How to prove genuine commercial flow in a fake invoice (SMİYB) audit

Substantiation with bank, shipment, inventory and yield records; the risk of VAT deduction rejection and penalties.

When a supplier is found to be an "issuer of fake invoices", businesses that purchased from that supplier are also taken under audit. At this stage, the burden of proof effectively shifts to the taxpayer.

Why is the risk significant?

If the invoice is held not to reflect a genuine purchase, the related VAT deduction is rejected, the expense is disallowed and the tax loss penalty is applied at three times the amount. In addition, criminal proceedings may arise under Tax Procedure Law (VUK) Article 359.

Records that can be used for substantiation

Bank: Receipts showing that payment was made to the seller's account, consistent with the amount and date on the invoice
Shipment: Delivery notes, weighbridge tickets, freight invoices and vehicle details
Inventory: The purchased goods being traceable in stock entries and exits
Yield: In manufacturing businesses, the raw material–finished product balance confirming the purchase
Correspondence: Order, quotation and delivery correspondence

Invitation to explain

Depending on the nature of the case, the tax administration may invite the taxpayer to explain (izaha davet) under VUK Article 370 before an audit. The response to this letter should be supported by the records above and be technically well organised; an inadequate response may result in the file being referred for audit.

Preventive step. When starting to work with new suppliers, checking their tax certificate, business address and commercial history, and making payments through the bank, considerably reduces the risk.

For dispute procedures, see the tax audits and disputes page.