Labor Supply Services

In section (3.2.5) of the General VAT Communiqué No. 117, it is stated that in the services provided to supply labor to those listed in section (3.1.2) of the Communiqué for the execution of their activities (in labor supply service purchases), a VAT withholding of 9/10 will be applied by the buyers.

Real or legal persons procure the labor they need for their activities not by employing paid staff bound by a service contract but by obtaining it from subcontractors or other individuals, institutions, organizations, or organizations operating in this field or other areas.

Such services fall under the scope of withholding when it is possible for the supplied personnel to work under the direct supervision, management, and control of the receiving enterprise.

With regard to the services generated in this way, withholding will be applied if the following conditions are met:

  • The supplied personnel must not be bound to the service receiver with a paid service contract.
  • The supplied personnel must be employed under the supervision, management, and control of the service receiver. If the personnel are employed in any stage of the production of goods and services by the enterprise, it will be accepted that the supervision, management, and control belong to the receiving enterprise.

Therefore, in determining the existence of labor supply services, factors such as the presence of personnel used in the execution of the service within the firm providing the labor supply service and bound by a service contract to it, and their employment under the supervision, management, and control of the service receiver will be considered. The presence of these factors will also be assessed by taking into account the provisions of the contract made between the parties or the explanations in the technical specifications attached to the contract.

If the taxpayer providing labor supply services uses personnel obtained from another taxpayer to provide such services, withholding will only be applied to the labor supply services provided to them.

Special security and protection services provided to those mentioned in section (3.1.2) of the Communiqué will also be subject to withholding as part of labor supply services.

Accordingly, the following services provided by businesses operating in the security services sector will be subject to withholding:

  • Taking precautionary measures against sabotage, fire, theft, robbery, looting, and demolition threats.
  • Ensuring the security of premises, areas, shopping centers, buildings, transportation vehicles, residences, workplaces, events, shows, meetings, celebrations, ceremonies, competitions, organizations, and similar activities.
  • Search and rescue, specially trained drivers.
  • Establishing and monitoring security systems, controlling entry and exit, preparing security studies, conducting personnel security investigations, research, and protection.
  • Security and protection training and consultancy.
  • Transfer of valuables, cash, collections, metals, and items from one place to another.
  • Alerts, monitoring alarms.

All similar services will be subject to withholding as part of labor supply services.

Only the establishment of private security systems is not subject to withholding in this context. However, if this establishment possesses the characteristics of construction works described in section (3.2.1) of the Communiqué, withholding will be applied in this context.

Source: VALUE ADDED TAX CIRCULAR/60
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