Draft General Communiqué No.1 on the Standards of Computer-Based Accounting Software.
As per article 175 of Tax Procedural Law (TPL) numbered 2131, the Ministry of Finance is authorized to establish the principles and procedures for the preparation of accounting standards, uniform chart of accounts and financial statements; to enforce them upon taxpayers, companies and enterprises with respect to their types; to designate the rules by which taxpayers using computer software for their bookkeeping and real persons and legal entities producing these software applications have to abide; to specify the minimum requirements that computer software has to meet; and to determine the implementation principles and procedures.
As per the provisions of paragraphs 1 and 3 of duplicate article 257 of TPL, the Ministry of Finance is entitled to ascertain the accounting principles and procedures according to taxpayers and professions; to designate and revise the obligatory contents and form of the statutory books and records and any other books and records it deems necessary; to sanction or enforce the filing and maintenance of the statutory books and records on micro film, micro card or electronic storage media; to implement the retention of copies of these books and records at the Ministry of Finance or at another association it chooses; and to determine the implementation principles and procedures.
By virtue of the above-mentioned jurisdiction this Communiqué covers explanations on the following issues:
1 - The rules and obligations by which the taxpayers that need to use certified accounting software for their bookkeeping and those employing self-developed accounting software have to abide,
2 – The rules and obligations by which real persons and legal entities developing accounting software have to abide,
3 – The principles and procedures regarding the minimum requirements and standards that accounting software has to meet.
This Communiqué does not cover electronic accounting regulations which cover the preparation, record, transmission, preservation and presentation of the statutory books and records by taxpayers on an electronic basis instead of documents, records and
statutory books prepared in paper format according to regulations of Tax Procedural Law.
I - TAXPAYERS WHO NEED TO MAINTAIN THEIR BOOKEEPING BY MEANS OF CERTIFIED COMPUTER SOFTWARE
Taxpayers keeping their records on a balance sheet basis are required to maintain their bookkeeping using computer software certified by the Ministry of Finance.
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Taxpayers maintaining their bookkeeping using self-developed accounting software have to make the necessary modifications to their software by 01.01.2007 to make them compatible with the minimum requirements and standards specified in this Communiqué.
Taxpayers keeping their records on a balance sheet basis and maintaining their accounts via independent accountants or certified public accountants are also obliged to abide by the principles and procedures specified in this Communiqué.
II – REGULATIONS AND OBLIGATIONS REGARDING TAXPAYERS MAINTAINING THEIR BOOKKEEPING BY MEANS OF CERTIFIED COMPUTER SOFTWARE
The legal regulations for taxpayers are:
1 – Taxpayers maintaining their bookkeeping using market-purchased computer software are required to have the necessary update modules to make their existing software
compatible with the minimum requirements and standards specified in this Communiqué.
2 – Taxpayers that make modifications on their market-purchased certified computer software are liable for those modifications. In the event that the certified computer software becomes incompatible with the principles and procedures specified in this Communiqué as a result of the modifications, taxpayers will be penalized as per article 359 of TPL; they will also be subject to penalties identical to those applicable to software developers for infringement of minimum standards.
3 – Taxpayers maintaining their bookkeeping using self-developed accounting software have to make them compatible with the minimum requirements and standards specified in this Communiqué. In order to determine the compatibility with the minimum
requirements and standards, the software has to pass the tests detailed in article III/2 of this Communiqué. Taxpayers that fail to make their software compatible with the minimum requirements and standards will be penalized as per article 359 of TPL; they will also be subject to penalties identical to those applicable to software developers for the infringement of minimum standards.
4 – Taxpayers are obliged to retain the statutory books and records they maintain by means of computer software, just as they preserve the statutory books and records documented on paper as per article 213 of TPL and to disclose them to officials of the Ministry of Finance when requested. As a result, taxpayers have to take the necessary precautions against risks related to computers and/or software used for their bookkeeping such as failures, defects and theft. It is obligatory to transfer copies of the accounting records to another electronic medium as of each provisional tax period.
5 – Public accountants and certified public accountants using computer software to maintain the bookkeeping of their clients also have to utilize certified accounting software and abide by the principles and procedures detailed in this section.
6 – In the case that taxpayers, irrespective of whether the transaction is free of charge, sell or transfer the certified computer software they had previously purchased and used to another taxpayer or share the right to use the software with them, they are required to disclose this information to the tax administration and the persons or entities that develop and sell the software.
III - REGULATIONS REGARDING REAL PERSONS AND LEGAL ENTITIES DEVELOPING ACCOUNTING SOFTWARE
The regulations for real persons and legal entities that develop accounting software are as follows:
1 – In order to receive Ministry approval for their accounting computer software meeting the minimum requirements and standards established with this Communiqué, real persons and legal entities shall submit their petitions together with a copy of their accounting software to the Ministry of Finance, Revenue Administration.
2 – The Revenue Administration, by taking the opinion of Accounting Software Testing Commission, determines whether the accounting computer software meets the minimum requirements and standards established with this Communiqué and notifies the developer of its decision. At the same time, accounting software has to pass the tests, as detailed in this Communiqué, regarding electronic submission of returns to the Revenue
Administration. Test scenarios and the list of developers with certified accounting software are published on the website of the Revenue Administration at
www.gelirler.gov.tr
3 – The Accounting Software Testing Commission is constituted of the Commissioner of Revenue Administration as the president, one member from universities appointed by the Turkish Council of Higher Education and one member from the Scientific and Technical Research Council of Turkey, one certified public accountant and one sworn financial adviser appointed by The Union of Certified Public Accountants and Sworn Financial Advisers of Turkey, and one member each appointed from Software Work Owners’ Society of Turkey and Software Industrialists Association. The Commission is charged with determining the compliance of accounting software with the minimum requirements and standards, and to notify the Revenue Administration of the outcome.
4 – On the occasion that developers make modifications to their certified accounting software in order to comply with legal amendments, they are required to get approval and to make the updates available to their customers at least 10 days prior to the
implementation of the amendments. Failure to comply with this regulation results in cancellation of the certification. In the event that it is indispensable to apply the software modifications without prior approval from the Commission, software developers hold the liability. In such urgent circumstances, it is possible for developers to inform the Revenue Administration of the situation and submit their application to the Commission at a later date.
5 – In view of the fact that this Communiqué establishes the minimum requirements and standards for accounting computer software, developers may include additional features in their software unless they infringe the minimum requirements and standards or cause security risks.
6 – If modifications to software with prior Ministry certification are confirmed to infringe the minimum requirements and standards established by this Communiqué, the developer of the software is removed from the list of approved developers, and it is penalized with a special irregularity penalty for each software breaching the regulation.
7 – Software developers are required to electronically submit the list of clients who purchase and use their software to the Revenue Administration on a monthly basis. In the event that their software are used in more than one location or installed in more than one computer, these have to be displayed separately in the list submitted to the Revenue Administration.
8 – Developers of the accounting software requesting certification should have an office in which operations will be executed, related equipment, a sufficient number of staff with adequate technical knowledge to work out any possible difficulties that can arise, user manuals explaining the usage of accounting software and assistance files embedded in the software, together with an on-line assistance site that gives detailed explanations on these files. Whether the software developer meets these requisites is determined by a report prepared jointly by central auditors from the Ministry of Finance and software developers or system analysts.
IV – MINIMUM REQUIREMENTS AND STANDARDS THAT ACCOUNTING COMPUTER SOFTWARE HAS TO COVER
So long as software does not breach the legislation in force, the designated chart of accounts or standards, software can be developed as demanded. Software may contain the basic accounting module and/or other modules. In any case, the basic accounting module has to incorporate the journal, the general ledger, the balance sheet, the income statement and the cost of sales, at the least.
Accounting software is viewed as a whole, complete product. If the software is comprised of separate modules and entries are recorded in these modules, the design should be such that related accounts should retain their connection within the framework of the uniform chart of accounts.
4.1 – Minimum Information to be Disclosed on Journal Voucher
The following is the minimum information to be disclosed on accounting software and on journal vouchers:
2 – Type (general journal voucher, collection voucher, payment voucher) of the journal voucher and its number.
3 – The lowest hierarchical level account codes and their names.
4 – Dates, serial and sequence numbers of the supporting documents.
5 – Document type (Invoice, Invoice with Waybill, Expense Voucher etc.).
6 – Full name and title of the customer.
7 – Tax ID Number and Turkish Republic ID Number (if needed) of the customers and providers of goods and/or services.
8 – Type, price, quantity and sum of goods or services.
9 – Value Added Tax (the rate and amount of VAT for every single good on invoices containing more than one good).
10 – Special Consumption Tax (the rate and amount of SCT for every single good on invoices containing more than one good).
11 – Special Communication Tax.
12 – Banking and Insurance Transactions Tax.
13 – Number, names-surnames, wages of employees, withholding tax amounts and premium payments of employees.
14 – Transactions with dependent persons.
15 – Explanations and other information.
While it is obligatory for taxpayers to record purchase invoices in such a way to include the minimum information required, it is optional for the sales records that are below the invoice preparation limits set by the Ministry of Finance according to the TPL numbered 213 to include all of the minimum information requirements. Journal vouchers have to include the above-mentioned information and have to be submitted to tax inspectors when requested. However, software may be developed such that vouchers can be
recorded in the journal with the minimum information required either as detailed amounts or lump sums.
Accounting records have to maintain source document association according to the lowest hierarchical level account codes. The general ledger has to be listed according to the ledger accounts, interim accounts, lowest hierarchical level account codes and names in the journal.
4.2 – Codification of Accounts at the Lowest Hierarchical Level and Listing and Usage of Account Names
It is obligatory for the accounting software to record not only general ledger accounts with three digits (XXX) but also subsidiary ledger accounts as well, and to have access to on-screen information at the general ledger or subsidiary ledger level when needed and the related information has to be able to be transferred to another program application and procurement of analysis has to be provided. Taking this into consideration, below is an example of a detailed codification system which has to be employed by taxpayers so as to get information on the general account and its details. The example demonstrates details of various accounts: Example Debit Credit 120 Customers 32.529,83 23.852,46 120 01 Adana Customers 21.315,45 15.741,95 120 01 001 X Corp. 12.826,52 9.000,00 120 01 002 Y LLC 3.524,86 3.524,86 120 01 003 Z Person 4.964,07 3.217,09 120 06 Ankara Customers 11.214,38 8.110,51 120 06 001 A LLC 3.834,76 1.162,15 120 06 002 B Corp 5.948,36 5.948,36 120 06 003 C Corp 1.431,26 1.000,00 600 Domestic Sales 56.849,85
600 01 Commercial Goods Sales 42.367,42
600 01 001 Refrigerator Sales 18.684,36
600 01 002 TV Sales 9.564,25
600 01 003 Furniture Sales 14.168,81
600 02 Finished Goods Sales 14.482,42
600 02 001 Pants Sales 5.694,48
600 02 002 Skirt Sales 3.536,96
600 02 003 Suit Sales 5.250,99
191 01 VAT of Goods and Services Purchases 4.145,55
191 01 001 %1 VAT 530,58
191 01 002 %8 VAT 1.260,47
191 01 003 %18 VAT 2.354,50
191 02 Returns from Sales VAT 439,09
191 02 001 %1 VAT 83,25
191 02 002 %8 VAT 152,48
191 02 003 %18 VAT 203,36
391 VAT Calculated 4.149,94
391 01 Goods and Services Sales VAT 3.750,37
391 01 001 %1 VAT 487,43
391 01 002 %8 VAT 1.110,50
391 01 003 %18 VAT 2.152,44
391 02 Returns from Purchases VAT 399,57
391 02 001 %1 VAT 98,83
391 02 002 %8 VAT 160,50
391 02 003 %18 VAT 140,24
As shown in the above records, if the 600 Domestic Sales account as a whole is to be retrieved, the main account and all of its sub-sections should be seen on-screen. Respectively, if one seeks to find information on pants sales only then the pants sales account numbered 600 02 001 should be accessed; just as a search for current accounts related to a Z person among Adana clients should return the details for the account numbered 120 01 003 only. Consequently, accounting software has to enable access to both the main account and its details on demand.
4.3 – Accounting Record Control Number
Accounting software should be developed in such a way that an “accounting record control number,” derived from the monthly journal vouchers and calculated via the below-mentioned algorithm, is generated. This algorithm is based on the creation of a control code derived from the journal vouchers, which in turn constitute the fundamentals of the accounting system. The amounts in journal vouchers are multiplied by the general ledger account codes, and the sum of control numbers for each line on a given period will constitute the accounting record control number for the specified period.
Since record control numbers will be utilized in tax inspections and audits to detect possible alterations to the records, accounting software should include a module for
calculation and reporting of control numbers. Additionally, this module should be able to report daily and monthly control numbers and to check them against those declared to the authorities. In the case that the control numbers calculated during inspection are
inconsistent with those declared beforehand, it will either be indicative of retroactive alterations to the records or display the incompatibility of the software with this minimum standard.
An example demonstrating the calculation of the accounting record control number for a taxpayer having two accounting records for the month of January 2006 is as follows:
Date 05/01/2006 Article
No
1
Account No.
Explanation Debit Credit Formula for Control No. Control No. 120.01 Sale of a Good 105,12 = 120 * (105,12 * 100) 1261440 600.01 Sale of a Good 105,12 = 600 * (105,12 * 100) 6307200 Date 06/01/2006 Article No 2 Account No.
Explanation Debit Credit Formula for Control No. Control No. 100.01 Cash Receipts 53,25 = 100 * (53,25 * 100) 532500 120.01 Cash Receipts 53,25 = 120 * (53,25 * 100) 639000
Accounting Record Control Number for January 1 2006 – January 31 2006
8740140
The accounting record control number for January is 8740140, created with two journal vouchers. Hence this number will change if the taxpayer adds new record(s) or updates the existing journal vouchers or cancels one or more of the existing records after the submission of tax return. Within this regard, taxpayers have to correct such false records through the provisions of the tax procedural code and generally accepted accounting principles. The declarations of accounting record control numbers and their relevant recording periods are as follows:
Accounting Control Number Period (Months)
Journal Record Periods for the creation of accounting control number
Accounting Record Control Number January 1.December-31.December February 1.January-31.January March 1.February-28(29)February April 1.March-31.March May 1.April-30.April June 1.May-31.May July 1.June-30.June August 1.July-31.July September 1.August-31.August October 1.September-30.September November 1.October-31.October December 1.November-30.November
4.4 – Separate Recording of Daily Transactions
Accounting software should to be adjusted in a way that allows the creation of a daily control mechanism between cash, banks, checks, notes payable accounts’ and current accounts (receivable/payable) and inventory items for every single transaction. Programs should prevent users from creating one record for daily totals of the accounts mentioned above. However, it should be optional of whether to create one record or multiple records for transactions below legal limits for invoice issuance.
4.5 – Appropriate Usage of Debit/Credit Accounts of the Uniform Chart of Accounts and Generally Accepted Accounting Principles
Accounting software should be designed in a way to prevent accounts with a debit or credit character to show reverse balances. As it is known, accounts listed in the uniform chart of accounts have either a debit or credit character. For example, “100. Cash” account is an account with a debit character that displays the cash in hand and should always display a debit balance. At the same time, “320. Accounts Payable”, which displays the company’s debt to suppliers, is an account with a credit character and should always display a credit balance. The one and only exemption for this rule is “393. Head Office and Branches Current Accounts”. This account has both a debit and credit character and is used throughout the financial year.
4.6 – Compliance of Accounting Software with Tax Law and Procedures
Accounting software should be in line with the ratios and calculations that take place in tax laws. Necessary issues and software in order to safeguard compliance between accounting software and tax laws can be obtained through the website of Revenue Administration. Software should be created in line with general communiqués on the accounting system and other regulations.
4.7. Notification System
Software should notify users about transactions and records which should be made in time and procedures that are mentioned in the tax procedural code. Software should be programmed to generate a list of record and transactions not made by the user, if the user does not take the necessary action. The notification system is for the following records and transactions:
1- Payments and collections above 8.000 YTL should be made through banks,
private finance entities or the general directorate of Post-Telephone-Telegraph (PTT), according to the General Communiqué numbered 332 of Tax Procedural Law. The software should notify the users of payments above the afore-mentioned amount.
2- Accounting records should be transferred to legal books according to the 219th provision of Tax Procedural Law. If the records are not transferred to legal books in due time regulated by Law, the software should notify the users.
4.8 – Taxpayers that Apply Branch Accounting
Should companies that follow-up their daily accounting transactions on a branch(s) basis and unify those transactions at the head office of the company use the accounting software with the standards mentioned in this Communiqué, the standards of this Communiqué that regulate the exposure of branch records at the head office records shall not be applied separately. It is obvious that the standards set forth in this Communiqué shall be applicable to the software for the records and transactions of the head office and the branches without separate accounting systems.
4.9 – Audit File
Accounting software, during a tax audit, should allow access to electronic data without controlling paper-based and other kind of data, and should have an audit module and file with functions allowing the control analysis of the data. The audit module shall be developed in such a way that it operates when the accounting program operates and its operations cannot be cancelled by the user. Accounting software should prepare the audit file any time it is requested.
The audit file consists of three sub-sections.
A- The section introducing the accounting software and the audit file information:
This section should contain information about the accounting program, address and line of activity of the taxpayer.
1- Accounting software will assign a number for each record and should be able to display journal vouchers of each account for a specific period.
2- Software should be developed in such a way that it should not allow the selling of items that do not exist in the inventory; but it should allow the creation of records initially using the waybill for invoicing later (when issued) within the periods determined for making out the invoice defined in TPL.
3- Software should prepare a list of notifications according to their issue and date. 4- Software should allow the creation of journal vouchers with a password. Journal
vouchers should be able to be saved as text, excel, access and/or XML format. Software should be able to process an index of accounts.
5- Software should have an activity log with the names of personnel that make and change the records.
6- Since the accounting software should be considered as a whole, the accounts should be able to be related to the relevant modules. General ledger vouchers or modules should be accessible through journal vouchers or vice versa.
7- The analysis on electronic setting, transfer of the accounts and transactions to other programs and their print outs should be practicable.
8- Software should be able to generate lists that display transactions in every single account according to amount, quantity, person, explanation of goods or services sold, countries to/from which goods are exported/imported. Besides, records should be able to be displayed on a monthly and yearly basis.
9- The auditing module should be able to calculate various ratios using the balance sheet and income statement. The ratios that have to be able to be calculated on a monthly and yearly basis are given below:
1. Current Ratio : Current Assets / Current Liabilities
2. Liquidity Ratio : (Current Assets – Inventory – Other Current Assets) / Current Liabilities 3. Cash Ratio : Liquid Assets / Current Liabilities
4. Receivable Turn Ratio : Receivables x 365 / Annual Credit Sales
5. Inventory Turn Ratio : Cost of Goods Sold / The average inventory for the period 6. Total Debts / Shareholders’ Equity : Total Debts / Average Shareholders’ Equity 7. Gross Profit Margin : Gross Profit / Net Sales
8. Net Profit / Shareholders’ Equity : Net Profit (Profit After Tax and Other Legal Obligations) / Average Shareholders’ Equity
C- Section Regarding VAT and Special Consumption Tax
Software should have the following components to ensure correct calculation and control of VAT and special consumption tax.
C.1 – Section Covering VAT information
1. A report should be generated by the software that ensures integrity and accuracy of VAT data.
2. A report on purchases, sales and other transactions which assures the filing of a VAT return should be generated by the software.
3. Software should notify users about discrepancies in the VAT periods (like late tax input or early tax input).
4. Software should notify users about discrepancies between the VAT base and VAT amount to be paid
5. Software should display transactions exempted from VAT as deductible and non-deductible VAT, and the calculated deductible VAT amount. 6. Nature of non-deductible VAT transactions and tax amounts regarding
those transactions should be displayed by the software.
7. Software should be able to follow-up changes in the VAT base and
deductible VAT amounts, paid VAT, VAT abated and VAT to be returned.
8. Those who work on commodity should be able to separate inventory items as to whether they are subject to VAT or not by advance tax periods.
C.2 - Section Covering Special Consumption Tax Data (SCT)
1. A report should be generated by the software regarding the integrity and accuracy of the special consumption tax data.
2. A report on purchases, sales and other transactions which assures the filing of special consumption tax return should be generated by the software. 3. Software should notify users about discrepancies in the special tax return
periods (like late tax input or early tax input).
4. Software should notify users about discrepancies between the special
consumption tax base and the special consumption tax amount calculated according to SCT ratios or amounts.
5. Software should notify users regarding the discrepancies between the
special consumption tax base and the special consumption tax amount to be paid and the VAT base.
6. Amount and quantity of transactions which are exempted from special
consumption tax, should be displayed by the software.
7. Nature and tax amount of transactions which are subject to tax deduction and tax amounts related to these transactions should be displayed.
8. Base, rate, amount, deduction amounts and paid, abated or returned special consumption amounts should be followed in the records.
9. Software should allow taxpayers to be able to separate inventory items that are subject to special consumption tax at the end of periods.
4.10 – Invoice Issuance Module
Accounting software should have a module for issuing invoice and similar documents and the documents that are prepared by this module should include minimum requirements of TPL. Software should automatically create the necessary journal vouchers upon the documents’ creation.
4.11 – Proceedings with Connected/Related Individuals
Accounting software should be prepared in such a way that overall information can be computed monthly and annually for purchase/sales proceedings of goods, services,
credits and rentals with all connected/related individuals. Connected/related individuals are the shareholders of organizations, their spouses, those related by blood and by marriage descending or ascending from/to lines of their partners and spouses including third level lineage and relatives, and legal entities participating in the capital, audit or management thereof by 10% or more.
4.12 – Automatic Creation of Electronic Return and Information Forms from the Records
Accounting software should be able to prepare electronic returns, information forms regarding the commodity and service purchase-sales, monthly information forms automatically from records, and transfer them to the Revenue Administration through electronic forms. Procedures and principles regarding the creation of electronic returns and information returns can be obtained through the Revenue Administrations’ website.
1- E-Return Preparation
Accounting software should be prepared in such a way that it should be able to prepare e-returns determined by the Revenue Administration through the accounts.
2- Preparation of Information Forms
Accounting software should be able to prepare invoice details (form Ba and Bs) of the persons from/to which commodities or services are bought and sold from the records of the company. The software should be able to prepare detailed lists of commodity and service purchase/sales invoices’ date, name, amount, commodity/service groups and list every single invoice separately and/or cumulative documents and amounts for a single person and entity and software should be able to create and send electronically this information to the Revenue Administration.
3- Monthly Return Forms
Accounting software should be prepared in such a way that it will be able to prepare the information asked for in the below stated monthly return forms automatically from the records and send them electronically to the Revenue Administration. Monthly return forms are to be submitted within the VAT return submission period.
4.13 – Transition Provisions
- Taxpayers whose legal books have to be certified by sworn financial advisers and who exceed the limits determined for the year 2006 should begin using the above explained software beginning from 01.01.2007;
- Others will begin using the above explained software beginning from 01.01.2008.
Taxpayers who are below the limits can use the approved software should they wish to adopt the novel software.
Declaration for ……….. (month) Balance of stock Opening Stock Stock purchases Purchase Returns (-) Cost of goods sold (-) Sales returns (-) Closing Stock Monthly Total Service Purchase and sales Service purchases Service sales Monthly Total Import and Export amounts Export amount Import amount Monthly Total Cash balance Cash collected
Cash paid Collections made through banks Payments made through banks Inflows through checks portfolio Outflows from checks portfolio Inflow s to notes portfol io Outflows from notes portfolio Loans taken Loans granted Monthly Total Expenses and non-operating revenues Operating expenses Non-operating expenses Financial Expenses (domestic payments) Financial Expenses (international payments) Non-operating revenues Monthly Total Records of Employees Number of employees with minimum salary Number of employees whose salary is 25% above the minimum salary Number of employees whose salary is 50% above the minimum salary Total Number of workers Total Gross Salary Paid Other Payments Incom e tax and other withho lding taxes paid from salary and other payme nts Social security premiums paid from employees salary and other payments Monthly Total Total Credit Card Sales Transactions made with public entities Goods and services sold to public entities Goods and services received from public entities Monthly total
Transactions with related / dependent persons Goods and services purchased Loans taken Interest paid on loans taken Rent or royalties paid Goods and services sold Loans granted Interes t collect ed on loans grante d Rent or royalty payments collected Monthly Total
Audit Ratios Current Ratio
Liquidity Ratio
Cash Ratio Collection Period Stock turnover ratio Total debts to sharehold ers equity ratio Gross profit margi n Net profit to shareholders ratio Monthly Rate Accounting Record control number First and last record number for the relevant period Software program and version number
