When one thinks of export, most people imagine products. You might envision container ships and planes, but the fastest-growing export is actually services. More and more companies are profiting from service exports, and some trends almost guarantee that the growth in service exports will accelerate. Moreover, you might already be exporting services without even realizing it.

How is Service Export Done?

We can simply explain service exports as any service provided by a person in one country to individuals or companies in another country. There are many service sectors, such as tourism, software, healthcare, consulting, and hospitality, from which foreign currency is earned through services that we cannot physically see. Another example of a service exporter includes those who export software. These are considered exports because they are provided by a service provider in one country to an individual or company in another country.

Is It Mandatory to Bring Service Export Proceeds to the Country?

There is no obligation to bring the proceeds of service exports back to the country.
It is said that the Ministry of Treasury and Finance and the Central Bank of the Republic of Turkey will begin the establishment of a system related to bringing the proceeds of service exports to the country in the same manner as goods exports. In a letter sent to the General Secretariat of the Service Exporters Association by the General Directorate of International Trade in Services of the Ministry of Commerce on May 17, 2022, it is indicated that the aim of the system to be initiated is to make it mandatory to bring service export proceeds back to the country within a certain time frame, and that there is also a possibility of introducing an obligation to sell export proceeds to banks and the Central Bank of the Republic of Turkey within this system.

What Are the Supports for Service Exports?

As a support for service exports, there is a special passport application in certain sectors based on service exports. Under this application, employees or managers of firms providing service exports in specific sectors are granted the use of a special passport, also known as the green passport.
With the development of technology, service exports have become a sector that can be done worldwide and provides various benefits to the service provider, with various support funds making the costs economical. Especially, the types of services provided through computers will create employment opportunities for many people over the years.
Special supports are available for service exports related to healthcare tourism, education, film, information technology, and consulting sectors. To promote certain sectors, government aids are also available for service exports. Supports for foreign currency earning sectors include product-service registration support, consulting support, translation support, overseas brand registration and protection support, advertising, promotion and marketing support, patient travel support, domestic promotion-training support, and support for market entry of computer game-mobile applications.

What Are the Conditions for Service Exports?

According to the Value Added Tax Law, a service export can be delivered under certain conditions. These conditions are;
- The services provided must be for a customer sourced from abroad.
- In the invoicing process of the services provided, it is necessary to issue an invoice on behalf of the customer located abroad.
- The services provided must be of a nature that can be utilized abroad.
In service exports, the Ministry does not consider the situation as a service export, as the software service provided abroad will be utilized worldwide and in Turkey; however, the latest Value Added Tax General Communiqué has specified exemptions from Value Added Tax in service exports. In this regard, many examples have been included with the new communiqué, and problems encountered in utilization options have been resolved.

What Sectors are Involved in Service Exports?

Some sectors engaged in service exports include; travel and tourism sector, environmental consulting services, transportation services, banking, finance and insurance services, telecommunications and information services, education and teaching services, commercial, professional and technical services, entertainment sector, architecture, construction, and engineering services can be mentioned as examples.

How is a Service Export Invoice Issued?

For issuing a service export invoice, it is emphasized that the seller, buyer, and information about the service must be complete. A service export sector firm that uses e-invoicing must make arrangements as an e-archive invoice. If the buyer is in a free zone and is an e-invoice user, it is required to issue an e-invoice to this buyer because there will be no e-archive invoicing. Important points here are that it should not be created as an e-invoice; it should be generated as a basic or commercial invoice, and the invoice type should be selected as "exemption".

Is There a Customs Declaration for Service Exports?

According to the Export Regulation, subcontracted services performed for free zones are supported by customs declarations or documents that will replace customs declarations and sales invoices issued on behalf of the buyer, based on the shipping of materials subject to subcontracted services from free zones to the domestic market and vice versa.

Is Value Added Tax Applied on Service Export Invoices?

According to the article stated by the Tax Administration of Turkey, Istanbul Tax Office, Taxpayer Services VAT Group Directorate; in order for a service to be exempt from Value Added Tax, it is required that, in accordance with the same law; the service be provided for a customer abroad and that the service is utilized outside of Turkey. The service export after the sale of services from Turkey abroad with a special invoice will have the Value Added Tax calculated for the sale. Micro export and free zone transactions will have exemption provided for export transactions up to the equivalent of 5,000 dollars or Turkish lira.
Besides, regarding the services exported outside after the activity is conducted in Turkey, there are regulations regarding the application of Value Added Tax on invoices.

What is the Value Added Tax for Service Exports?

Service exports to abroad are exempt from Value Added Tax and are not subject to tax. The exemption in service exports is contingent on certain conditions. The most important of these conditions is that the costs incurred in Turkey for services provided for a buyer abroad are subject to Value Added Tax. This Value Added Tax payment situation, which can create a bilateral impact for firms operating in the tourism sector, can be explained through an example.
A company in Turkey provides services to a tourist population sent by a travel agency abroad for accommodation and food and expects to receive 50,000 TL in return. Of this amount, the 15,000 TL portion incurred for providing the mentioned services allows taking advantage of the Value Added Tax exemption. The 15,000 TL expenditure made in Turkey is subject to Value Added Tax.

Is Service Export Invoices Issued in TL?

In service export practices, the provision that the entire foreign currency earnings from abroad can be saved is stated in the VAT law. There is no obligation to bring these earnings back to Turkey and convert them into Turkish lira; however, the requirement for taxpayers to apply for VAT refunds related to the previous practices still exists, along with the new communiqué demands that the service fee be brought to the country in foreign currency and be documented as foreign currency purchases in invoices.

What Are the Exceptions and Conditions That Service Exports Can Benefit From?

Service exports can be defined as the provision of services from one country to another. The exceptions and conditions that service exports can benefit from can be as follows:
• Free Trade Agreements (FTA): Free trade agreements signed between two countries aim to liberalize service exports primarily and protect against restrictions.
• GATS (General Agreement on Trade in Services): GATS aims to liberalize service exports and protect against barriers.
• Labor Services: The export of labor services allows for employment by international enterprises.
• Foreign Investment: Foreign investors can export services in countries where they can provide services.
• Service Provision Capability: Countries that have the capacity to provide services have the opportunity to engage in service exports.

Of course, in addition to all these, the exceptions and conditions that service exports can benefit from can vary from country to country. Therefore, businesses wishing to export services or considering it must act in compliance with the legislation of their respective countries.