Increased Tax

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hobbo
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Joined: Sat Aug 25, 2012 8:28 pm
Location: Kalkan, Turkey
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Increased Tax

Post by hobbo »

Looking for advice.

We rent our Turkish villa out and have been successful in getting good quality bookings (12 weeks already booked for 2018) including several repeat bookers.
The Turkish authorities are reclassifying short-term rentals as commercial income from 1/1/2018 which means getting a business licence and different tax rules (monthly account submissions, no personal allowance etc) this will raise costs but can be covered, However since the KDV (Turkish VAT) threshold in Turkey is zero, 18% KDV should now be collected on all bookings, we should be able to reclaim any KDV paid in Turkey on production of a KDV official invoice, (not easy to obtain in a mainly cash market!). KDV should be invoiced on the date of guest arrival, if the price is not in Turkish Lira then the exchange rate on the invoice date is to be used to convert.
The KDV to be paid on my current bookings for 2018 is >£2000

Would you:

a: Take the hit for the 2018 bookings. and increase prices to include KDV in 2019.

b: Pass the 18% on to guests (our T&Cs say 'The Villa rental price does not include transfer costs, airport or other taxes, insurance cover or other costs in whatever form.' )

c: Run for the hills
I have a very responsible position, if anything goes wrong I'm responsible ..
www.villa-in-kalkan.co.uk
ianh100
Posts: 598
Joined: Thu Jan 10, 2013 4:37 pm
Location: Sherborne Dorset

Post by ianh100 »

Hi Hobbo

We were concerned this was going to happen in the UK as lowering of the VAT threshold was being suggested. We don't actually spend a great deal where we could recover VAT spent so it would be a big problem for us.

I assume this is going to impact all of your local competition, do you track the costs of others locally? are they increasing prices? At the end of the day you need to be competitive I doubt everyone will just take the hit.
hobbo
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Joined: Sat Aug 25, 2012 8:28 pm
Location: Kalkan, Turkey
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Post by hobbo »

ianh100 wrote:Hi Hobbo

We were concerned this was going to happen in the UK as lowering of the VAT threshold was being suggested. We don't actually spend a great deal where we could recover VAT spent so it would be a big problem for us.

I assume this is going to impact all of your local competition, do you track the costs of others locally? are they increasing prices? At the end of the day you need to be competitive I doubt everyone will just take the hit.
Yes the proposed lowering of the UK threshold got quite a few people 'twitchy'

There is no official ruling on this yet and so most owners that know about it are nervously watching various key sources (the source of the info is the local Tax office and a couple of trusted accountants), quite a few owners have pulled their villas/apartments off the market, most of the rest are planning to increase prices to cover the increased costs but at this moment holding their breath, the difficulty we have is that whilst most only have a couple of weeks booked we are already 50% booked for 2018 and already 4 weeks in 2019
I have a very responsible position, if anything goes wrong I'm responsible ..
www.villa-in-kalkan.co.uk
newtimber
Posts: 1945
Joined: Sat Nov 24, 2012 5:57 pm
Location: Brighton
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Post by newtimber »

I don't know about Turkish VAT, but in UK, it's the VAT rate when the payment is received/invoiced that is relevant not the date the holiday is taken. So if guest pays in advance, they pay the reduced/nil rate.
hobbo
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Joined: Sat Aug 25, 2012 8:28 pm
Location: Kalkan, Turkey
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Post by hobbo »

newtimber wrote:I don't know about Turkish VAT, but in UK, it's the VAT rate when the payment is received/invoiced that is relevant not the date the holiday is taken. So if guest pays in advance, they pay the reduced/nil rate.
that would be great and also fair however.. 'Each month the owner (or agent) will have to prepare a Fatura (Turkish invoice) for each rental booking, dated on the day of arrival of the guest(s). KDV of 18% is charged on the rental income. After registration, each owner will need to get a book of pre-numbered Faturas printed for this purpose. As bookings are generally made in GBP sterling, an exchange rate pertaining at the time will need to be used to convert the GBP sterling into Turkish lira.'
I believe the Tax office is aiming to tie up the guest registration system with the rental income.
I have a very responsible position, if anything goes wrong I'm responsible ..
www.villa-in-kalkan.co.uk
JoolsB
Posts: 6
Joined: Sun Nov 27, 2016 9:17 am
Location: Yorkshire
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VAT

Post by JoolsB »

newtimber wrote:I don't know about Turkish VAT, but in UK, it's the VAT rate when the payment is received/invoiced that is relevant not the date the holiday is taken. So if guest pays in advance, they pay the reduced/nil rate.

So - If we invoice people now ( Jan) but we have a payment date of august and they they pay in Aug do they pay the Jan rate?
Having fun and making memories
newtimber
Posts: 1945
Joined: Sat Nov 24, 2012 5:57 pm
Location: Brighton
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Re: VAT

Post by newtimber »

JoolsB wrote:
newtimber wrote:I don't know about Turkish VAT, but in UK, it's the VAT rate when the payment is received/invoiced that is relevant not the date the holiday is taken. So if guest pays in advance, they pay the reduced/nil rate.

So - If we invoice people now ( Jan) but we have a payment date of august and they they pay in Aug do they pay the Jan rate?
I don't think so. I expect most people are on Cash Accounting and pay the VAT in the period when they receive the money not when they invoice it. ie you'll pay at the VAT rate when you receive the funds. No-one wants to pay VAT when they invoice and before they get the money and so will issue VAT invoices only on receipt.
JoolsB
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Joined: Sun Nov 27, 2016 9:17 am
Location: Yorkshire
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Post by JoolsB »

Thank you, your answer is really helpful.
awe have already taken all our bookings for next year. We have not charged VAT because we are currently not VAT registered. Would this mean that if we choose the cash system , we would have to pay VAT on all our bookings even though we haven't charged them VAT? We have already quoted and taken deposits so can't really add an extra 20% to their bills!
Any advice on how we manage crossing that threshold?
Having fun and making memories
newtimber
Posts: 1945
Joined: Sat Nov 24, 2012 5:57 pm
Location: Brighton
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Post by newtimber »

JoolsB wrote:Thank you, your answer is really helpful.
awe have already taken all our bookings for next year. We have not charged VAT because we are currently not VAT registered. Would this mean that if we choose the cash system , we would have to pay VAT on all our bookings even though we haven't charged them VAT? We have already quoted and taken deposits so can't really add an extra 20% to their bills!
Any advice on how we manage crossing that threshold?
In reality the prices you charge guests will be VAT inclusive and they'll be comparing your rates and deciding where to stay based on this. You take the VAT hit yourself and when the guests pay, you account for the VAT due.
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