Turkey: Comprehensive VAT Country Guide (2026)

Turkey’s Value Added Tax (VAT) system – known locally as Katma Değer Vergisi (KDV) – is a broad-based consumption tax introduced in 1985 to replace a range of earlier indirect taxes. Turkey’s VAT regime is similar in structure to European Union VAT principles, levying tax at each stage of production and distribution with input credits to avoid double taxation. However, businesses should be aware of Turkey’s specific rules, requirements, and recent changes (such as rate increases in 2023) when navigating KDV compliance. This comprehensive guide outlines the key aspects of Turkey’s VAT system, organized into clear sections for ease of reference.

1. Country Overview

Turkey is a transcontinental nation (spanning Europe and Asia) with a large economy where VAT (KDV) serves as the primary indirect tax on consumption. VAT was introduced on 1 January 1985 by Law No. 3065, replacing several older indirect taxes in a move to modernize and streamline the tax system. Since then, Turkey has continually updated its VAT legislation and administration, often aligning with international best practices and EU VAT principles as part of its long-term policy harmonization efforts. The Turkish Revenue Administration (Gelir İdaresi Başkanlığı, GİB) under the Ministry of Treasury and Finance is responsible for VAT collection, enforcement, and guidance. VAT is a crucial component of Turkey’s tax revenues and applies broadly to the supply of most goods and services consumed within Turkey and on imports.

2. Local VAT Term

The local term for VAT in Turkey is “Katma Değer Vergisi (KDV)”, which literally means “value-added tax.” All legislation, official forms, and guidance use this term or the abbreviation KDV to refer to VAT. Businesses and consumers will commonly encounter “KDV” on invoices and receipts, indicating the value-added tax charged on taxable transactions.

3. VAT Rates

Turkey applies multiple VAT rates: a standard rate and two reduced rates, as well as provisions for zero-rating and exemptions for specific goods and services. The rates were recently updated in 2023 to increase revenue. Below is an overview:

3.1 Standard Rate (20%)
Turkey’s standard VAT rate is 20%, applying to the majority of goods and services. This general rate was increased from 18% to 20% effective 10 July 2023 as part of a fiscal measure under Presidential Decree No. 7346. The standard rate covers most commercial transactions not specifically subject to a reduced rate or exemption. Businesses must charge 20% KDV on their sales of standard-rated goods and services and remit this output VAT to the tax authority, offsetting any allowable input VAT credits.

3.2 Reduced Rates (10% and 1%) – with Examples
Turkey has two tiers of reduced VAT rates for certain goods and services deemed essential or meriting lower tax: 10% and 1%. The 10% reduced rate (recently raised from 8% in 2023) applies to a range of everyday and essential items. Examples of supplies subject to 10% VAT include many basic foodstuffs (e.g. meat, milk, eggs), textiles and clothing, footwear, furniture and household appliances, pharmaceuticals and medical products, and admission to cultural events like cinemas, theaters, operas. The 1% “super-reduced” rate is reserved for a very limited set of essential goods. Notably, unprocessed staple foods such as bread and flour, some legumes, certain agricultural products (like raw cotton and dried nuts), newspapers and magazines, and specific affordable housing or real estate transactions can be subject to 1% VAT. These reduced rates are intended to keep essential goods affordable and support certain sectors. Businesses must be careful to apply the correct rate; misapplying a lower rate to a standard-rated item can lead to penalties.

3.3 Zero-Rated and Exempt Supplies
Some transactions in Turkey are not subject to VAT either because they are zero-rated (taxed at 0%, with the right to deduct input VAT) or exempt (no VAT charged, but also no input VAT recovery on related purchases). Key zero-rated supplies include exports of goods (all goods exported from Turkey are zero-rated to encourage international trade). International transport services (e.g. transporting goods or passengers to or from Turkey) are also zero-rated for VAT. Additionally, services rendered to customers abroad may qualify for a 0% VAT rate if they meet the conditions of being exported services (i.e. the service is performed for a non-resident and is utilized outside Turkey). This encourages Turkish service providers in sectors like consulting, software, construction, or event organization to export their services without adding VAT, while still allowing them to recover input VAT on related costs.

Exempt supplies (transactions completely exempt from VAT, meaning no output tax is charged but input VAT on costs is generally not recoverable) include certain activities often taxed by other means or given special treatment. Major VAT-exempt sectors are financial and banking services (e.g. loans, credit, banking transactions) which are subject to a separate Banking and Insurance Transactions Tax instead, insurance services, postal services and telecoms by state enterprises (as per specific listings in the VAT law), and leasing of immovable property by individuals (residential rent). Educational services, certain medical and healthcare services, and social/welfare services may also be exempt in specific circumstances. Sales of scrap metal, waste paper and certain precious metals can be exempt, though businesses can opt to waive this exemption in some cases to instead apply VAT (often to reclaim input VAT).

3.4 Recent and Upcoming Rate Changes
The most significant recent change to Turkish VAT rates came in mid-2023. Effective 10 July 2023, the standard VAT rate was increased from 18% to 20%, and the 8% reduced rate was raised to 10%, via Presidential Decree No. 7346. Essential goods previously taxed at 8% (such as many cleaning products) moved to 20% unless they were in the specially protected categories. The 1% rate remained unchanged. These changes were part of a broader fiscal adjustment in response to economic conditions, aiming to boost tax revenues while still maintaining lower rates on key necessities. As of early 2026, no further VAT rate changes have been officially announced beyond the 2023 increases (the standard rate remains 20%, with reduced rates of 10% and 1%). Businesses should stay updated via official GİB announcements, as Turkey’s government can adjust VAT rates by decree within limits set by law if economic policy requires.

4. VAT Number Format

Every individual and legal entity conducting business in Turkey is assigned a Tax Identification Number (TIN) known as a “Vergi Kimlik Numarası (VKN)”. For Turkish companies and other legal entities, the VAT number (VKN) is a ten-digit numeric code (e.g. 0123456789). Individuals use their 11-digit Turkish national identification number as their tax ID; for foreign individuals resident in Turkey more than 6 months, a 10-digit taxpayer number is issued (often using the foreigner’s ID number). There are some patterns in how numbers are assigned – for example, a company name starting with “A” may be given a VKN beginning with 0, those starting with “B” get a number beginning with 1, and so on – but generally the format is a simple sequence of digits.

Turkey is not part of the EU VAT system, so Turkish VAT numbers do not have an “EU” country prefix and are not included in the EU’s VIES database. However, Turkish businesses involved in cross-border trade often still prefix their 10-digit number with “TR” on invoices for clarity. Businesses must display their tax number on all VAT invoices and official documentation.

5. Registration Requirements

5.1 Mandatory Registration and Thresholds (Residents vs. Non-Residents): Turkey operates a “no-threshold” policy for VAT registration. All persons or entities that make taxable supplies in Turkey are required to register for VAT from their first sale, regardless of turnover. This rule applies equally to Turkish-established businesses and to foreign (non-resident) companies making taxable supplies in Turkey. In other words, there is no minimum revenue threshold – anyone conducting a commercial activity involving taxable goods or services in Turkey must register and account for VAT.

For non-established (foreign) businesses, Turkey historically did not allow direct VAT registration without a local presence. In practice a foreign company was required to either form a Turkish entity (such as a joint-stock or limited company, or a branch office) to get a VAT number, or else have its Turkish customer account for the VAT under reverse-charge (see section 15.3) if it did not register. Recent rules, however, have introduced specific exceptions (notably for digital services – see Section 17) where certain non-resident suppliers can register for VAT under a simplified procedure without full establishment. Aside from those special cases, any foreign company starting taxable activities in Turkey must register immediately – typically by setting up a local business presence or appointing an agent – because no registration threshold applies to non-residents either. Delaying registration when required can lead to penalties (see Section 24).

5.2 Voluntary Registration: Since registration is compulsory for all taxable activities from day one, the concept of a “voluntary” VAT registration (to register before crossing a threshold or for exempt small businesses) is generally not applicable in Turkey. Certain very small-scale traders and service providers (such as small barber shops, shoeshine or repair stalls, some artisans) may fall under special regimes that effectively exempt them from VAT – they pay a simplified lump-sum tax or no VAT at all, under domestic small business incentives. Apart from such limited cases, there is no provision for voluntary VAT registration because all businesses with taxable supplies must already register. If a business’s activities are entirely exempt from VAT by law, they would not register for VAT (since they cannot charge or deduct VAT), unless they also have taxable activities.

5.3 EU OSS/IOSS Schemes: The EU’s One-Stop Shop (OSS) and Import One-Stop Shop (IOSS) do not apply to Turkey, as Turkey is not a member of the European Union. These EU schemes allow simplified VAT reporting for cross-border B2C supplies of goods and digital services within the EU, but they are not available for Turkish VAT compliance. A business selling goods from the EU to Turkish consumers cannot use OSS/IOSS for Turkish VAT – instead, such sales are treated as imports into Turkey, with import VAT and customs processes applying (usually the buyer or their customs agent pays Turkish import VAT and duties at the border). Likewise, Turkish businesses making distance sales to EU consumers would need to register for OSS in an EU member state if they wish to use that system – but again, this is outside Turkish VAT law. In summary, Turkey does not participate in the EU’s OSS/IOSS; any cross-border B2C sales involving Turkey are subject to normal import/export VAT rules.

6. VAT Grouping Rules

Historically, Turkey did not permit VAT group registrations – each legal entity had to register and file VAT separately, with no group consolidation. Consolidation of VAT liabilities across related companies was not allowed, reflecting the general principle in Turkish taxation that each company is a distinct taxpayer.

However, a recent amendment to the VAT Law (Law No. 3065) introduced an optional Group VAT registration regime. Under Law No. 7104 (enacted in 2018), the Ministry of Finance gained authority to allow “VAT group liability” for corporate taxpayers under certain conditions. In practice, this means that companies with at least 50% common shareholding between them can apply to be treated as a single VAT group, filing a consolidated VAT return. The group registration is not mandatory; it is an option that qualifying companies may elect (with Ministry approval). All members of a VAT group are jointly and severally liable for the group’s VAT debts. It’s important to note that the VAT grouping mechanism in Turkey is still relatively new and uncommon, and detailed regulations and procedures (as set by the Ministry of Treasury and Finance) determine its implementation. Businesses considering VAT grouping should seek local tax advice and ensure they meet the necessary shareholding and reporting requirements.

7. VAT Recovery for Foreign Businesses

If a foreign business (not established in Turkey) incurs Turkish VAT – for example, on local purchases or expenses – its ability to recover that VAT is very limited. Turkey generally does not allow refunds of VAT to non-resident companies that are not registered for VAT in Turkey, except under specific circumstances. In most cases, a foreign business must either register for VAT in Turkey (which typically requires establishing a local entity or appointing a fiscal representative) in order to reclaim input VAT through the normal return process, or simply treat the VAT as a cost.

One important exception involves reciprocal refund arrangements (see Section 16 for details): Turkey permits VAT refunds to foreign companies for certain specific activities (e.g. participation in Turkish trade fairs or exhibitions) provided the company’s home country offers similar VAT refunds to Turkish businesses. In those cases, a foreign business with no Turkish VAT registration can submit a refund claim to Turkish tax authorities for qualifying expenses. Outside of such scenarios, the rule of thumb is that non-resident businesses without a Turkish VAT registration cannot normally recover VAT.

8. Fiscal Representative Requirements

Non-resident businesses (apart from those using the special digital services regime) cannot directly register for Turkish VAT without local representation. In practice, a foreign business must either incorporate a legal entity in Turkey (such as a local company or branch) or appoint a locally established fiscal representative to handle VAT obligations on its behalf. The fiscal representative (sometimes an accountant or tax agent certified in Turkey) will be responsible for fulfilling all VAT compliance duties (filings, payments) and is often held jointly liable for the VAT liabilities of the foreign business.

It’s important to note that for the special regime applicable to digital (electronically supplied) services to Turkish consumers (see Section 17), Turkey introduced a simplified online registration system (often referred to as “VAT-3” special registration) that does not require a full fiscal representative or local company formation. Aside from that specific case, however, any non-resident company engaged in regular taxable trading in Turkey must go through a local presence or representative to register for KDV. Failure to appoint a fiscal representative when required can result in an inability to register and potential non-compliance penalties.

9. Currency and Foreign Exchange (FX) Rules

The Turkish currency is the Turkish Lira (TRY), and VAT must generally be accounted for in TRY. While invoices in Turkey can be issued in a foreign currency, the VAT amount must be converted to Turkish Lira and shown in TRY on the invoice for official tax purposes. Taxpayers should use the exchange rate published by the Turkish Central Bank (TCMB) on the date the tax liability arises (usually the invoice date or delivery date) to convert foreign currency amounts to TRY for VAT calculation. All VAT returns and payments to the tax authorities are made in TRY as well.

Exchange rate fluctuations can impact the VAT calculation for foreign-currency denominated contracts. If an invoice is issued in, say, USD or EUR, the VAT portion must still be reported in lira. Businesses should retain documentation of the exchange rate used for conversions in case of audit. Notably, Turkey experienced high inflation and interest rate changes in recent years, which led to changes in official late payment interest rates (see Section 24.2). Ensuring accurate conversion to TRY on invoices and returns is therefore critical for compliance.

10. VAT Law and Legal Framework

Turkey’s VAT system is governed by the Value Added Tax Law (VAT Law No. 3065), originally enacted on 2 November 1984 and effective from 1 January 1985. This primary legislation, known in Turkish as “Katma Değer Vergisi Kanunu”, provides the framework for VAT in Turkey, including definitions of taxable persons, taxable transactions, exemptions, rates, and the mechanics of the tax. Over the years, the law has been amended multiple times – for instance, significant amendments in 2001 (aligning refund rules with EU practices) and in 2018 (introducing group VAT and other changes) – to modernize the system and align with evolving economic policies and EU directives where appropriate.

In addition to the main law, there are detailed Implementing Regulations and Communiqués issued by the Ministry of Treasury and Finance (formerly Ministry of Finance) and the Revenue Administration. These provide guidance on specific aspects of VAT (such as invoicing rules, e-invoicing, refund procedures, etc.) and are updated frequently. Taxpayers must also follow the provisions of the Tax Procedure Law (Vergi Usul Kanunu) for procedural aspects like record-keeping, assessments, audits, and penalties.

The tax authority responsible for enforcing VAT law is the Turkish Revenue Administration (GİB), which operates local tax offices throughout Turkey to handle registrations, filings, audits, and refunds. The legal framework vests the government (Council of Ministers/President) with the power to adjust VAT rates within set limits, and to define specific rules (e.g., sectors subject to VAT withholding, scope of exemptions) via secondary legislation.

11. Tax Authorities

The administration of VAT in Turkey is centralized under the Revenue Administration (Gelir İdaresi Başkanlığı, GİB), which is part of the Ministry of Treasury and Finance. The GİB is responsible for all matters related to VAT, including processing VAT registrations, collecting VAT returns and payments, conducting audits and investigations, issuing tax rulings and communiqués, and managing refund claims. There are numerous local Tax Offices (Vergi Dairesi) across Turkey; businesses are generally assigned to a specific tax office based on their registered address or the nature of their activities. These offices handle day-to-day taxpayer services such as VAT return submissions, payments, and audits.

Taxpayers interface with the GİB through an online portal (the Interaktive Vergi Dairesi – Interactive Tax Office) for electronic return filing and payments. The GİB also maintains a website (primarily in Turkish) where it publishes VAT Communiqués, guidelines, and announcements of any changes in tax laws or rates. The GİB has the authority to impose penalties and interest for non-compliance (see Section 24). In case of disputes, taxpayers may appeal GİB assessments through administrative objections and the Turkish tax courts.

12. Scope of VAT

Turkey’s VAT (KDV) is a broadly applied tax on consumption. It covers the supply of goods and services within Turkey, as well as the importation of goods and services into Turkey. In practical terms, a transaction is considered to occur “in Turkey” (and thus is within the scope of Turkish VAT) if for goods, the goods are located in Turkey at the time of delivery, or if for services, the service is performed in Turkey or the benefit/enjoyment of the service is realized in Turkey. All stages of production and distribution are subject to VAT on the “value added” at that stage, with businesses charging VAT on their sales (output VAT) and crediting any VAT paid on their inputs (input VAT) against that liability.

In-scope transactions include: sales of movable goods in Turkey, the provision of services in Turkey, imports of goods (which are taxed at customs upon import), and imports of services (where a Turkish recipient pays a foreign service provider; see reverse charge in Section 15.3). The law defines taxable persons broadly to include those conducting commercial, industrial, agricultural, or professional activities in Turkey, as well as other specific situations (e.g. organizers of entertainment events in Turkey, lessors of certain rights, and those who inadvertently show VAT on an invoice) which all fall under VAT obligations.

Certain transactions are outside the scope of VAT entirely (neither taxed nor exempt) – for instance, non-commercial personal transactions or sales of goods abroad that never enter Turkey – but the majority of business-related transactions involving Turkey will either be taxable or exempt under the VAT law.

13. Time of Supply Rules (Tax Point)

General Rule: In Turkey, the time of supply (tax point) is generally the moment when the taxable event occurs, which is typically the earlier of when goods or services are supplied (delivered or completed) or when the consideration is received (payment). This establishes when VAT becomes chargeable and in which tax period the transaction must be reported.

Important Exception – Advance Payments: Unlike some jurisdictions, receiving an advance payment in Turkey does not by itself create a VAT liability until the goods are delivered or the service is performed. In practice, this means if a customer pays before the actual supply (e.g. a deposit or prepayment), VAT on that amount is generally not due until the supply is rendered. The tax point is deferred until the delivery of goods or completion of the service. Businesses should still issue advance payment receipts as needed, but a full VAT invoice will be timed to the actual supply.

13.1 Goods: For one-off sales of goods, the VAT tax point typically occurs upon the delivery of the goods or transfer of title to the buyer. In other words, when control of the goods passes to the customer (often evidenced by delivery notes or shipment), VAT becomes due. If payment is received or an invoice is issued before the goods are delivered, under the general rule the earlier event would normally fix the tax point; however, as noted, a pure advance payment alone is not treated as creating a final tax point in Turkey until the goods are delivered. Thus, the safe approach is to issue the VAT invoice no later than the delivery date (and in any case within 7 days after delivery – see invoicing rules in Section 14.1), to ensure compliance with the tax point rules.

13.2 Services: For one-time services, the time of supply is when the service is ** rendered or completed**, or when payment is received – whichever occurs first. If a service is fully performed before any payment, VAT becomes due at completion of the service (and an invoice should be issued within 7 days of that completion). If payment is received in advance of completing the service, the standard rule would treat that payment as the tax point; however, as mentioned, Turkish practice is that an advance by itself does not trigger VAT until the service is actually rendered. Businesses should therefore time their invoicing for services to coincide with the performance of the service (or receipt of payment), as one of these events will mark the tax point.

13.3 Continuous Services: For ongoing or continuous services (e.g. long-term contracts, subscriptions, leases, etc.), the tax point is determined on a periodic basis. Specifically, for continuous services the VAT becomes due at the earliest of: the time when payment is due (or actually received) for a period, the date of issuance of an invoice for that period, or the end of each taxable period (e.g. month) covering the service – whichever comes first. In practice, if a continuous service runs for several months, VAT would be apportioned and reported in each month or period when billings or payments occur or at minimum at the end of each month for the portion of service delivered up to that point.

13.4 Imports: For imports of goods, the time of supply (taxable event) occurs at the point of customs clearance into Turkey’s domestic market. In other words, when goods are released from a customs regime (or a bonded warehouse) into free circulation in Turkey, import VAT becomes due at that moment. Typically, import VAT is collected by Turkish Customs authorities at the time of importation (simultaneously with any customs duties). For imports of services (where a Turkish business or consumer acquires a service from abroad), the “time of supply” is usually when the service is rendered or paid for; the Turkish recipient must account for VAT via the reverse-charge at that time (see 15.3).

13.5 Goods on Approval/Return: In cases where goods are supplied on approval, consignment, sale-or-return, or similar terms, Turkey does not prescribe a special tax point rule distinct from the general rule. The supply is typically not considered to occur (and VAT is not due) until the customer actually approves or accepts the goods (finalizing the sale) or payment is received – whichever happens first. If goods are delivered on a “try and return” basis, and the customer returns them within the approval period, then no sale has taken place for VAT purposes. If the customer keeps (accepts) the goods, the VAT becomes due at that point (with the supplier obligated to issue a proper invoice within 7 days of acceptance). In summary, the normal “earlier of delivery or payment” rule applies, with the understanding that delivery is only finalized when the goods on approval are taken into ownership.

14. VAT Invoicing Requirements

Turkey has detailed invoicing rules to ensure VAT is properly accounted for. All VAT-registered businesses must issue legal invoices for their sales (except for certain retail transactions, where a fiscal receipt can substitute).

14.1 Invoice Issuance Deadlines: Taxable persons are required to issue a VAT invoice to the customer within 7 days of the date on which the taxable supply took place. This means after delivering goods or completing a service (the VAT tax point), the seller has up to seven days to issue the invoice documenting the supply and the VAT due. Late invoicing can result in penalties. In practice, many businesses issue the invoice on the same day as the supply to avoid missing the deadline. For retail sales to consumers (B2C) below a certain small threshold (approximately TRY 1,200), a simplified sales receipt from a certified cash register (fiscal till receipt) may be issued instead of a full tax invoice. However, for B2B transactions and larger sales, a full VAT invoice is mandatory.

14.2 Required Invoice Contents: Turkish VAT invoices must contain a comprehensive set of information as specified by law. At minimum, an invoice should include:

• Invoice Date and, if different, the date of delivery or service (i.e. the date the taxable supply occurred).
• A unique sequential invoice number that allows identification of the transaction.
• Supplier details: name, address, and tax identification number (VKN) of the supplier.
• Customer details: name, address, and tax ID number of the customer (for B2B transactions). (For B2C sales, the customer’s tax ID may not be required on the receipt if it’s a cash sale to a final consumer.)
• Description of goods or services supplied, including quantity and unit price for each item or service.
• The total amount charged for the goods/services and the applicable VAT rate(s) and amount of VAT charged (in Turkish Lira).
• If any exempt or zero-rated items are included, the invoice must clearly indicate that no VAT is charged on those items and cite the relevant legal provision or VAT law article that grants the exemption/zero-rating.
• Any other information required by specific regulations (for example, a waybill (transport) number if applicable to goods in transit).

Invoices in Turkey are typically issued in Turkish (the official language) and amounts shown in TRY. While bilingual invoices may be used, the Turkish text is considered legally authoritative.

14.3 E-invoicing and Digital Signature Rules: Turkey is a leading country in implementing mandatory e-invoicing for many businesses. There are two main electronic invoice systems:

• e-Fatura: A clearance-based e-invoice system for B2B and B2G (business-to-government) invoices. Certain taxpayers – such as those in specific industries (e.g. oil, tobacco), large companies over defined annual turnover thresholds, and those who participate in particular schemes – are required to use e-Fatura. Introduced in 2012, the e-Fatura system requires invoices to be issued electronically in a prescribed XML format and cleared through the GİB’s central platform in real time or near-real time. Each e-Fatura carries a government-approved digital signature and a unique identifier. Buyers who are in the e-Fatura system must receive e-invoices from their suppliers through this platform.
• e-Arşiv Fatura: An electronic invoicing system for B2C transactions and smaller B2B transactions where the customer is not registered in the e-Fatura system. Implemented starting in 2013 and expanded since, e-Arşiv allows businesses to issue consumer invoices electronically (often as PDF or printed e-archive invoices) and to report them to the tax authority. It is considered a quasi-real-time reporting system for B2C sales. For example, retailers meeting certain size thresholds must issue e-archive invoices (or approved fiscal receipts) for their sales to individuals.

Both e-Fatura and e-Arşiv are part of a broader digital tax transformation in Turkey. Over time, the government has expanded the scope of mandatory e-invoice usage – lowering turnover thresholds and adding new sectors annually. Additionally, companies using e-invoicing often must also use e-ledger (e-Defter), an electronic bookkeeping system, and adhere to digital archiving rules. All e-invoices must include secure electronic signatures or seals to ensure authenticity and integrity. Businesses should verify whether they fall under mandatory e-invoice requirements based on current GİB communiqués, as non-compliance can lead to fines.

14.4 Simplified Invoices: Simplified or abridged VAT invoices are generally not permitted in Turkey. All invoices must contain the full details as described above. The only minor exception is for small retail transactions under a defined threshold (around TRY 1,200) where a fiscal cash register receipt (which contains basic information and tax breakdown) can serve as the sales document. Even in those cases, larger business customers may request a full invoice. In summary, Turkey expects a full VAT invoice for nearly all transactions; there is no generic concept of a highly simplified invoice for low-value sales beyond the use of approved cash register receipts in retail.

14.5 Self-Billing: Self-billing (where the customer issues an invoice on behalf of the supplier) is not allowed under Turkish VAT law. Invoices must be issued by the supplier (or its authorized e-invoicing system) to be valid for VAT purposes. Buyers cannot unilaterally issue VAT invoices for their purchases (except in certain limited cases like self-assessment documents for reverse charge services, which are not actually called “invoices”). Companies engaging in self-billing practices used in some other countries will need to adjust their processes to comply with Turkish requirements.

14.6 Invoice Retention Period: Records and invoices must generally be kept for at least 5 years for tax purposes in Turkey. This means all VAT invoices (issued and received), accounting books, and related documents should be retained and available for inspection for five years following the year they relate to. Additionally, Turkish Commercial Law requires accounting records to be preserved for 10 years, which can extend the practical document retention period for businesses. Invoices can be stored electronically (and many will be in the e-invoice system by default), and storage outside of Turkey is permitted provided that authorities have ready electronic access to them if needed. It’s prudent for businesses to ensure both paper and electronic records are securely kept for the full retention period.

14.7 Invoice Correction Methods: Turkey’s VAT system does not use credit notes in the same manner as some other countries. Credit notes are not recognized as formal adjustment documents for VAT. If an issued invoice has an error (for example, an overcharge or a mistake in tax calculation), the standard practice is:

• Cancel and reissue: If the error is identified quickly (and the buyer agrees), the supplier can cancel the incorrect invoice entirely – typically by issuing a storno annotation or obtaining a signed acknowledgment from the buyer – and then issue a new corrected invoice. The cancellation and reissuance should be documented and cross-referenced.
• Adjust via VAT returns: If the correction occurs after the original invoice has already been recorded, the supplier and customer may each make adjusting entries in their respective VAT returns (e.g. the supplier can reduce their output tax in an amended return, and the customer reduces their input tax claim) to reflect the correction. This requires mutual coordination and supporting documentation since unilateral credit notes are not accepted.

Because of these strict rules, it’s critical to issue accurate invoices. If a price adjustment or discount needs to be given after an invoice was issued, the parties should follow the proper procedure (potentially canceling and reissuing the invoice) to ensure VAT is correctly adjusted.

15. Compliance and Deductions

15.1 Right to Deduct Input VAT (and Key Exceptions): Like most VAT systems, Turkey allows businesses to deduct input VAT (KDV paid on purchases) against their output tax liabilities, so long as the purchases are used for making taxable (KDV-liable) supplies. Input VAT can be offset on the periodic VAT return. If in a given month the input VAT exceeds output VAT, the excess is generally carried forward as a credit to subsequent months (see Section 22.5 on refunds). However, **certain inputs are not deductible. Notably, VAT incurred on passenger cars (such as cars purchased for company use) is blocked from recovery in most cases. Other non-deductible input VAT items include purchases used for exempt activities (since no output VAT to offset) and any goods/services that are not used for business purposes or are considered non-deductible expenses for income tax (for example, personal or luxury expenditures, or gifts and entertainment, beyond allowed limits). Essentially, if a cost is not recognized as a business expense for corporate tax, its VAT is also not recoverable.

There are time limits for exercising the VAT deduction: Input VAT should be claimed in the tax period in which the supplier’s invoice is booked, or at latest by the end of the following calendar year after the year in which the taxable supply occurred (after which the right to deduct expires). Companies should ensure to claim VAT credits in a timely manner. Finally, if an activity is partially exempt (e.g. a company makes both taxable and exempt supplies), input VAT must be apportioned – only the portion related to taxable (creditable) activities may be deducted, while VAT directly attributable to exempt supplies is not recoverable.

15.2 Call-Off Stock Arrangements: Call-off stock (where a foreign supplier stores goods in Turkey for a local customer, who takes ownership only when the goods are “called off” from stock) does not benefit from a simplified VAT deferral arrangement in Turkey. Since there is no specific call-off stock regime, such scenarios are treated as a normal import and supply. Typically, the foreign company would either need to register for VAT in Turkey (via a local entity or representative) or the Turkish customer would be considered the importer and accountable for VAT upon transferring the goods from the warehouse. In practice, inventory held by a foreign seller in Turkey (even if for one customer) is likely seen as creating a taxable presence or an obligation to register, and any subsequent sale out of that stock is treated as a domestic supply subject to Turkish VAT (with the usual requirement of VAT registration since there’s no threshold). In summary, Turkey does not offer a call-off stock simplification – the arrangement would typically trigger import VAT at entry and local VAT on the sale of the goods to the customer.

15.3 Reverse Charge Mechanisms (Domestic and Cross-Border):

• Cross-Border (Imports of Services): Turkey employs a reverse-charge mechanism (”sorumlu sıfatıyla KDV”) for services purchased from abroad by Turkish businesses. If a Turkish VAT-registered company or other taxable person receives services from a non-resident provider (who has no Turkish VAT registration), the Turkish customer is required to self-assess the VAT on the payment to the foreign supplier. The Turkish recipient does this by issuing a special return (known as **VAT Return “Form KDV-2” for reverse-charge liabilities) and pays the VAT due to the tax office, while simultaneously claiming it as input VAT (if the purchaser engages in fully taxable activities). This reverse-charge thus shifts the liability to the local firm and ensures VAT is paid on imported services, but it typically results in no net VAT cost for the Turkish buyer if they can fully deduct VAT. (If the Turkish recipient is partially exempt or not VAT-registered, the reverse charge VAT becomes a cost.) Cross-border services commonly subject to reverse charge include consulting, legal and professional services, royalties and licenses, digital services, and advertising purchased from abroad. Note that imports of goods are not handled via reverse charge – import VAT is collected by Customs (see 13.4).
• Domestic Reverse Charge / VAT Withholding: Turkey also operates a “partial VAT withholding” system for certain domestic transactions, where the buyer withholds part of the VAT and remits it directly to the government. The aim is to reduce VAT fraud in sectors prone to evasion. For example, in designated sectors like construction services provided to government agencies, cleaning and security services, catering services, advertising services, scrap material sales, certain metal and plastic waste sales, and textile subcontracting among others, the purchaser is required by communiqués to pay a specified portion (such as 50% or other fraction) of the VAT directly to the tax office, while the seller charges and collects only the remainder. The purchaser’s withheld portion is reported on a KDV-2 return. This is often referred to as “withholding VAT” or “partial reverse charge”. The exact scope and rates of withholding are defined by the Ministry of Treasury and Finance and can be updated; for instance, sales of certain precious metals and jewelry involve a portion of VAT to be self-declared by the buyer. Domestic businesses must be aware if any of their purchase/sale transactions fall under these rules to ensure correct VAT handling.

15.4 Treatment of Cash Discounts: Turkey has no special VAT rule for cash or prompt payment discounts, beyond the general principle that VAT is due on the actual consideration paid. If a seller offers a cash discount (for example, a price reduction for early payment), the VAT should be calculated on the net amount after the discount. In practice, if the discount is agreed at the time of sale, the invoice would simply reflect the reduced price and charge VAT on that lower amount. However, if a prompt payment discount is applied after the invoice is issued (e.g. the customer pays early and becomes entitled to a 2% rebate), Turkish rules do not allow a traditional credit note to reduce the original VAT. Instead, the supplier and customer would need to follow the invoice correction procedure (Section 14.7) – potentially cancel and reissue the invoice for the lower amount or make offsetting adjustments in their VAT returns – to account for the discount properly. It’s therefore advisable to clarify payment terms in advance and issue the invoice for the amount actually due (post-discount) to avoid complications.

15.5 Bad Debt Relief: In Turkey, relief for bad debts (uncollected receivables) is limited. A supplier generally cannot recover the VAT on a sale that the customer fails to pay unless certain stringent conditions are met. Specifically, bad debt VAT relief is only available after a legal process has established that the debt is uncollectible – for example, if the customer has been declared bankrupt or a court judgment confirms the debt cannot be recovered. Only once the debt is officially deemed irrecoverable can the supplier adjust its VAT (often via an amended return) to claim relief for the output VAT previously paid. There is no automatic bad debt adjustment simply for aging receivables; the company must pursue legal remedies and obtain evidence of the debt’s uncollectibility. This makes Turkey’s bad debt relief relatively restrictive, effectively requiring a court ruling or similar formal proof before VAT can be reclaimed.

15.6 Import VAT Deferment Schemes: Turkey does not provide a general import VAT deferment or postponed accounting scheme for imports. When goods are imported into Turkey, import VAT is due at the time of importation and is collected by customs authorities as part of the clearance process (along with any customs duties). Import VAT is levied at the same rate as the domestic VAT on the goods in question. Businesses can typically later offset this import VAT on their VAT returns as input tax (just as for local purchase VAT), but they must fund the VAT at the time of import and then reclaim it through the return (which can create a cash-flow timing issue). There are a few exceptions that provide relief: for example, imports of machinery and equipment under an Investment Incentive Certificate are exempt from VAT at import. Also, authorized exporters operating under certain regimes (like inward processing) might avoid or defer import VAT. However, unlike some countries (e.g., those that allow direct reporting of import VAT in the next VAT return), Turkey generally requires payment of import VAT upfront to customs.

15.7 VAT Warehousing: Turkey does not have a domestic VAT warehousing scheme (such as those that allow suspension of VAT on goods stored in specific warehouses). Instead, Turkey uses the traditional customs-bonded warehouse system for imports. Placing goods in a bonded warehouse or free zone will suspend import VAT and customs duties until the goods are removed into free circulation, at which point VAT/duties are due. But for goods produced and traded within Turkey, there is no mechanism to defer VAT by using a warehouse; a transfer of goods between Turkish companies is a VAT-able event at the appropriate rate. Businesses trading internationally can utilize Free Zones and customs warehouses as part of their supply chain to defer taxation until the point of sale or import into Turkey, but once goods enter the Turkish market, VAT applies. In summary, VAT warehousing as known in some EU countries is not implemented in Turkey – only standard customs warehousing for imports exists.

15.8 Supply-and-Install Contracts: Turkey has no special VAT rules for “supply and install” contracts. In cases where a company (domestic or foreign) supplies goods and also installs or assembles them in Turkey, the VAT treatment follows the general rules. If a foreign supplier ships goods into Turkey and also provides installation services on-site, the transactions may be viewed as either a single supply or separate supplies depending on contract terms, but either way the Turkish VAT will apply: the goods part would be subject to import VAT (if coming from abroad), and the installation service (if performed in Turkey) would be a taxable service in Turkey. No distinct tax timing or rate rules apply specifically to supply-and-install; thus, the normal place-of-supply and time-of-supply rules are used. Practically, foreign suppliers engaging in installation in Turkey might need to register for VAT (or work with a local partner) to account for VAT on the installation labor, unless the reverse charge is applicable.

15.9 Use-and-Enjoyment Provisions: Turkish VAT law does not explicitly list “use and enjoyment” rules in the same way some other jurisdictions do. Instead, it relies on general place-of-supply principles. In effect, if a service is supplied from abroad but effectively used or enjoyed in Turkey, it will often be considered a Turkish taxable supply by virtue of those principles, and subject to VAT (usually via reverse charge if the supplier is non-resident). Conversely, services performed in Turkey but used entirely outside Turkey may be treated as outside the scope or zero-rated if they qualify as exported services. For example, telecommunication or electronic broadcasting services consumed in Turkey are subject to Turkish VAT even if the provider is foreign, because the “enjoyment” is in Turkey. While the term “use and enjoyment” is not explicitly in the VAT law, similar outcomes are achieved through Turkey’s place of supply rules for services. Businesses should consider where their service is performed and consumed: for certain services, the location of use can determine VAT obligations even absent specific statutory wording.

15.10 Capital Goods Adjustment Period: Turkish VAT rules do not impose a formal long-term capital goods adjustment scheme as in the EU. Input VAT on capital goods (e.g. machinery, equipment) is typically claimed in full in the VAT return for the period of the purchase. There is no requirement to spread the credit over several years, nor a mandatory adjustment period to monitor the use of the asset. If a capital asset’s use changes (for instance, if a machine initially dedicated to taxable outputs is later diverted to produce exempt outputs), there is no specific multi-year adjustment mechanism under VAT law. Instead, any change of use might be addressed by making an output VAT charge (if required) or by disallowing input VAT at the time of purchase if the intention was non-taxable use. In summary, Turkey does not have a capital goods scheme with multi-year adjustments – the input VAT recovery on capital items is taken upfront in the period of acquisition, with no prescribed subsequent adjustment period (other than adjusting for any change in use through the normal VAT rules if applicable).

16. VAT Recovery for Non-Residents (Foreign VAT Refunds)

Businesses that are not established in Turkey and not registered for Turkish VAT generally cannot recover VAT on Turkish expenses through the normal input tax credit mechanism. However, Turkey has implemented a special refund procedure inspired by the EU’s 13th Directive (Council Directive 86/560/EEC) for certain non-resident businesses to reclaim Turkish VAT on specific activities, provided reciprocity conditions are met.

16.1 EU 8th Directive (EU Businesses) Refunds: The EU 8th Directive refund system (for EU businesses reclaiming VAT from other EU countries) does not apply to Turkey, since Turkey is not an EU member. EU-based companies cannot use the EU VAT refund electronic portal to get Turkish VAT back, and Turkey is not part of the OSS/IOSS frameworks. Instead, EU businesses must use Turkey’s own non-resident refund process (similar to the 13th Directive process) and are subject to the same rules of reciprocity and eligible expense categories (see below).

16.2 Non-EU (13th Directive-equivalent) Refunds: Under Turkey’s foreign VAT refund regulations (modeled after the 13th Directive), a non-Turkish business may reclaim VAT on certain expenses incurred in Turkey only if two main conditions are met: (a) the business has no residence, place of business, or VAT registration in Turkey, and does not make taxable supplies in Turkey; and (b) the business is resident in a country that offers reciprocal VAT refunds to Turkish businesses. As of recent updates, Turkey has established reciprocity agreements with around 16 countries, including several EU member states (e.g. Germany, France, Italy, the Netherlands, etc.), EFTA countries like Norway and Switzerland, and certain others. Only claimants from those jurisdictions can apply for a VAT refund in Turkey.

16.3 Reciprocity Requirements: Reciprocity is a cornerstone of Turkey’s non-resident VAT refund system. If a foreign business’s home country does not allow Turkish companies to claim back VAT in that country, then Turkey will not grant VAT refunds to claimants from that country. The list of reciprocal countries can change if new agreements are signed, so companies should verify current GİB announcements or bilateral tax treaties. Generally, most EU countries (which allow refunds to Turkish firms) are on the list, as well as a few others (the Gurulkan law firm noted 16 countries as of 2021, including EU states like Bulgaria, France, Italy, etc., and non-EU states like Norway, Switzerland, Bosnia-Herzegovina among others).

16.4 Need for Fiscal Representative: To claim a VAT refund in Turkey, an overseas company typically must either file the claim directly with the Turkish tax office that has jurisdiction (often Ankara Large Taxpayers Office for foreign refund claims) or appoint a local fiscal agent to handle the refund process. While not all claims strictly require a fiscal representative, practically many companies use local tax advisors or agents for assistance. The application must be submitted with supporting documentation – including the original invoices, proof of payment, a Turkish tax registration certificate (which implies the business has obtained a temporary tax number for the refund process), and a Power of Attorney if using a representative. The deadlines and minimum invoice amounts are defined by law (generally, claims must be filed by the end of the second year following the year of the expenses). The refund, once approved, can be paid out in cash or by bank transfer, and in some cases Turkey may require an audit of the claim before payment (claims under a certain amount may be paid without audit, while larger claims are subject to verification, unless a bank guarantee is provided).

It’s important to note that the scope of refundable expenses for non-residents is narrow. Usually only VAT on expenditures related to participating in fairs, exhibitions, and trade shows in Turkey (such as booth fees, event services, accommodation) is refundable to foreign businesses under this scheme. General business travel expenses or other operational costs typically do not qualify. Therefore, non-resident businesses should not expect to recover all Turkish VAT incurred – only those costs fitting the specific criteria under the refund program and for which their country is on the reciprocity list.

17. VAT on Digital Services

In response to the growth of the digital economy, Turkey amended its VAT law in 2018 to bring non-resident providers of e-services to consumers into the VAT net. Since 1 January 2018, electronically supplied services (ESS) provided by non-resident companies to Turkish customers who are not VAT-registered (B2C services) are subject to Turkish VAT. Key points of this regime include:

• Scope: Digital services covered include the supply of services online or electronic delivery of content to Turkish individuals. While the law doesn’t exhaustively define “digital services,” in practice it covers things like streaming media (video, music), online gaming, software and app downloads, cloud services, online advertising, and similar services delivered via the internet or electronic network. Essentially, if the service is provided remotely over the internet to a person in Turkey, it’s within scope. This also aligns with many categories of digital services taxed under EU VAT rules.
• Non-Resident Supplier Obligations: A foreign company with no Turkish establishment that provides digital services to Turkish consumers must register for Turkish VAT under a special “digital service provider” regime. This is sometimes referred to as “VAT 3” special liability, named after the return form (KDV-3) used. There is no sales threshold – a single Turkish B2C digital sale triggers the obligation. Registration is done online through a simplified portal provided by the GİB. The non-resident is then required to charge Turkish VAT (generally at the standard rate of 20% unless a reduced rate applies to that type of service) on sales to Turkish consumers.
• Returns and Payments: Initially, the digital service VAT return (KDV-3) was required monthly (with filing by the 24th and payment by the 26th of the following month). More recently, the filing frequency for non-resident digital service providers has been shifted to quarterly to simplify compliance. Each quarter’s VAT return for digital services is due by the 26th day of the month following the quarter (e.g. Q1’s return due April 26) and payment is due by the same deadline. These filings are done electronically (in Turkish, via the GİB’s system). Non-resident digital service providers are not required to issue Turkish fiscal invoices to consumers, but they must provide receipts and keep records of Turkish sales.
• Other Digital Taxes: Note that Turkey also introduced a separate Digital Services Tax (DST) in 2020 that applies to certain large digital platform revenues; however, DST is distinct from VAT. The VAT on digital services regime is focused purely on VAT and compliance with KDV for B2C electronic services, and it does not apply to B2B services (where instead the Turkish business customer would reverse-charge the VAT). Non-resident companies should take care to distinguish VAT obligations from any DST obligations.

In summary, Turkey’s approach is to ensure VAT is collected on digital economy transactions consumed in Turkey. Non-resident digital service providers need to register under the special scheme and charge Turkish VAT to private consumers, leveling the playing field with local providers and contributing tax revenue on digital sales.

18. Distance Selling Rules

“Distance selling” typically refers to cross-border sales of goods to consumers (B2C) where the goods are shipped from one country into another. Because Turkey is not in the EU, it is not part of the EU distance selling regime and does not recognize the EU’s distance selling thresholds or OSS (One-Stop Shop) system for goods. Instead, any goods delivered from abroad to consumers in Turkey are treated as imports, subject to regular import VAT and custom duties regardless of value.

18.1 Distance Selling Thresholds: Turkey does not have a distance selling threshold for foreign sellers. In the EU, businesses enjoy a threshold (like €10,000 under OSS for intra-EU sales) below which they need not register in the customer’s country. In contrast, for sales of goods to Turkey, even low-value shipments are technically subject to Turkish import VAT and customs processes. In practice, express couriers or postal services will handle the import VAT on behalf of the Turkish consumer for e-commerce purchases. Foreign e-commerce companies sending goods to Turkey do not register for Turkish VAT simply for shipping goods cross-border; instead, the transaction is taxed as an import. (For imports of small consignments, Turkey has at times had de minimis exemptions for customs duties and VAT, but as of recent years Turkey’s de minimis threshold has been reduced; for example, as of 2022 the VAT exemption for low-value goods was eliminated, meaning virtually all goods imported by consumers are subject to VAT). Thus, there is no direct distance-selling registration threshold in Turkey – any continuous significant B2C trade may necessitate establishing a local presence if one wants to stock goods in Turkey, but shipping directly will rely on import procedures.

18.2 OSS/IOSS Participation: Turkey is outside the EU’s VAT OSS/IOSS schemes. A Turkish business selling goods to EU consumers may opt to register for the EU’s non-Union OSS (for services) or IOSS (for low-value imports) by registering in an EU member state, but that is governed by EU law, not Turkish law. Likewise, an EU or other foreign company cannot use OSS or IOSS to report Turkish VAT – those schemes do not cover Turkish tax. Essentially, Turkey handles cross-border B2C sales through its national rules (imposing import VAT on goods coming in, and requiring local registration for foreign digital services as noted above).

For completeness, it’s worth noting that if a foreign company decides to hold stock in Turkey to fulfill online orders locally, that company would be treated as having a taxable presence and would need to register for VAT in Turkey (no threshold), rather than using any OSS/IOSS. In summary, distance sales into Turkey are treated as imports (with no OSS/IOSS), and distance sales out of Turkey are treated as exports (zero-rated) – businesses must plan accordingly for VAT.

19. Cash Accounting Scheme

Turkey does not operate a cash accounting scheme for VAT. Under a cash accounting (or cash basis) scheme, businesses would pay VAT to the government only when they have actually received payment from their customers (and conversely, claim input VAT only when they pay their suppliers). This is not generally available under Turkish VAT law.

All taxpayers are required to account for VAT on an accrual (invoice) basis, meaning VAT on a sale is due in the period when the tax point occurs (per the time of supply rules, usually delivery or invoice date), regardless of when the customer pays. Similarly, input VAT is claimable when the supplier’s invoice is recorded, not necessarily when cash is paid out. Some very small businesses and farmers might benefit from special regimes (such as presumptive taxation or exemption) that effectively take them out of the VAT system entirely, but these are not “cash accounting” for VAT – they are more like simplified lump-sum tax schemes. Therefore, no formal cash accounting option exists for standard VAT payers in Turkey.

20. VAT-Registered Cash Tills (Point-of-Sale Requirements)

Turkey has implemented regulations for “New Generation Payment Recording Devices”, essentially fiscal cash registers/point-of-sale (POS) systems that are connected to the tax authorities. As part of efforts to digitize and monitor retail transactions, businesses engaging in cash or credit card sales to consumers are required to use certified cash register devices that record each sale and report data to the Revenue Administration. The obligation to use these fiscal cash registers (Yeni Nesil Ödeme Kaydedici Cihazlar) generally applies to retail businesses above a certain size – specifically, those classified as first or second category merchants and with annual turnover above TRY 150,000 (approximately €8,000) are required to use new-generation cash register/POS devices for recording sales. These devices integrate features like credit card terminals (EFT-POS) with a fiscal memory that logs transactions.

The goal of this requirement is to ensure that cash transactions are properly recorded and reported, thereby reducing under-the-table sales and improving VAT compliance. Businesses must obtain approved devices and maintain them according to technical specifications. The fiscal tills automatically produce receipts with the required tax information and can transmit or be polled for sales data by the tax authority. Non-compliance (e.g., not using a required cash register or tampering with it) can lead to fines or other sanctions. Note that for businesses fully under the e-Archive invoicing system (for B2C sales) or online sales, specific e-invoicing rules apply instead, but even e-commerce sellers must issue approved e-archive receipts for B2C sales.

In summary, point-of-sale requirements in Turkey mandate approved cash register tills for many retailers, ensuring that each transaction is logged for VAT purposes. Businesses should confirm if they fall under the obligation based on their turnover and activities and implement the appropriate fiscal till systems.

21. Statute of Limitations

The statute of limitations for VAT in Turkey is generally five years. In practice, this means the tax authorities can audit and assess additional VAT (or adjust a VAT return) until the end of the fifth year following the year in which the tax became due. For example, a VAT incurred in 2025 would be subject to audit and potential reassessment up through the end of 2030. If no assessment is made by that time, the tax cannot be later collected.

It’s important to note that certain actions can extend or interrupt this five-year period. For instance, if a tax audit is initiated or if a legal case is ongoing, the limitation period may be tolled or extended under provisions of the Tax Procedure Law. Additionally, under the Turkish Commercial Code, businesses must retain financial records for 10 years, which indirectly means documentation for VAT may need to be available for up to a decade. This 10-year record-keeping requirement is sometimes referred to as a de facto longer limitation period under “commerce rules.” However, strictly for tax assessment purposes, the baseline is five years in normal cases.

Taxpayers should keep all VAT-related records (invoices, returns, payment proofs) at least for the five-year period and ideally for 10 years, given the extended record-keeping rules and possibility of audits or disputes arising later.

22. VAT Return Filing

Compliance with VAT filing in Turkey involves regular returns and payments, mostly on a monthly cycle. All registered VAT payers must adhere to the filing schedule and requirements set by the tax authority.

22.1 Filing Frequency: The standard filing frequency for VAT returns in Turkey is monthly. Each VAT return covers one calendar month of transactions. In general, there is no option for annual or less frequent filing for regular taxpayers; VAT must be reported every month. (A limited exception exists for certain small businesses under special schemes – e.g. some small transport or taxi operations using a cash register/margin scheme – which may file quarterly returns, but this is not common for most VAT-registered businesses.) The vast majority of companies, including all medium and large businesses, file monthly KDV returns.

22.2 Filing Method: Electronic filing is mandatory for VAT returns in Turkey. Taxpayers use the online tax portal (e-Beyanname / İnteraktif Vergi Dairesi) to submit their KDV returns digitally. Paper filing is only permitted in exceptional cases (if at all). The electronic system requires using the standardized form (often referred to as Form KDV-1 for the main monthly VAT return). Taxpayers typically prepare their returns using approved accounting software or GİB-provided templates and then upload them through the portal. The entire filing and payment process is integrated with the online system, streamlining compliance.

22.3 Deadlines for Filing and Payment: Currently, monthly VAT returns are due by the 28th day of the month following the end of the taxation period. (This due date was extended from the 24th to the 28th in late 2022 via a Tax Procedures Circular, giving taxpayers a bit more time.) Payment of the VAT due must be made by the same deadline (28th of the following month), typically via electronic bank transfer to the tax office or through authorized banks. For example, the VAT return for January is due by February 28, with payment also due by February 28. If the 28th falls on a weekend or public holiday, the deadline usually shifts to the next working day.

Non-resident electronic service providers filing quarterly VAT returns (KDV-3) under the digital services regime have returns and payments due by the 26th of the month following the quarter (e.g., Q2 ending 30 June would be due by 26 July). This differs from the standard domestic monthly schedule.

22.4 Pre-Filled Return Availability: Turkey does not currently provide pre-filled VAT returns. Taxpayers must compile their own VAT return data from their accounting records each period. While Turkey’s tax authority does receive considerable data through e-invoicing and other digital reports (which theoretically could be used to pre-populate returns in the future), as of 2026 the KDV return is not pre-filled by the tax office. All sales and purchase figures and calculations must be entered by the taxpayer (or their accounting software) for each filing. Taxpayers should ensure the accuracy of these self-assessments, as the GİB may cross-check declared amounts against e-invoice, e-ledger, and BA/BS submissions for discrepancies.

22.5 Handling of VAT Credits/Refunds: If a VAT return results in a credit (excess input VAT over output VAT), the general rule in Turkey is that this excess credit is carried forward to subsequent months to offset future VAT liabilities. Turkey does not routinely refund excess VAT credits each month. The carry-forward continues indefinitely until the credit is used up against future output VAT. Cash refunds of VAT are allowed only in specific scenarios, primarily:

• Exports: Companies that have excess input VAT related to zero-rated exports can apply for a cash refund of the accumulated credits attributable to those exports (since exports are 0% rated, exporters often have refund positions).
• Reduced-rate sales refunds: In some cases, if a business sells goods or services at a reduced VAT rate (e.g. 10% or 1%) and accumulates credits because their inputs were taxed at 20%, Turkish law allows a refund of the excess credit once certain thresholds are exceeded. (For instance, as of 2026, input VAT credits arising from 1% or 10% rate sales can become refundable if they surpass a yearly threshold, which was around TRY 164,000 in 2026, as noted by local tax experts.)
• Investments and special incentives: Businesses with government investment incentive certificates, especially for large projects (e.g., in manufacturing, R&D or regional development programs), may be entitled to VAT refunds on certain purchases like construction materials or machinery, even if those purchases would normally create a credit carryforward.
• Diplomatic or other special exemptions: VAT paid on purchases by foreign embassies, consulates, NATO personnel, certain international organizations, etc., can be refunded under special refund schemes in line with diplomatic reciprocity.

Claiming a VAT refund in these cases typically requires submitting a refund claim form and supporting documentation after the end of the tax period or year, and the tax authorities will review and often audit the claim before approving the refund. In other instances (like typical domestic credits not related to those special cases), the relief comes through carrying the credit forward.

22.6 Correction of Errors: If a business discovers an error in a submitted VAT return (such as an incorrect amount, omitted invoice, or misclassification), the error typically must be corrected by submitting an amended return (revision) for the period in question. Turkey’s tax procedure does not allow informal adjustments in subsequent returns for past errors; instead, the taxpayer should file a corrective (revised) VAT return for the affected period, accompanied by an explanation of the changes. This is done electronically via the tax portal by choosing the option to revise a past return (often referred to as a “düzeltme beyannamesi”). The amended return should reflect the correct figures, and any additional tax due should be paid promptly (with late payment interest accruing from the original due date). If the correction reduces the tax due, typically the excess paid can be credited to subsequent periods or refunded, but an explanation and possibly supporting documents may be required to substantiate the change. Promptly correcting errors is important, as delaying until an audit can result in heavier penalties.

22.7 Non-Resident Filing Specifics: As noted, the main scenario in which non-resident companies file Turkish VAT returns is under the digital services VAT scheme (KDV-3) for B2C e-services (filed quarterly). Non-resident businesses with a full VAT registration in Turkey (e.g., via a branch or subsidiary handling local sales) follow the same filing schedule and rules as resident companies (monthly KDV-1 returns, filed in Turkish). Most foreign companies without a presence in Turkey do not file regular VAT returns; instead, their Turkish B2B customers account for any VAT via reverse charge (Section 15.3). However, if a foreign company does register (or is required to register) for VAT – for example, it opened a branch or is selling goods from stock in Turkey – then it becomes a “resident” taxpayer for VAT purposes and must file like any local company. In summary, aside from the special digital services filings, there are no separate or simplified filing rules for non-resident businesses: they either operate outside the system (with Turkish customers handling VAT), or they establish a presence/rep and comply fully with Turkish VAT filing and payment obligations.

23. Other Filings

In addition to the periodic VAT return, Turkish VAT law and related regulations require a few supplementary filings and reports in certain cases:

23.1 EU Sales List: Not applicable. Turkey is not in the EU, so it does not require an EU Sales List (EC Sales List) for intra-community supplies. Turkish companies making sales to EU customers will not file an EC Sales List in Turkey (though their EU customers may need to report acquisitions on their side, and other customs export documentation will be required for goods).

23.2 Intrastat: Not applicable in Turkey. Intrastat is an EU-specific requirement for reporting intra-EU goods movements. Since Turkey is not in the EU, Turkish companies do not file Intrastat. However, goods traded between Turkey and the EU are subject to customs declarations. (Under the EU-Turkey Customs Union for industrial goods, an A.TR movement certificate can be used to simplify trade of certain goods, but this is a customs matter, not a VAT filing.)

23.3 Annual Returns: Turkey does not require a separate annual VAT return or summary. The monthly (or quarterly) filings are considered final. There is no consolidation of VAT data in an additional annual declaration for VAT, unlike some countries that require an annual summary of VAT or a recapitulative return. The corporate income tax return contains some summary figures of sales and tax, but there is no annual KDV return. Businesses should ensure that all monthly returns are accurate, as those serve as the official records for the year.

23.4 SAF-T or Digital Reporting Requirements: Turkey has not adopted the OECD Standard Audit File for Tax (SAF-T). Instead, Turkey has developed its own digital reporting and e-auditing requirements. Key digital compliance obligations include:

• E-Ledger (e-Defter): Companies meeting certain criteria must keep their general ledgers and journals in electronic format and submit them periodically to the GİB. This is analogous to an ongoing electronic audit file.
• BA/BS Forms: All VAT-registered taxpayers must file monthly purchase and sales lists known as “Form BA” (a list of large purchases) and “Form BS” (a list of large sales). These forms detail all individual transactions exceeding a threshold (e.g. currently TRY 5,000 including VAT) for the month, and are due by the end of the following month. The BA/BS filings allow the tax authority to cross-verify that one taxpayer’s sales are properly reported as another’s purchases. Failure to file or mismatches in BA/BS data can trigger audits or penalties.
• E-Arşiv Reports: Taxpayers using e-Arşiv for B2C invoices must typically submit a summary report of those e-archive invoices to the tax administration on a regular basis (often monthly).
• Electronic tax return filings: as discussed, all VAT returns are filed online.

These digital reporting requirements serve a similar purpose to SAF-T by giving tax authorities data for audits, but they are native to Turkey’s system. Businesses should stay informed on the latest digital compliance thresholds (which have been gradually lowering to include more companies) to ensure they meet all ancillary filing obligations in addition to the VAT return.

24. Penalties and Interest

Turkey enforces a range of penalties and interest charges to encourage compliance with VAT laws. Key aspects of the penalty regime include:

24.1 Late Filing Penalties: If a taxpayer fails to file a VAT return on time, they are subject to a “first degree irregularity” penalty under the Tax Procedure Law. This is a fixed monetary fine, which is adjusted annually – recent figures are around TRY 2,500 for a missed return. Filing late but before the tax authority contacts you may result in a smaller “irregular filing” penalty, whereas if an audit discovers a non-filed return, higher penalties can apply (including a possible tax loss penalty if tax was unpaid as a result). Repeated failures or egregious non-compliance can lead to increased penalties or even criminal charges in severe tax evasion cases. To avoid late filing penalties, taxpayers should adhere to the monthly (or quarterly) deadlines (see Section 22.3). If a deadline is missed, it’s advisable to file as soon as possible and pay the tax due with calculated interest to mitigate further consequences.

24.2 Late Payment Interest Rates: Overdue VAT payments are subject to “delay interest” (late payment interest) which accrues on the unpaid tax from the original due date until payment. This interest rate is adjusted in line with economic conditions. Notably, in late 2023 and 2024 Turkey significantly raised these rates due to high inflation. As of early 2024, the late payment interest was 4.5% per month, later reduced to 3.7% per month by late 2025. This is equivalent to an annual interest burden of around 44% on late taxes. Taxpayers who pay late will incur this high interest cost on top of the tax due. The authorities can also impose a “late payment penalty” in addition to interest, but in practice the high monthly interest (set by reference to the Law on Collection Procedure of Public Receivables) is the main financial consequence for late tax payments. It’s critical for businesses to pay their VAT on time given these substantial interest rates on arrears.

24.3 Other Fines and Penalties: Turkish VAT law includes various other penalties for non-compliance or inaccuracies:

• Tax Loss Penalty: If a taxpayer’s action (or inaction) causes a loss of tax (for example, under-reporting VAT due), the standard penalty is typically an amount equal to the unpaid tax (essentially a 100% penalty). This is often applied in audit assessments for undeclared VAT.
• Administrative (Irregularity) Fines: There are fixed fines for breaches of procedural requirements (so-called “irregularity” penalties under the Tax Procedure Law). These cover failures such as not keeping proper records, not issuing invoices/receipts correctly, failing to notify tax office of changes, etc. These fines are generally set as fixed amounts that can vary each year or by the size of the business. An example is the first-degree irregularity penalty for late filing of a return as noted above. Repeated or more serious infractions can attract higher fines (e.g., second degree irregularity).
• Special Irregularity Penalties (Electronic compliance): If a taxpayer fails to comply with electronic filing or e-invoicing obligations, special irregularity fines can be imposed for each incidence of non-compliance. For instance, failing to issue e-invoices when required or not submitting the BA/BS forms can trigger these penalties.
• Invoice and Documentation Penalties: There are penalties for issues with invoices, such as not issuing a required invoice or using an unregistered printing press for paper invoices. Turkish law infamously has a rule that both the seller and buyer can be penalized (a percentage of the invoice amount) if an invoice is not properly issued or recorded. This is to deter the unregistered “off-the-books” economy.
• Criminal sanctions: In cases of proven tax evasion (e.g., using fake invoices or falsifying records), criminal charges may apply under Turkish law, potentially leading to judicial penalties in addition to administrative fines.

Penalties in Turkey can be abated or reduced under certain conditions (for example, if a taxpayer voluntarily corrects an error before an audit, or if they accept the assessment without challenge, some penalties might be reduced by 50%). However, given the complexity and severity of some VAT penalties, it is crucial for businesses to maintain robust compliance processes.

25. Other Notable VAT Features

Finally, here are a few additional notable features of the Turkish VAT system that businesses should be aware of:

• Special Consumption Tax (SCT): In addition to VAT, Turkey levies Special Consumption Tax (ÖTV) on specific goods (such as fuel, alcohol, tobacco, motor vehicles, luxury products) at various rates. While not part of the VAT Act, ÖTV can impact the total tax cost of certain transactions (e.g., cars have both ÖTV and KDV). Unlike VAT, which is charged at every stage, ÖTV is typically a one-time tax at the point of import or manufacture. Businesses dealing in ÖTV-liable goods need to account for both taxes separately.
• Investment Incentives and VAT: Turkey offers incentive schemes (like Investment Incentive Certificates) that can affect VAT. For example, qualifying investors may import machinery and equipment VAT-free for certain projects. There are also VAT refunds for investments under government programs and for construction of strategic investments, subject to conditions.
• Free Zones and Technoparks: Turkey has Free Zones and Technology Development Zones (Teknoparks) which offer VAT advantages. Sales of goods within Turkish free trade zones are generally exempt from VAT to promote export-oriented production. Likewise, certain services (especially R&D services and software development) rendered within Tech Development Zones can be exempt from VAT under specific legislation until at least 2028. Businesses operating in these zones should understand the interplay between zone incentives and VAT obligations.
• Tourist VAT Refunds: Similar to many countries, Turkey operates a VAT refund scheme for tourists (tax-free shopping). Non-resident visitors who purchase goods in Turkey to export in their personal luggage can get a refund of the VAT paid on those goods, provided they meet the conditions (such as using authorised tax-free shopping retailers, meeting the minimum purchase amount, and exporting the goods within 3 months). While not affecting businesses directly, this is a notable feature of the VAT system facilitating retail tourism. Retailers who participate in the scheme must issue special VAT refund invoices to tourists and meet reporting requirements.
• Withholding VAT Mechanism: As discussed in section 15.3, Turkey’s partial VAT withholding (reverse charge) mechanism in certain domestic sectors is a unique feature. This system means split payment of VAT in specified transactions, which is different from full VAT remittance by the supplier. Companies in affected sectors must keep track of current lists of which goods/services are subject to withholding and at what ratios, as these can change via Ministry communiqués.
• High Compliance Burden: Turkey’s VAT system is considered relatively complex. A 2023 study noted Turkey as having one of the more challenging VAT compliance regimes globally. The combination of no registration threshold, frequent rate changes, extensive digital compliance (e-invoices, e-ledgers), monthly filings, and strict enforcement means businesses must be diligent. Engaging knowledgeable local tax advisors and setting up strong internal systems for VAT accounting is highly recommended to navigate KDV successfully.

Conclusion:
The Turkish VAT (KDV) system is comprehensive and closely intertwined with the country’s economic policies. While sharing many similarities with European VAT systems – including multi-rate structure, input tax credits, and broad tax base – Turkey’s regime has its own unique elements such as no registration threshold, mandatory e-invoicing for many taxpayers, partial VAT withholding in certain sectors, and very high penalties for non-compliance. Companies doing business in Turkey should ensure they understand these local specifics. Keeping up-to-date with Turkish VAT laws (which can change through Presidential decrees and new communiqués) is essential for compliance. When in doubt, it’s advisable to consult with local tax professionals or refer to official GİB guidance for the latest rules. By adhering to the guidelines laid out in this comprehensive country guide, businesses can navigate Turkey’s VAT system more effectively, remain compliant, and avoid unnecessary costs.

Links

 

• 🇹🇷 Turkish Revenue Administration (GİB) – Official VAT Portal
  https://www.gib.gov.tr
• 🇬🇧 Grant Thornton – Indirect Tax Guide: Turkey
  https://www.grantthornton.global/en/insights/indirect-tax-guide/indirect-tax—turkey/
• 🇬🇧 PwC Türkiye – VAT Rate Changes (2023)
  https://www.pwc.com.tr/en/hizmetlerimiz/vergi/bultenler/2023/vat-rate-changes.html
• 🇬🇧 EY Global – Türkiye Increases VAT Rates on Goods and Services
  https://www.ey.com/en_gl/technical/tax-alerts/turkiye-increases-vat-rates-on-goods-and-services
• 🇬🇧 Avalara VATLive – Turkey VAT Guide
  https://www.avalara.com/us/en/vatlive/country-guides/asia/turkey.html
• 🇬🇧 Fonoa – Türkiye VAT Guide: Tax Number Format, Rates & Compliance
  https://www.fonoa.com/resources/country-tax-guides/turkiye
• 🇬🇧 VATCalc – Turkey VAT Guide
  https://www.vatcalc.com/turkey/turkey-vat-guide/
• 🇬🇧 Celikel CPA – VAT in Turkey 2026: Rates, Exemptions & Compliance Guide
  https://celikelcpa.com/blog/vat-in-turkey-2026-guide/
• 🇬🇧 Gurulkan Law Firm – VAT Refund in Turkey for Foreign Companies
  https://www.gurulkan.com/insights/vat-refund-in-turkey-opportunities-for-foreign-companies-participating-in-trade-shows
• 🇬🇧 Denge Yeminli Mali Müşavirlik – Declaration Submission and Payment Periods
  https://dengeymm.com.tr/en/practical-information/declaration-submission-and-payment-periods/
• 🇬🇧 Orbitax – Turkey Increases Interest Rates for Late Tax Payment
  https://www.orbitax.com/news/country/article/Turkey-Increases-Interest-Rate-55774
• 🇬🇧 PA Turkey – Turkey Cuts Interest Rates on Public Debt Delays
  https://www.paturkey.com/news/2025/turkey-cuts-interest-rates-on-public-debt-delays-and-installment-plans-25274/
• 🇬🇧 Fiscal Solutions – New Generation Cash Registers in Turkey
  https://www.fiscal-requirements.com/news/1709
• 🇬🇧 PwC Tax Summaries – Turkey: Corporate Tax Administration
  https://taxsummaries.pwc.com/turkey/corporate/tax-administration

 

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