Turkey has a long, complex, and changing history with their legal requirements for the electronic submission of VAT-related information. In March 2010, the General Communiqué 397 of the Turkish Tax Procedural Law was officially published and has regulated the usage of e-invoices (Turkish: E-Fatura) in Turkey. This doesn´t mean e-invoicing became mandatory at that time, but electronic invoices were assigned the same legal value as paper invoices. In 2011, E-Invoicing became mandatory for certain industries in Turkey. In 2012, the E-Ledger (Turkish: E-Defter) legal requirement was introduced and around that time, E-Invoicing was made mandatory for companies with a turnover of more than 25 million Turkish Lira (this equals to about EUR 3,25 million). In the following years, more and more companies were required to comply with the Turkish legal requirements for E-Invoicing and E-Ledger. With their latest changes, the Turkish GİB (Gelir İdaresi Başkanlığı = Turkish Revenue Administration) have introduced a legal requirement for E-Delivery (Turkish: E-İrsaliye) and have expanded their rules for mandatory E-Invoicing and E-Ledger to companies with a turnover of more than 5 million Turkish Lira (this equals to about EUR 650.000) with a deadline in 2020.
With all these legal requirements for the mandatory electronic submission of VAT-related information, the Turkish tax authority wants to close the big VAT gap in Turkey. Countries all over the world have been looking for effective ways to close their VAT gap. E-Invoicing has been one of the most successful ways to do this. By introducing other electronic regulations, such as E-Ledger and E-Delivery, the Turkish GİB authorities have found effective instruments to combat tax evasion and to make it more difficult for companies to hold back information from them. In addition, the introduction of a standard data format for the electronic communication between companies helps saving time and costs on the long run. Because of that, quite a few private companies are eager to support and push this digital transformation and strive to find uniform ways of working all around the globe.
Turkey has imposed the following 4 legal requirements for the electronic submission of VAT-related information to their GİB Revenue Administration:
- E-Archive Invoicing
Each of these legal requirements has its own specifications and rules. This makes Turkey one of the most complex countries for SAP compliance projects. In this blog post, you will learn with which Turkish legal requirements you need to comply with and how you can achieve compliance in SAP.
The E-Invoicing and E-Archive Invoicing regulations in Turkey
In Turkey, you need to issue an E-Invoice (Turkish: E-Fatura) in the UBL-TR XML format and transmit this for approval to the Turkish GİB tax system. After approval, the government will transfer your e-invoice to your customer, who can, in certain cases, accept or reject the e-invoice. An e-invoice can only be issued if your customer is able to receive invoices in the UBL-TR XML data format. In practice, this means that this process will only work in case your customer is also required to meet the E-Invoicing regulations.
In case your customer is not able to receive and process e-invoices, you are allowed to provide him with an E-Archive Invoice (Turkish: E-Arşiv) instead of a regular e-invoice. An e-archive invoice is an invoice that is created electronically and can be provided to your customer by e-mail, SMS or as a printed document. This e-archive invoice does not have to be sent for approval to the Turkish tax authority and can be sent directly to your customer.
Since it depends from your customer to customer if they need an e-invoice or an e-archive invoice, your SAP system needs to be adapted to become able to distinguish between customers who also have to comply with the Turkish E-Invoicing regulations and customers who don’t. For this reason, the Turkish Revenue Administration have introduced taxpayer identification numbers (TCKN) and aliases to represent e-invoice users. The “alias” number has to be maintained in your SAP system for sending and receiving e-invoices.
The E-Ledger (E-Book) requirements in Turkey
Another legal obligation in Turkey is called E-Ledger (Turkish: e-Defer). This type of legal requirement exists in several other countries as well and is also known as the E-Book requirement. The Turkish E-Ledger regulation stipulates that a report of the different ledgers, containing the financial information of a company, needs to be issued and submitted in electronic format to the Turkish Revenue Administration.
The E-Delivery (E-WayBill) rules in Turkey
More recently, Turkey has also published their E-Delivery (E-İrsaliye) regulation, which is also known as the E-WayBill. This is a transportation document that needs to be issued electronically before the transport of goods occurs, and needs to be transmitted for approval to the Turkish Revenue Administration. This directive helps your company and the Turkish GİB monitor all goods movement and therefore monitor the supply chain. Just as with e-invoices, the e-delivery transportation document only needs to be transmitted to your business partner only in case your business partner is able to receive and process e-delivery documents. Read more about the Turkish E-Delivery Note in my newest blog article.
Do I need to comply with the E-Invoicing/ E-Archive Invoicing, E-Delivery and/or E-Ledger regulations in Turkey?
I have prepared the following graphic for you to find out with which Turkish legal requirements your company needs to comply with.
If you have any questions about this or need help to find out if your company needs to comply with any of these Turkish legal requirements, please leave a comment in the comments section below or click the following button to request a web-meeting. I am happy to help you.
Technical and process-related challenges for your SAP compliance project in Turkey
All these different legal requirements and their individual complexity bring new challenges for you to achieve compliance. Since for every of these e-regulations, documents need to be issued and submitted electronically, your SAP system needs to be adapted to become able to provide all required data electronically, to structure this data in the required data format and to transmit the data to the Turkish Revenue Administration. A particular technical challenge in such a compliance project is to ensure the creation of the electronic documents in the required XML data format, meeting your and your business partner’s requirements. Although SAP provides a standard mapping that is 100% compliant with the Turkish requirements, in most of our customer projects we have also added customer-specific information to the XML file.
In such an SAP compliance project, also some business process-related challenges need to be considered. It is crucial that your business end-users will be involved in this project, which will potentially increase their workload throughout the project. Furthermore, in the course of the project, all related business processes need to be reviewed. On the one hand, this is the perfect opportunity to optimise some business processes. On the other hand, this requires some deep analysis work and can potentially change the current way of working.
Depending on your situation, the deadline for mandatory E-Invoicing/ E-Archive Invoicing, E-Delivery and E-Ledger is in 2020, more specifically potentially 1st July 2020. We recommend planning enough time to implement this SAP compliance project. In particular larger organisations that are doing business in Turkey will have to comply with all above-mentioned legal requirements. Because of that, larger companies are not only challenged to implement and ensure compliance with these regulations in their SAP system on time, but also to integrate all these regulations with each other. Only this will guarantee 100% compliance, so you avoid paying severe penalties for non-compliance.
How to make your SAP system compliant with the different legal requirements in Turkey
If you are required to comply with any of the above-mentioned Turkish legal requirements and are using SAP ECC or SAP S/4HANA as your backbone for digital transformation and growth, one of the most crucial next steps is to adapt your SAP system to ensure compliance and avoid paying severe penalties. For this, we at PIKON, recommend implementing the following two SAP solutions:
- SAP Document Compliance for E-Invoicing/ E-Archive Invoicing and E-Delivery
- SAP ACR in S/4HANA for E-Ledger
SAP Document Compliance for E-Invoicing/ E-Archive Invoicing and E-Delivery in Turkey
SAP Document Compliance is also known as the SAP eDocument Solution. This is 100% integrated in SAP ECC and SAP S/4HANA and provides a fully automated end-to-end solution for compliance with many country-specific legal requirements worldwide that make it mandatory for you as a company to issue transactional tax data in an electronic format and transmit this to the local tax authorities. As such, the E-Invoicing, E-Archive Invoicing and E-Delivery regulations in Turkey are covered by this solution, but also e.g. SDI E-Invoicing in Italy, SII Reporting on VAT info in Spain, CFDI E-Invoicing in Mexico, RTIR E-Invoicing in Hungary, and many more local requirements are covered. Therefore, this is a strategic SAP solution that ensures compliance on the long run and enables you to implement different country-specific legal requirements that can be managed and monitored from within its centralised, built-in SAP eDocument Cockpit.
In particular for compliance with the E-Invoicing, E-Archive Invoicing and E-Delivery regulations in Turkey, SAP Document Compliance automatically converts the needed document into the required XML format by using so-called SAP eDocuments. In a next step, this XML file will be automatically submitted for approval to the Turkish GİB tax system. This covers the end-to-end process, which means that manual intervention is only needed in case of errors. Furthermore, all feedback (approvals/ rejections) from the Turkish tax authorities is transmitted back into SAP and shown within the central SAP eDocument Cockpit. As a result, you can monitor and follow-up on the entire end-to-end process at a glance within the SAP eDocument Cockpit.
In order to ensure compliance with all those country-specific legal requirements worldwide, SAP has built its SAP Document Compliance solution around one core process flow that can be easily adapted for compliance with the individual country-specific, local specialties and requirements. Data transmission between your SAP system and the local government’s system is covered by SAP CPI (Cloud Platform Integration), but can also be done through e.g. SAP PI (Process Integration), or even through a third-party middleware platform. This setup makes it easier for you as an organisation to manage, monitor, understand and use the different country-specific processes from within this centralised SAP solution. The basic process flow in SAP Document Compliance (thus relevant for E-Invoicing and E-Delivery in Turkey) is illustrated in the following graphic:
E-Ledger in Turkey with SAP ACR
With the Turkish E-Ledger requirement, also known as the E-Book requirement, it is a different story. Compliance with this regulation is achieved in SAP ACR in S/4HANA (SAP Advanced Compliance Reporting). SAP ACR helps you generate compliance reports in the data format that is required for submission to the Turkish GIB Revenue Administration. It is also possible to download the generated E-Ledger reports from SAP ACR and submit them manually to the Turkish GİB portal. The most common example of an E-Ledger report is the general VAT report. However, also other reports, such as the Input VAT declaration, Sales Invoice List, Inventory Ledger and Purchase Sales Declaration (Ba/Bs forms) are supported by SAP ACR.
Just as SAP Document Compliance, SAP ACR is also a strategic solution. It ensures compliance with many country-specific tax reporting requirements all over the world and provides a solution for almost all countries that have a mandatory tax reporting regulation in force. Additional analytics, real-time monitoring and full traceability not only cover the different end-to-end processes, but also ensure compliance on the long run. Just as SAP Document Compliance, SAP Advanced Compliance Reporting is also built around one centralised process flow that can be easily adapted according to the specifications per country-specific legal tax reporting requirement. This SAP ACR process flow is illustrated in the following graphic:
The standard SAP ACR process flow points out that the only action you need to take in your SAP S/4HANA system is executing and downloading the required report. SAP ACR assists in this process by showing which reports are almost due. After downloading the report in the required data format, the file can be manually uploaded in the government portal.
Why you need 2 different SAP solutions for compliance with the legal requirements in Turkey
The reason why compliance with the different legal requirements in Turkey is met with two different SAP solutions is because of the nature of the individual legal requirements:
For E-Invoicing, E-Archive Invoicing and E-Delivery, transactional data needs to be submitted and a high number of document submissions will be processed. Therefore, a direct interface with the Turkish Revenue Administration system is needed. These specifications are implemented in the SAP Document Compliance framework. Data transmission can be done through SAP CPI, SAP PI, or even a third-party middleware platform.
For E-Ledger, only summary information needs to be submitted, and a rather low number of document submissions will be processed. Therefore, a direct interface with the Turkish Revenue Administration system is not needed. For these specifications, SAP ACR provides a stable and future-proof environment.
Both SAP Document Compliance and SAP Advanced Compliance Reporting (ACR) convert your business data into the by the government required data format. Therefore, third-party mapping is not needed. Another advantage of and similarity between both solutions is their user-friendliness. Both solutions were designed to manage and monitor different country-specific legal requirements in one centralised overview transaction.
Why start your SAP compliance project (E-Invoicing/ E-Archive Invoicing, E-Delivery, E-Ledger) in Turkey with PIKON
With our Competence Center for Legal Requirements, we are a strategic partner who ensures that your SAP system and business processes meet different country-specific legal requirements all over the world on the long run. We have a team of experts that combine SAP expertise and in-depth knowledge of the end-to-end legal process and technical requirements of the different Turkish regulations for the electronic submission of VAT-related information, being E-Invoicing, E-Delivery, E-Archive Invoicing and E-Ledger. Together with you, we analyse and define the best possible, future-proof SAP solution scenario for you and implement this in a minimum of time according to your pre-agreed budget and your specific wishes/ requirements.
If you want to have more information/ a system-demo about compliance with the different Turkish e-regulations in SAP, or if you want to learn more about our project approach and experiences, or if you have any other questions, then please feel free to click the button earlier in this article and request a web-meeting. Or you can always leave a comment in the comments section below, I will then come back to you as soon as possible.