NEWS Accounting        30/08/2020

Turkey increases Special Consumption Tax on cars

Turkey has announced a surprise increase in the special consumption tax (ÖTV) on cars and light commercial vehicles.  Only the lower engine cylinder capacity cars had their special consumption tax rates decreased marginally. The government gave the reason for this tax change as the need to discourage imports and boost sales of domestic cars. Since the introduction of cheap loan packages by state banks as from the beginning of June this year, there has been a dramatic increase in domestic sales. However, this has also resulted in a large increase in imports, which at a time of higher foreign trade deficits and increasing pressure on the Turkish lira, the government feels that it has to take action to deter further imports at this level. These new tax rates have not been welcomed by the automotive sector, especially importers, who are now faced with a depressed market due to the ongoing economic recession and the coronavirus pandemic. The only consolation has been the surge in sales in June, July and August as a result of the cheap bank loan packages and the pent-up demand. The state banks offering these generous loan facilities have since increased their loan interest rates in August as a result of monetary supply tightening by the government. A significant fall in car sales can now be expected in September. With regard the larger models in particular, Turkey now holds the world record for automobile tax with a rate (including consumption and KDV taxes) surpassing 270%.

 

The new special consumption tax rates are as follows:

**  Vehicles with cylinder capacity up to 1600 cm3 and with value up to TL 85,000 will be taxed at 45% instead of previous 50%, resulting in a 3.33% fall in price after KDV

**  Vehicles with cylinder capacity up to 1600 cm3 and with value between TL 85,000 and TL 130,000 will be taxed at 50% instead of previous 60%, resulting in a 6.25% fall in price after KDV

**  Vehicles with cylinder capacity up to 1600 cm3 and with value over TL 130,000 will be taxed at 80% instead of previous 60%, resulting in a 12.50% increase in price after KDV

**  Vehicles with cylinder capacity between 1600 cm3 and 2000 cm3 and with value under TL 170,000 will be taxed at 130% instead of previous 100%, resulting in a 15% increase in price after KDV

**  Vehicles with cylinder capacity between 1600 cm3 and 2000 cm3 and with value over TL 170,000 will be taxed at 150% instead of previous 110%, resulting in a 19.05% increase in price after KDV

**  Vehicles with cylinder capacity of over 2000 cm3 and with no value limit will be taxed at 220% instead of previous 160%, resulting in a 23.08% increase in price after KDV

 



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