The VAT return month: your side

Kadir Usta the mechanic's forgotten invoice

On the evening of 30 September Kadir Usta finished the gearbox of a minibus. The customer transferred 24,000 lira. Kadir Usta was tired: "I'll issue the invoice tomorrow." Tomorrow came and went. On 6 October his mali müşavir (accountant) called: "I'm preparing the September VAT. 24,000 lira came into your bank account; where is its invoice?"

Kadir Usta was lucky; the seven days were not up yet. In this lesson we see why, even though the mali müşavir files the VAT return, the real work of the month is on your side.

We explained what VAT is, and output and deductible VAT, in the article What is VAT? (in Turkish). Here we turn that knowledge into the work within the month.

First a check: under simplified taxation you do not collect VAT on sales and you do not file a VAT return. The VAT part of this lesson is for VAT taxpayers. The habit of issuing and collecting invoices on time, however, applies to everyone.

The VAT month is like a laundry basket

At home the laundry basket fills up all month. A shirt that doesn't go into the basket doesn't go into the machine either. Every invoice you issue and receive during the month goes into that basket. At the end of the month the mali müşavir runs the machine: the VAT you paid on purchases is deducted from the VAT you collected on sales. An invoice that doesn't go into the basket doesn't go into the calculation either.

During the month: three boxes

1. Invoices you issued. e-Invoices and e-Archive invoices stay in the system, and your mali müşavir sees most of them there. If you have paper invoices or cash register end-of-day reports, collect them separately.
2. Invoices you received. Materials, rent, electricity, phone. For the VAT you paid on purchases to be deductible, the invoice must be issued in the business's name and must have reached your mali müşavir. Not every purchase's VAT can be deducted, and for a late invoice the right to deduct is limited by time; the details are in the article What is VAT? (in Turkish). Ask your mali müşavir about any purchase you are unsure of.
3. Money that came into the bank but has no invoice. Like Kadir Usta's 24,000 lira. Look at your bank transactions once a week; catch any collection without an invoice that same week.

The full list of which documents go to the mali müşavir is in the lesson What to send your mali müşavir every month.

The invoice not issued: the seven-day rule

Under Tax Procedure Law art. 231/5, an invoice is issued within seven days at the latest from the day the goods were delivered or the service was performed. An invoice not issued within this period is considered never to have been issued, and is the subject of a separate penalty.

Watch out at the end of the month: even if you issue the invoice for work you finished on 30 September on 3 October, the VAT belongs, as a rule, to the month you did the work, that is, September (VAT Law art. 10). Tell your mali müşavir about work finished in the last days of the month together with the September documents. The easiest thing is to leave no work without an invoice on the last working day of the month. You saw how to issue an invoice in Issue your first invoice, and how to correct one issued by mistake in the lesson Invoice issued by mistake.

End of the month: the package that goes to the mali müşavir

In the first days of the month, send your mali müşavir these: the invoices you issued, including paper ones, the invoices you received, bank and card sales (POS) statements, and the reason for any returns and discounts. Add a short note: "September: 40 sales invoices, 25 purchase invoices, 2 returns. The invoice for the gearbox job on 30 September was issued on 6 October." This note shortens the time the mali müşavir would spend looking for something missing.

VAT carried forward, briefly

In some months the VAT you paid on purchases is more than you collected on sales; for example, the month you bought a big piece of equipment. That month you pay no VAT. The difference is carried forward to the next month and deducted from the VAT of the coming months; as a rule it is not paid back in cash. If you see a figure called "VAT carried forward to the next period" on the return, this is an amount to be deducted later. Ask your mali müşavir for this figure every month and write it down; it helps when you make next month's estimate.

Seeing the VAT to pay in advance

You don't have to find out the VAT on the 28th of the month. Do a rough calculation in the middle of the month:

Half the month has gone and a 4,000 lira difference has built up. If the month goes on like this, it will come to around 8,000 lira at the end. This estimate is not exact, because the mali müşavir may not deduct the VAT on some purchases. But it means you won't be surprised on the 28th.

You built the habit of putting money aside in the lesson Setting money aside for tax. What you do now is compare the money in your savings box with this estimate in the middle of the month. If the box is short, make up the difference before the month ends. To calculate the VAT on an invoice quickly, the VAT calculator (in Turkish) is useful.

Kadir Usta issued the invoice for the gearbox job on 6 October, before the seventh day was up; the VAT went into the September return. The next month he pinned a sheet of paper to the board in the workshop: "Before the month ends: is there any job without an invoice?"