Payment method refers to the conditions and ways in which the payment for goods is made to the seller. Regulations regarding payment methods are included in the Exchange Regulations. The payment methods in foreign trade are outlined in the General Communiqué on Exports and Imports by the Undersecretariat of Treasury and include: Letter of Credit, Deferred Letter of Credit, Documents Against Payment, Cash Against Goods, Acceptance Credit Letter of Credit, Acceptance Credit Documents Against Payment, Acceptance Credit Cash Against Goods, and Cash in Advance Payment.
Barter and countertrade transactions, being essentially forms of trade, are not covered under the Exchange Regulations. Therefore, they are not listed as payment methods in the Export and Import General Communiqué. However, in commercial practice, “countertrade” and “barter” are used as forms of trade and can be declared as payment methods in the import and export declarations registered with the customs authority.
Barter is defined as the partial or complete offsetting of the export value of goods and/or services with the import value of goods and/or services between the same individuals or legal entities, without any cash transaction.
Although “barter” is defined as the offsetting of goods or services between the same individuals or legal entities, customs authorities focus solely on goods trade, disregarding the import or export of services. The offsetting of the cost of imported goods with payment for services provided by the exporter is not considered barter by the customs authorities. For a transaction to be considered barter by the customs authority, several conditions must be met: goods must be imported and exported between the same individuals or legal entities, a contract must be in place for the transaction, and both the export and import declarations must declare the payment method as “special barter.”
There are tax advantages in terms of Resource Utilization Support Fund (KKDF) for imports made under barter transactions. Article 3(d) of the Council of Ministers’ Decision No. 88/12944, dated May 12, 1988, stipulates that imports made under acceptance credit, deferred letter of credit, and cash against goods are subject to KKDF deductions. Article 4(12) of the same decision lists “barter” among the transactions exempt from KKDF deductions.
After the regulatory changes that eliminated the follow-up on foreign exchange transactions and the abolition of the legislation that governed the follow-up procedures for barter-related import and export transactions, a legal gap arose regarding which public institution would oversee the follow-up of barter transactions. This led to uncertainty about whether the KKDF exemption for barter transactions would apply until the publication of General Communiqué No. 2013/21 on June 28, 2013.
To address the necessity of using barter transactions, especially in trade with countries where the banking system is not used or cannot be used, and to apply the KKDF exemption in these specific cases, the General Communiqué No. 2013/21 was issued by the Directorate General of Customs on June 28, 2013.
The Communiqué specifies that KKDF deductions are not applied to barter transactions, provided that these transactions are completed within 3 months through the same customs authority, and that all import transactions under this scope are secured by a guarantee for KKDF. A subsequent amendment made through General Communiqué No. 45, dated October 3, 2013, extended the completion period for barter transactions from 3 months to 1 year and allowed the import and export transactions to be conducted through different customs authorities, provided that a determination report is issued by Authorized Customs Brokers.
The Communiqué also stated that the countries where the banking system is not used or cannot be used would be announced by the Directorate General of Customs. Following this, it was announced that Iran would be considered under this Communiqué. On January 2, 2017, General Communiqué No. 2017/1 was issued by the Directorate General of Customs, addressing the application of KKDF exemptions for barter transactions.
What Does General Communiqué No. 2017/1 Introduce Regarding Barter Transactions?
- Countries Eligible Under General Communiqué No. 2017/1
Previously, under General Communiqué No. 2013/21, the KKDF exemption was only applied to barter transactions with Iran, provided that the conditions outlined in the Communiqué were met. However, with General Communiqué No. 2017/1, the KKDF exemption began to be applied to barter transactions regardless of the country.
The Communiqué establishes procedures and principles for the application of KKDF exemptions in barter transactions, without differentiating between countries.
- Application Conditions
One of the conditions stated in both General Communiqué No. 2013/21 and General Communiqué No. 2017/1 is that the same individuals or legal entities must be involved in both the import and export transactions under the barter arrangement. In this regard, the import and export transactions under barter must be conducted between the same companies in Turkey and the foreign country.
General Communiqué No. 2017/1 also introduces the requirement for the “Barter Transaction Tracking Application Form” to be filled out electronically and submitted to the first customs authority where the import or export transaction will be conducted. Previously, under General Communiqué No. 2013/21, barter follow-up transactions were conducted manually by customs authorities, using different forms. Now, these forms have been consolidated into a single electronic “Barter Transaction Tracking Application Form.”
- Guarantee Procedures
The requirement to provide a guarantee for the KKDF amount in import transactions made under barter arrangements, as stipulated in Article 202 of Customs Law No. 4458, remains unchanged under General Communiqué No. 2017/1. Regardless of whether the export transaction occurs before or after the import, the KKDF amount must be secured in import transactions under barter arrangements.
The customs authority or an Authorized Customs Broker must verify that the barter transactions were completed in accordance with the details specified in the Barter Transaction Tracking Form.
- Time Limits
The time limits for completing barter transactions, as outlined in General Communiqué No. 2013/21, have been retained in General Communiqué No. 2017/1. If the export is conducted first, the barter transactions must be completed within one year from the date of registration of the first export declaration. If the import is conducted first, the one-year time limit starts from the date of registration of the first import declaration.
- Transitional Provisions
For barter transactions registered with a payment method of “Special Barter” under General Communiqué No. 2013/21, but not yet completed as of January 2, 2017, the provisions of General Communiqué No. 2013/21 will continue to apply.
Even though Decree No. 2015/7511 set the KKDF rate at 0% for a wide range of raw materials and intermediate goods, General Communiqué No. 2017/1 allows the continued use of “barter” as a payment method, especially in the trade of goods subject to KKDF between related companies. It is essential to comply with the conditions and time limits specified in the Communiqué to avoid potential penalties.