/revision); summary information on the taxpayer’s economic and legal background; and brief information on the subject of the application. The form is completed with the date and the signature or stamp of the taxpayer or its authorised representative.

Under Article 21 of the Communiqué the Administration is authorised to change the application form and the annual tracking report, so the version currently published by the Revenue Administration should be checked.

Who may apply?

Only income and corporate taxpayers whose profits are determined on the balance-sheet basis may benefit from Article 278/A. In the balance sheets for the last accounting period before the application date, the arithmetic average of net sales and asset size must exceed TL 10,000,000, or equity must exceed TL 5,000,000 (Article 11). These are the amounts in the 2018 text in which the Communiqué was published.

The Communiqué also lists the product groups within scope: all meat and meat products, milk and dairy products, eggs, fresh fruit and vegetables, bakery products, and medicines used for human and animal health that are licensed or permitted to be imported by the relevant ministry, and similar goods. The goods must have been sold domestically and returned because of a very short shelf life, spoilage or expiry, and the destruction operations must be continuous (Article 10).

Which documents are attached to the form?

The following are submitted with the application form or petition (Article 12(2)):

• The product groups for which the benefit is sought and detailed product lists.
• Domestic sales and sales returns for the last five accounting periods, by product and quantity.
• A table showing the quantity of goods destroyed in the last five accounting periods, by type and period.
• Documents relating to the destruction operations.
• For taxpayers with their own destruction or waste disposal facilities that are authorised or licensed under the relevant legislation, a notarised copy of the authorisation or licence.

The Administration may ask for missing or additional information or documents; the application is not considered until they are provided (Article 12(3)–(4)).

How is the application assessed and the destruction rate set?

The Administration first carries out a preliminary assessment. If the view is favourable, the file is sent to the Tax Inspection Board for research and an opinion and recommendation report; the report includes its view of the destruction rate that may be appropriate for each product (Article 13). A three-member commission chaired by a deputy president or department head designated by the President of the Revenue Administration then fixes the destruction rate for each product and offers it to the taxpayer. The rate applies from the taxpayer’s written acceptance; if it is not accepted, the general valuation rules based on the pricing commission apply to those goods (Article 14).

The rate remains valid until the end of the fifth accounting period following the one in which acceptance was declared. For a taxpayer applying in its first year of business, the period runs until the end of the third accounting period after the acceptance date (Article 14(2)).

What does it mean for destruction and recycling?

Once the destruction rate is accepted, goods destroyed within that rate are valued at a fair market value of zero (Article 15). This allows the loss in value of the destroyed goods to be taken into account as an expense in determining the period’s profit. Documentation requirements, such as the destruction report and the summary of return invoices, differ depending on whether destruction takes place at the taxpayer’s own facility or at a licensed waste treatment facility, so it is important to define the destruction route clearly at the application stage.

What should be checked in practice?

A renewal request must be made at least nine months before the current destruction rate expires; an application for a new product group is treated as a revision (Article 17). Application information or documents that turn out to be incomplete, wrong or misleading are a ground for cancelling the rate (Article 18(1)(b)). Where the rate is exceeded, the general valuation rules in the first part of the Communiqué apply to the excess (Article 20).