In Turkey's European Union relations and acquis process that started in 1963, IPA has a great place. In this context, IPA (Instrument for Pre-Accession) is a financial tool created for the benefit of candidates and potential candidate countries in the EU membership process.
Within the framework of the financial cooperation between Turkey and the European Union (EU), the “Pre-Accession Assistance Between the Republic of Turkey and the European Commission” signed between Turkey and the European Commission on 17/10/2022 for the EU's financial assistance for 2021-2027 budget period. Financial Framework Partnership Agreement on Special Arrangements for the Implementation of Union Financial Assistance to the Republic of Turkey within the Framework of the Intermediary (IPA III) (IPA III Financial Framework Partnership Agreement) was approved by Law No. 7424 of 1/12/2022 and 12/ It entered into force on 13/12/2022 with the annexe of the President's Decision dated 12/2022 and numbered 6537.
General communiqué on tax provisions in terms of IPA III aids has also been issued by the Revenue Administration. In this article, we examined the "General Communiqué on the Association Agreement in the Financial Framework of Turkey - European Union Instrument for Pre-Accession Assistance (IPA III)" published in the Official Gazette on 24/04/2023.
IPA III
In the IPA III period, unlike the previous periods, it does not consist of direct assistance to EU candidate countries. Instead, assistance will be provided on a project basis within the scope of thematic windows. For the IPA I period, a total of 4.7 billion € funds were created for Turkey in 2007-2013, and a total of 3.4 billion € funds were created for the IPA II period in 2014-2020. In terms of funds to be given in 2021-2027, a total of 14.2 Billion € pre-accession assistance was provided for 7 countries in the IPA III Period.
There are 5 different thematic windows within the framework of the IPA III term. These windows are; (i) the rule of law, fundamental rights and democracy, (ii) good governance, alignment with the EU acquis, good neighbourly relations and strategic communication, (iii) green agenda and sustainable connectivity, (iv) competitiveness and inclusive growth, and (v) regional and identified as cross-border cooperation.
The projects that will receive support in the IPA III period are based on the relevance and maturity criteria of the European Commission. Relevance means that the project proposed by the beneficiary institution;
Having an issue related to our EU harmonization process
To complement the deficiencies that the institution needs to overcome within the scope of the EU harmonization process
It means that it is oriented towards the transfer of good practices and examples from EU member states.
Project proposals that pass the relevance stage are subject to a maturity assessment. In the maturity assessment, priority is given to the projects proposed by the beneficiary institution, which can be tendered as quickly as possible and whose implementation can start as soon as possible.
Communiqué Scope
The Communiqué includes provisions on tax exemptions as well as various definitions.
The definition of Union Contractor is included in the definitions and is as follows:
"Natural and legal persons executing an Association Agreement. The term "Association Contractor" specifically includes service/goods/work contractors, grant beneficiaries (including twinning contractors, and sub-grant beneficiaries), and partners of a consortium or joint venture. or co-beneficiaries or affiliates in grants, sub-grants, contractors, Resident Twinning Advisors (RTA) under twinning contracts and international organizations including specialist or development agencies, as well as contractors under the Technical Assistance and Information Exchange Mechanism (TAIEX)."
The general rule regarding tax exemptions within the scope of the Communiqué is as follows:
"Taxes, duties and charges with equivalent effect are not applicable under IPA III programs or any other Union instrument unless otherwise provided in a sectoral or financing agreement. This exemption rule for taxes, customs duties or other fiscal charges is also It also applies to other financings under co-financing or other Union instruments provided by the III beneficiary or other co-financing institutions, as well as by recipients of IPA III financial assistance received by natural or legal persons."
In this context, it has been stated that taxes, customs duties and burdens and/or taxes with the equivalent effect that may arise during the implementation of the agreements financed by the EU or with the joint contribution of the EU and implemented in Turkey will not be financed from financial aid. Exceptions to taxes and other financial charges are as follows:
Value Added Tax (VAT)
Special Consumption Tax (SCT)
Economic assets related to depreciation (ATIK)
Income and Corporate Tax
Inheritance and Gift Tax
Stamp Duty and Fees
Special Communication Tax (SCT)
Motor Vehicle Tax (MTV)
Taxes on Import Transactions
Although IPA II is stated to be completed in 2020, the projects in this process are mostly long-term projects due to the purpose of pre-accession assistance. However, as stated in the Communiqué, its implementation will continue until the completion of IPA II.
Finally, under the title of "Liability" within the scope of the communique, the responsibilities of both the contracting parties and the union contractors were mentioned.
Conclusion
IPA III is an important investment tool for both Turkey and other candidate countries, and it is also of great importance for entrepreneurs. At the same time, it is of great importance to draw the tax exemption for each stakeholder, the implementation of previous exemptions and the framework of tax liability for the stakeholders.
Our article has been published by the Revenue Administration Turkey - General Communiqué on the Association Agreement in the Financial Framework of the European Union Instrument for Pre-Accession Assistance (IPA III) and Turkey - European Union IPA III Information Page has been prepared by utilizing.
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