There are certain topics in our profession that are not only difficult to explain but also require great attention to detail when it comes to implementation. One of those topics is export-registered sales. I’ve been in this field for many years now, and from what I’ve seen, those who fail to fully understand the essence of this system—despite their best intentions—often end up facing penalties and legal repercussions. In this article, I’ll clearly lay out the legal framework and guide you on how to avoid common traps in the practical application of export-registered sales. If you’re ready, let’s dive in!
📜 Legal Framework: Where is the Constitution of This System Written?
Export-registered sales are regulated under Article 11 of the Value Added Tax (VAT) Law and its accompanying VAT General Communiqué No. 26. The key legal basis is:
✅ VAT Law Article 11/1-c:
“Goods delivered to exporters with the condition that they will be exported are exempt from VAT. However, the export of these goods must occur within three months from the date of delivery, and the export must be documented with the customs declaration and similar documents.”
In simple terms, the state says:
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The goods will be sold to an exporter.
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No VAT will be calculated on this sale (it will be invoiced with 0% VAT).
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However, the exporter must export the goods within 3 months (90 days).
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The export must be documented with a customs declaration.
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The goods must be exported as-is. If altered? Goodbye exemption!
🎯 The Basic Logic: Is This the Same Product?
This is where confusion typically arises. Export-registered sales are viewed as if you are making a direct sale to a foreign country through the government’s intermediary. The government treats this delivery as part of the export process. In other words:
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Company A sells goods to Company B (the exporter) under export registration.
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Company B then sends those goods abroad without altering them.
If this chain is maintained, everything is fine. However…
If the goods are altered (for example, cutting, painting, assembling, repackaging, relabeling, etc.), the goods are now considered a different product.
🧯 Common Misunderstandings in Practice and Customs Issues
Many companies say:
“The goods are the same as we sold them, just cleaned a little… Anyway, they went abroad, who would notice?”
But customs authorities are no longer in the “glance and pass” era.
Today:
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HS code (Customs Tariff Statistics Position) is thoroughly analyzed.
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The technical specifications, codes, and label information are compared.
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The actual form of the goods is checked to ensure it matches the declaration.
If a discrepancy is found:
❌ The Export-Registered Delivery is Null and Void
And the result is:
| Outcome | Description |
|---|---|
| 💸 VAT Payment Liability | The seller company must pay the VAT it did not account for, with interest. |
| 🔍 Tax Evasion Penalty | An additional 50% tax loss penalty will be applied. |
| 🧾 Declaration Cancellation | Due to the mismatch, the exporter cannot claim VAT refunds. |
| ⚖️ Audit Risk | The company falls into a high-risk category and is subjected to scrutiny by tax and customs authorities. |
👀 Real-Life Examples: Export-Registered Sales Gone Wrong
🪑 Example 1: The Furniture Scandal
A company sold office chairs to another company under export registration. The buyer, before exporting, changed the cushions on the chairs to a different color. During customs inspection, differences were detected from the product photos. It was determined that the export-registered sale was not valid, and both companies faced penalties.
🛢️ Example 2: The Plastic Granule Incident
A petrochemical company sold plastic granules. The buyer melted these granules and reshaped them into small plastic bowls before exporting them. Customs noticed a change in the HS code. Since this was clearly a processed product, the export registration system collapsed. Both the producer and exporter had to pay VAT and penalties.
🛡️ How to Ensure Safe Export-Registered Sales
✅ 1. Check the Exporter’s Credentials
Verify the exporter’s export authorization certificate, customs liability, and past export records.
✅ 2. Ensure No Alterations to the Goods
Get a written statement from the exporter that the goods will not be altered, stored, and sent as-is.
✅ 3. Track the 90-Day Deadline
The customs declaration date must be within 90 days from the invoice date. Set up a tracking system to monitor this.
✅ 4. Always Obtain the Customs Declaration and Waybill
These documents are your guarantee to prove the sale.
✅ 5. Use an Internal Control Form with Tables
Prepare an internal control form that documents the transaction chain.
📌 Conclusion: No Shortcuts! Penalties Are High!
The export-registered sales system provides tremendous advantages when used correctly. However, a single modification to the goods can turn the benefit into a burden. The essence of this system is simple:
The goods must be sent abroad as they were sold. No painting, no perforating, no assembly. Not even dust should touch them.
In short: Keep the goods unaltered to avoid penalties.
