A VAT Guide in Turkey

A VAT Guide in Turkey



 This guide has been prepared by Pricewaterhouse Coopers to provide a summary of the VAT law in Turkey. It reflects the current tax law as at March 1999.

This booklet is not  intended as definitive advice, but merely as an explanatory guide, and we would strongly recommend that readers who have specific queries regarding the VAT system in Turkey seek professional advice.

  • General overview

The Turkish tax system charges value added tax on the supply and the importation of goods and services. The Turkish name of Value Added Tax is Katma Değer Vergisi, abbreviated to KDV.

Liability for VAT arises;

  • when a person or entity performs commercial, industrial, agricultural or independent professional activities within Turkey,
  • when goods or services are imported into Turkey.

VAT is levied at each stage of the production and the distribution process. Liability for the tax falls on the person who supplies or imports goods or services, however, the real burden of VAT is borne by the final consumer. This result is achieved by a tax-credit method where the computation of the VAT liability is based on the difference between the VAT liability of a person on his sales (output VAT) and the amount of VAT he has already paid on his purchases (input VAT).

The Turkish VAT system employs multiple rates  and the Council of Ministers  is authorised to change the VAT rates within  certain limits.



VAT taxpayers  are defined in the VAT Law as those engaged in taxable transactions, irrespective of their legal status or nature and their position with regard to other taxes.


The following people or entities are liable to VAT:

  • Those supplying goods and services,
  • Those  importing  goods or services,
  • Those required to complete customs formalities in case of transit of goods through Turkey,
  • General Directorates of the Authorised Public Lotteries, including Spor-Toto and National Lottery,
  • General Directorates of Postal Services (PTT) and Radio and Television Administration (TRT),
  • Organisers of horse races and other betting activities,
  • Organisers of shows, concerts and sporting events with the participation of professional artists and professional sportsmen,
  • Lessors of goods and rights stated in Article 70 of the Income Tax Law.
  • Goods and rights set out in Article 70 of the Income Tax Law including immovable property such as land, buildings, mines and rights which are in the nature of immovable property; and “other goods and rights’’ such as all kinds of motor vehicles, machines and equipment, ships, literary, artistic and commercial copyrights, commercial or industrial know-how, patents, trademarks, licences and similar intangible properties and rights.

2.3.VAT responsibility

In the event that the taxpayer is not resident or does not have  a place of business in Turkey,  a legal head office or the place of management in Turkey, or in other cases deemed necessary, the Ministry is authorised to hold any one of the people involved in a taxable transaction responsible for the payment of tax.



Taxable transactions defined in VAT Law include the supply of goods and services, importation of goods and services and other  activities.

The following transactions carried out in Turkey are subject to VAT;

  • Supply of goods and services within the scope of commercial, industrial, agricultural or independent professional activities,
  • Importation of all kinds of goods and services,
  • Other activities;
  • Postal, telephone, telegram, telex and other similar services; radio and television services;
  • Organisation of all kinds of betting, gaming and lotteries including authorised public lotteries (Spor Toto and Milli Piyango),
  • Organisation of shows, concerts and sporting events with the participation of independent professional artists and professional sportsmen,
  • Sales at bonded warehouses and auctions
  • Transportation of petroleum and gas and their products through pipelines,
  • Leasing of the goods and rights stated in Article 70 of the Individual Income Tax Law.
  • Deliveries and services  of a commercial, industrial, agricultural or professional nature  performed by enterprises that belong to national and local government agencies and establishments, universities, associations, foundations and all kinds of professional organisations,
  • Deliveries and services deemed to be taxable upon voluntary registration with the tax authorities, to avoid uncompetitive pricing,

Any real person or legal entity, resident or non-resident, private or public, engaged in the above transactions is subject to tax. Exemptions granted under other tax laws  are not valid for VAT purposesif  they concern an activity that falls within the scope of the VAT Law.



Importation of goods and services is a taxable transaction whether or not the importation is made with a business purpose.

Export transactions are exempt from VAT and a credit and refund are available for input VAT for the export goods.

4.2.Importation of goods and services

For VAT purposes, any importation of goods or services into  Turkey  is a taxable transaction regardless of the status of the importer or the nature of the transaction.

To equalize the tax burden on importation and domestic supply of goods and services, the VAT is levied only on importation of goods and services that are liable to tax within Turkey. Accordingly, any transaction exempt in Turkey is also exemptat import. The VAT on importation is imposed at the same rates applicable to the domestic supply of goods and services. In the case of importation, the taxable event occurs at the time the goods pass the frontier customs control.

4.2.1.Taxpayer for imported goods

The VAT on importation of goods is assessed by customs authorities on each individual import and is payable together with customs duty. Where the transaction is exempt from customs duty or in the case of international transportation, VAT is assessed upon a special declaration made at the customs frontier and is payable at the time the taxable event occurs. The taxpayer is the individual or entity who has the title of imported goods.

4.2.2.Tax responsibility for importation of services

Services purchased abroad are taxable only if utilised or accounted for in Turkey. Therefore, an importer in Turkey is required to declare and pay the VAT as the withholding agent.

4.3.Exportation of goods 

4.3.1.Normal exportation

Export deliveries of goods and services related to such deliveries are exempt from VAT. delivery and exportation of services

An export delivery is exempt from VAT if the following conditions are met:

  • The delivery must be made to a customer (foreign recipient) outside the domestic territory of Turkey (deliveries to free zones are considered export deliveries since free zones are outside the customs area),
  • The goods to be delivered must pass the Turkish customs frontier and reach a foreign country,

The VAT burden on exports is completely relieved by the credit and refund mechanism. Export deliveries are not only exempt from VAT, but also the input VAT paid is credited and the excess amount is refunded.

4.3.2.Sale of goods destined for export

Where goods are sold by their producer to an exporter, subject to the condition that they are to be exported, the exporter will pay no VAT. The producer will include the VAT in his periodic returns. However the VAT will be computed and assessed but deferred. If the goods are exported within three months from the beginning of the month following the date of the delivery to the exporter, the deferred VAT will be cancelled.

If the export is not realised, the deferred VAT will be collected together with a delay interest applicable to public receivables increased by 50% of the normal rate (The normal rate is currently 12% monthly. The increased rate is therefore 18%).

4.3.3.Supplies to non-resident travellers

VAT on goods purchased by non-resident travellers is payable at the time of the supply. However a refund is available when they are cleared through customs upon presenting the relevant invoice or similar document.

The following conditions must be met to qualify for a refund of the VAT paid by non-resident travellers:

  1. Goods must be purchased at a place where there is a letter of permission obtained from the local tax office,
  2. A special kind of invoice prescribed by the regulation must be furnished upon checking the passport of the customer,
  3. The consideration paid must be at least 50.000.000 TL. excluding VAT
  4. The goods purchased must be taken through the customs frontier within 3 months following the date of purchase,
  5. A copy of the special invoice must be approved by the customs authorities upon inspection of the

If the amount of the refund is less than 150.000.000 TL, it may be collected at a bank outside the customs frontier where the seller has a proper account for this purpose. In other cases the purchaser should send a copy of the special invoice approved by the customs authorities to the seller within a month following this departure. The seller is required to send the refund within ten days after receiving the special invoice.


There are two basic forms of exemption under the Turkish VAT Law.

5.1.Exemption without credit for previously paid VAT


Transactions that are subject to “exemption without credit for previously paid VAT’’ are the supply of goods and services for cultural, educational, recreational, scientific, social and military objectives and certain other categories.

The following goods and services supplied by national and local public institutions, universities, political parties, trade unions, non-profit organisations, agriculturaland co-operative societies, social security institutions and other officially qualifying organisations, in performance of their regular activities, are exempt from VAT;

  • Goods and services supplied at hospitals, clinics, dispensaries, human blood and organ banks, public parks, monuments, botanical and zoological gardens, veterinary bacteriological, serological and similar laboratories, school dormitories, orphanages and homes for the elderly.
  • Goods and services supplied at theatres, concert halls, libraries, sport facilities, reading rooms and conference halls.
  • Goods and services supplies for the purpose of promoting and encouraging scientific, artistic and agricultural activities.
  • All kinds of supplies free of charge to the above organisations.
  • Supplies by military factories, shipyards and workshops, in accordance with their statutory objectives, are exempt.

 5.1.2.Other exemptions property

  • Supply of land and workplaces by business enterprises within small industrial sites and organised industrial regions is exempt from VAT.
  •  Supply of houses/buildings to members of housing construction co-operatives.
  • The leasing of immovable property is exempt from VAT except for the immovables included in the business assets of an enterprise. transactions

  • Transactions carried out by banks and insurance companies that fall within the scope of banking and insurance transaction tax are exempt without credit from VAT to avoid double taxation.
  • Services rendered by banks, bankers and insurance companies are subject to banking and insurance transactiontax.
  • Supply of unprocessed gold and silver, foreign exchange, money, tax and duty stamps, negotiable instruments, vehicle tax stamps, stocks and bonds are exempt from VAT.
  • Supply by public institutions of banknotes, coins and official stamps and papers are exempt from VAT. and communication

  • International transportation is exempt from tax.
  • Transportation of foreign crude oil, gas and their products through pipelines is exempt from VAT. and equipment under investment incentive certificate

 Importation or domestic purchases of machinery and equipment under an investment incentive certificate (IIC) are exempt from VAT.

 Supply of water for agricultural purposes and land improvement services rendered by public institutions, agricultural co-operative societies and farmers unions are exempt from VAT.

 5.2.Exemption with credit for previously paid VAT


Certain transactions are not taxable and at the same time the taxpayer has the right to claim a credit and a refund. This mechanism operates under the name ‘’exemption with credit for previously paid VAT’’ and is issued principally for exports.

Supply of the following  goods and services is exempt from VAT with credit for previously paid VAT:

  • Export supplies,
  • Supply of sea, air and railway transportation for business purposes and supplies related to maintenance and repair of such
  • Supplies to people engaged in petroleum exploration activities within the scope of the Petroleum Law,
  • Services supplied at harbours and airports for vessels and aircraft,
  • Supplies to embassies, consulates and diplomatic and consular agents subject to the condition of reciprocity,
  • Supplies to international institutions and foreign agents connected with such institutions, to the extent that the exemption is granted by an international agreement,
  • Supplies of machinery and equipment under an  IIC granted to the buyer.

5.3.Exemptions at importation of goods

 5.3.1.Normal importation of goods

 Exemptions at importation granted under VAT Law are set out below:

  • Importation of goods and services that are exempt from VAT, if supplied in Turkey (e.g. importation of unprocessed gold and silver; importation of machinery and equipment under IIC)
  • Importation of certain goods that are exempt from customs duties, with reference to the Customs Law (e.g. samples and models of products that are of no commercial value),
  • Goods and services to which transit, transhipment, bonded warehouse, temporary storage, customs area and free zone regimes are applied.

5.3.2.Temporary importation of goods for re-exportation

Temporary importation of goods for re-exportation is exempt from tax secured by a deposit  under the conditions set out in Article 119 of the Customs Law .

5.3.3.Temporary exportation for re-importation

Goods temporarily exported for re-importation are exempt from tax under the provision of Article 132 of the Customs Law provided that they have not been through any change in quality. An increase in the value of the goods exported due to work performed abroad will be subject to tax at re-importation.



The tax mechanism operates on the basis of tax returns filed by taxable entities within the period indicated in the VAT Law. The enterprise may credit the VAT charged to him on goods and services supplied and on importation against the VAT on the supply of goods and services effected by him and pay the difference due. If the amount of credit exceeds the amount charged by the enterprise the excess credit is either carried forward or refunded.

To be eligible to claim the credit the invoice or similar documents must cover the VAT  separately for each item and they must be recorded in the enterprise’s legal books. However it is not necessary that the VAT should actually have been paid, i.e. VAT liability and deductibility is computed on an accrual basis.

6.2.Taxable base

The taxable base of a transaction is generally the total value of the consideration received not including the VAT itself. The VAT Law deals with the taxable base under four headings, namely taxable base on deliveries on importation, services on importation, on international transportation, and special kinds of taxable bases.

In case a consideration does not exist,  is unknown or is in a form other than money, the taxable base is the market value. Market value is the average price payable in the market for similar goods and services and is determined with reference to the Tax Procedural Law.

6.2.1.Exclusions from the taxable base

The taxable base for goods delivered and services rendered does not include the VAT itself or any discounts, provided that they are at a reasonable rate with regard to commercial practice and are explicitly listed in all invoices or similar documents.

 6.3.Tax rates

6.3.1.General rate

The standard rate of VAT on taxable transactions is set at 10% in the VAT Law, but this rate was increased to 15% as of 1 January 1993.

6.3.2.Special rates

  • For the deliveries and services mentioned in List No. I …………….1% (e.g. agricultural products such as raw cotton, dried hazelnuts;  supply and leasing of goods within the scope of the Finane Leasing Law)
  • For the deliveries and services mentioned in List No. II …..….…….8%

(e.g. basic food stuffs,  books and similar publications)

  • For the deliveries and services mentioned in List No. III …………..23%

( luxury goods, e.g. hairspray, cosmetics, make up, electric shavers, video cassettes)

  • For deliveries and the services mentioned in List No. IV ..…………40%

(automobiles with cylinder capacities exceeding 2,000, 2,500, and 3,000 depending   which Tariff numbers are mentioned)

6.4.The credit mechanism

VAT is collected at every stage of production and distribution from the first sale by the producer to the last sale to the consumer. At each of these stages, the amount of tax payable is the difference between the total amount of tax charged on the invoices issued by the taxpayer and the total amount of tax charged on invoices issued to the taxpayer during the same period. Thus the VAT is initially computed by applying the appropriate rate of taxation to the taxable base for goods and services supplied by the taxpayer during a taxable period. This amount is then reduced by a credit for VAT previously paid on importation and on goods and services supplied to the taxpayer.

6.5.Undeductible VAT

In the following cases VAT may not be credited from the VAT computed on  taxable transactions.

  • VAT on purchases of cars (which should be recorded as an expense or cost)
  • Missing and stolen stocks,
  • VAT on undeductible expenses.
  • Input VAT on exempt deliveries listed in Article 17 of the VAT Law.



Any person or entity engaged in an activity within the scope of the VAT Law must notify the local tax office where his place of business is located. If there is  more than one place of business, registration is  performed at the tax office that is authorised with respect to individual or corporate income tax.


Taxpayers must keep records in such a way as to enable the computation and  checking  of  VAT.


Invoices must include the following information:

  • invoice number,
  • date of supply,
  • name, address and the tax registration number of the company receiving the supply,
  • name, address and tax registration number of the supplier,
  • description of goods or services supplied,
  • quantity and price,
  • date of delivery of goods and  numbers of goods dispatched notes,
  • VAT must be shown separately on invoices and similar documents for the purpose of the credit mechanism.


8.1.Taxable period and submission of VAT return

The Ministry of Finance established monthly taxable periods for all  taxpayers under the normal VAT regime as of 1 October 1985.

Taxpayers must file and submit their returns to the local tax office within twenty five days following the end of each taxable period.

For  taxpayers engaging in international transportation and transit transportation , the taxable period is defined as the quarterly period.

The taxable period for international transportation, transit transportation  and  VAT on import assessed at the customs administration is the moment of crossing the customs frontier.


 VAT payments are made  at the same date as the submission of VAT returns to the relevant tax office.

* VAT Application may have legislation updates.
* Please apply to our consultancy for current legislation.





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