VALUE-ADDED TAX DEDUCTION FOR PASSENGER CARS IN TURKEY AND THE EUROPEAN UNION’S APPROACH

VAT Law has imposed certain restrictions on VAT deduction. One of such restrictions pertain to VAT deduction concerning passenger cars. As per the said restriction, VAT expressed in purchase documents of passenger cars owned by enterprises, save for passenger cars used by enterprises that fully or partially operate in renting and various other utilisation of passenger cars, cannot be deducted from VAT calculated on the taxpayer’s operations subject to taxation. This restriction stipulated by the VAT Law constitutes a breach of the VAT rationale, which is indeed based on a deduction mechanism. On the other hand, in the European Union, entire VAT amounts for goods and services purchased by taxpayers in the context of their business operations can be subject to deduction. According to the EU approach, the taxpayer’s use of the passenger car in business operations and the lack of any motive for personal use in acquisition of such passenger cars are considered to be pretexts sufficient to allow VAT deduction