Effective use and enjoyment. To avoid instances of non-taxation or double taxation, jurisdictions can apply “use and enjoyment” rules that allow a service that is “used and enjoyed” in the jurisdiction to be taxed or prevent a service that is “used and enjoyed” outside the jurisdiction from being taxed. If a service is taxed in the jurisdiction under the “use and enjoyment” provisions, a non-established supplier of the service may be required to register for VAT in every jurisdiction where it has customers that are not taxable persons. In Türkiye, no services are subject to the “use and enjoyment” provisions.
Transfer of a going concern. Transfer of going concern rules do not apply in Türkiye. As such, VAT applies to all sales of a business or part of a business capable of separate operation including assets. However, merger and acquisition transactions, which are done under the articles of Corporate Tax Law exemptions, may also benefit from the VAT exemption. This is on a case-bycase basis.
Transactions between related parties. For a transaction between related parties, the value for VAT purposes should be done at on an arms-length basis.
C. Who is liable
A taxable person is any person or legal entity that is registered or must register for VAT in Türkiye. Any entity that has a fixed place of business or regularly carries out commercial or professional operations in Türkiye must register in Türkiye.
No VAT registration threshold applies. VAT registration is granted automatically by the tax office when a business registers for corporate and income tax purposes. It is necessary to have a fixed place of business to register for tax. A fixed place of business includes a residence, place of business and registered head office or business center in Türkiye. Only entities that are registered for tax may import goods into Türkiye.
Partial VAT withholding. There is a “partial VAT withholding” mechanism in Türkiye. Under this mechanism, a certain portion of VAT amount is withheld by the recipient (purchaser, service receiver, etc.), and the recipient pays this VAT directly to the tax office instead of the supplier (seller, service provider, etc.). The portion that is not subject to withholding is declared and paid to the tax office by the supplier.
Partial VAT withholding is applied to a list of transactions that covers but is not limited to:
• Construction works
• Maintenance and repair services related to machinery and equipment
• Catering and organization services
• Labor procurement services
• Contract textile manufacturing
• Cleaning, environmental and garden care services
• Delivery of copper, zinc, aluminum and lead products
The rate of withholding varies depending on the type of services.
Exemption from registration. The VAT law in Türkiye does not contain any provision for exemption from registration.
Voluntary registration and small businesses. The VAT law in Türkiye does not contain any provision for voluntary VAT registration and no special VAT registration rules for small businesses, as there is no registration threshold (i.e., all entities established in Türkiye that make taxable supplies are obliged to register for VAT).
Group registration. Group VAT registration is not allowed in Türkiye.
Fixed establishment. In Türkiye, there is no legal definition of a fixed establishment for VAT purposes. However, there is no VAT-only registration rule in Türkiye. In principle, a taxable person registered for all taxes (including VAT) is responsible for all direct and indirect taxes. Tax registration is done based on the permanent establishment evaluation under the Corporate Tax Legislation and Tax Procedural Code.
Non-established businesses. A “non-established business” is a business that has no fixed establishment in Türkiye. A non-established business may not register for VAT only (other than “Special VAT Registration for Electronic Service Providers” – see the Digital economy subsection below). If a Turkish taxable person receives services from an entity that does not have a fixed establishment in Türkiye, VAT is accounted for using the reverse-charge mechanism (that is, the Turkish recipient of the service must self-assess VAT).
Tax representatives. Tax representatives are not required in Türkiye.
Reverse charge. The reverse charge is a form of self-assessment for VAT through which the recipient of services accounts for the tax. The reverse charge applies if certain services subject to Turkish VAT are made by a person that is not a resident in Türkiye or that does not have a permanent establishment or headquarters in Türkiye. The Ministry of Treasury and Finance is authorized to determine the parties responsible for the payment of VAT. The recipient does not need to be a taxable person under Turkish VAT law. The recipient may be an individual or an institution.
The reverse charge applies to the following services performed or used in Türkiye:
• Transfers of copyrights, patents, licenses, trademarks, know-how and similar rights
• Import commissions
• Services of independent professionals, such as engineering, consulting, data processing and provision of information
• Interest payments made to foreign entities other than banks and financial institutions
• Rental services
• Transfer or assignment of the right to use capacity for the transmission, emission or reception of signals, writings, images, sounds or information of any nature by wire, radio, optical or other electromagnetic systems
• Other services not specified in this list
Domestic reverse charge. There are no domestic reverse charges in Türkiye.
Digital economy. Nonresidents providing electronically supplied services to nontaxable real persons (i.e., for business-to-consumer (B2C) supplies) in Türkiye are required to register and account for VAT on supplies in Türkiye. Nonresidents mean those businesses that have no resident, business place, legal or business center in Türkiye.
The service providers must register for “Special VAT Registration for Electronic Service Providers.” Such service providers declare the VAT related to these transactions electronically with the VAT Return No. 3. There is no VAT registration threshold for these types of suppliers.
These service providers must fill in the form on the Turkish Revenue Administration’s website (www.digitalservice.gib.gov.tr) before filing the VAT Return No. 3 for the first time. Upon completing and filing the aforesaid form online, the “Special VAT Registration for Electronic Service Providers” will be registered in the name of the service provider.
Such service providers will be required to file VAT return type No. 3, electronically, by the 28th of the month following the end of the return period. See the Section I. Returns and payment below for further detail.
transfer of cash in advance before the supply or invoice. Therefore, prepayment alone does not create a tax point for VAT.
Continuous supplies of services. If services are received continuously but payment is made periodically, the tax is declared every month. If the invoice is issued before the declaration period, the tax point is the date of the invoice.
Goods sent on approval for sale or return. The time of supply for goods sent on approval for sale or return is when the customer accepts the goods, and a supply is made.
Reverse-charge services. There are no special time of supply rules in Türkiye for supplies of reverse-charge services. As such, the general time of supply rules apply (as outlined above).
Leased assets. There are no special time of supply rules in Türkiye for supplies of leased assets. As such, the general time of supply rules apply (as outlined above).
Imported goods. The time of supply for imported goods is either the date of importation or the date on which the goods leave a duty suspension regime.
F. Recovery of VAT by taxable persons
A taxable person may recover input tax, which is VAT charged on goods and services supplied to it for business purposes. A taxable person generally recovers input tax by deducting it from output tax, which is VAT charged on supplies made.
Input tax includes VAT charged on goods and services supplied in Türkiye, VAT paid on imports of goods and VAT self-assessed on reverse-charge services.
If the input tax exceeds the output tax, the excess amount is generally not refunded but can be carried forward to subsequent VAT periods.
A valid document, such as an invoice or customs document, must accompany a claim for input tax.
The time limit for a taxable person to reclaim input tax in Türkiye is until the end of the calendar year following the calendar year in which the taxable event takes place. The right of deduction may be exercised in the tax period in which the purchase documents are entered into the recipient’s books of account, but only until the end of the calendar year following the calendar year in which the taxable event takes place.
Nondeductible input tax. Input tax is not recoverable if it is charged on purchases of goods and services that are not used for business purposes and are considered to be nondeductible expenses for corporate tax purposes. In addition, input tax may not be recovered for partially exempt transactions.
Examples of items for which input tax is nondeductible
• Input tax of nondeductible expenses in corporate tax law
• Input tax on purchase documents for passenger cars owned by businesses, except for those whose activities involve the rental or operation of passenger cars partially or fully for such purposes
• Input tax of lost goods (covering all situations where goods were lost, other than an earthquake, flood disaster or fire disaster that has been announced by the Ministry of Finance as a force majeure)
• Input tax over the surveillance application, anti-dumping, additional financial obligation on imports (abolished through Presential Decision No.7846, with effect from 24 November 2023)
Examples of items for which input tax is deductible (if related to a taxable business use)
• All kinds of commercial expenses for operating activities of the entity
• All direct and indirect expenses for commercial purposes of the entity
Partial exemption. An input tax deduction is granted for taxable supplies and for supplies that are exempt with credit. An input tax deduction is not granted for partially exempt supplies. If a taxable person makes both taxable and partially exempt supplies, it may recover only input tax related to supplies that are taxable or fully exempt.
Approval from the tax authorities is not required to use the partial exemption standard method or special methods in Türkiye.
Capital goods. In general, input tax incurred on fixed assets is recoverable. Taxable persons can deduct the whole amount of VAT paid for fixed assets in the taxation period in which the related invoices are recorded in the legal books.
On the other hand, input tax of lost goods is not deductible and needs to be corrected in the taxation period in which the goods became lost.
However, if depreciable assets are lost (due to fire, being stolen, etc.) after completing their useful lives, then there is no need for VAT correction.
If depreciable assets are lost before fully completing their useful lives, then the portion of input tax corresponding to the remaining useful life needs to be corrected.
Refunds. If the amount of input tax recoverable in a period exceeds the amount of output tax payable in the same period, a refund is, as a rule, not granted. In most cases, the taxable person must carry forward the excess amount to a future VAT period. Refunds of the excess are available only for the following:
• VAT related to supplies of goods subject to a reduced rate.
• VAT related to supplies of goods and services that are exempt with credit.
• VAT related to supplies in the scope of partial VAT withholding.
The amount of the VAT refund may be credited against other tax liabilities.
In addition, it is mandatory to submit all VAT refund certification reports on electronic environment via the internet tax office.
According to the Law No. 7524, “Law on Amendments to Tax Laws, Certain Laws, and Decree Law No. 375,” some provisions have been added to the VAT law that allow VAT amounts that have been carried forward for five or more calendar years to be removed from the deductible VAT accounts and placed in a special account. These amounts can then be considered as an expense for income or corporate tax purposes based on the result of a tax audit, which will be conducted upon the taxpayer’s request. These regulations will come into effect on 1 January 2030.
Pre-registration costs. The amount of incurred VAT for the prior costs and expenditures related to the registration process could be deductible after the registration process is complete. The main condition that must be met is that they are related to the registration process. As for recovery, there is no separate/special rule – normal recovery rules apply (as outlined above).
Bad debts. Taxable persons must declare and pay the VAT related to their supplies of goods and services, whether or not they receive the consideration for these supplies.
Taxable persons can deduct the VAT that has been calculated and declared related to the receivables that became a bad debt (as per the article 322 of the Tax Procedures Code).
A “bad debt” is defined as receivables that are no longer possible to be collected according to a judicial decision or a satisfactory document, as per the article 322 of the Tax Procedures Code.
Noneconomic activities. Input tax incurred on purchases that are used for noneconomic activities is not recoverable in Türkiye.
benefit from the e-archive application have to issue, deliver, archive and, when requested, submit the invoices as e-invoices, which are issued for those who are registered for e-invoicing. Taxable persons may use e-archiving in two methods: through their own information technology system or through a special integrator information technology system authorized by the Revenue Administration.
I. Returns and payment
Periodic returns. The VAT return period is monthly. Returns must be submitted electronically through the internet by the 28th day of the month following the end of the return period. Only the VAT Return No. 2 must be submitted until the 25th day of the month following the end of the return period. Returns must be declared in the form that was designated according to the provisions of Tax Procedural Law. There are five types of VAT returns:
• VAT Return No. 1: Filed by the taxable persons who are subject to real taxation to declare VAT calculated over their supplies.
• VAT Return No. 2: Filed by taxable persons responsible to declare reverse charge and partially withheld VAT.
• VAT Return No. 3: Filed by the non-established companies to declare VAT on their electronically supplied services to Turkish real persons (B2C).
• VAT Return No. 4: Filed by the taxable persons who are subject to revenue-based taxation system.
• VAT Return No. 5: Filed by the enforcement offices and those who are not subject to real taxation to declare VAT on sales made in auction halls.
Periodic payments. Payment in full must be made by the 28th day of the month following the end of the return period (i.e., month of submission). Only the VAT Return No. 2 must be paid by the 25th day of the month following the end of the return period. Tax return liabilities must be paid in Turkish lira.
For “Special VAT Registration for Electronic Service Providers,” payment of VAT is made online via using debit cards (via a Turkish public bank or any foreign banks) and only foreign bank credit cards. Alternatively, there is also EFT option to the bank account of the Large Taxable Person Tax Office.
Partial VAT withholding. There is a “partial VAT withholding” mechanism in Türkiye. Under this mechanism, a certain portion of VAT amount is withheld by the recipient (purchaser, service receiver, etc.), and the recipient pays this VAT directly to the tax office instead of the supplier (seller, service provider, etc.). The portion that is not subject to withholding is declared and paid to the tax office by the supplier.
Partial VAT withholding is applied to a list of transactions that covers but is not limited to:
• Construction works
• Maintenance and repair services related to machinery and equipment
• Catering and organization services
• Labor procurement services
• Contract textile manufacturing
• Cleaning, environmental and garden care services
• Delivery of copper, zinc, aluminum and lead products
The rate of withholding varies depending on the type of services.
Electronic filing. Electronic filing is mandatory in Türkiye for all taxable persons. Taxable persons are obliged to submit their tax returns by using the Ministry of Treasury and Finance’s system called “e-Beyanname.” All tax returns must be submitted through this system and are electronically archived. Tax returns from previous periods are easily retrievable from this system.
Payments on account. Payments on account are not required in Türkiye.
Special schemes. Specified sectors. As of 1 January 2019, a revenue-based taxation system has been established for taxable persons operating in specified sectors in Türkiye. Accordingly, those operating within the sector and occupational groups determined by the President, if requested, may pay a certain percentage of their proceeds (including VAT) by declaring it without considering the deductible VAT amount. Currently, suppliers of public transportation services who fulfill certain conditions are in the scope.
Annual returns. Annual returns are not required in Türkiye.
Supplementary filings. BA-BS forms. Taxable persons used to be required to file BA-BS forms to declare the transactions over TRY5,000 between the purchaser company and seller company. However, according to the General Communiqué of the Tax Procedure Law (Serial No: 565), Form BA and Form BS declarations are no longer required for the period related to September 2024 and for subsequent periods.
Correcting errors in previous returns. To correct any errors in a tax return, a new tax return must be filed electronically by including an explanation for the purpose of correction on the return. If a tax amount is corrected, the new tax return must show the final corrected amount and not only the part of amount to be added or deducted.
Digital tax administration. There are no transactional reporting requirements in Türkiye.
J. Penalties
No specific penalties relate to VAT offenses. Penalties are prescribed by the Tax Procedures Code, which defines various acts of noncompliance with the tax laws, as outlined in more detail below.
Penalties for late registration. In the case of late registration, the following penalties could apply:
• Tax loss penalty
• Late payment charge (interest)
• Irregularity penalty
Penalties for late payment and filings. Late submission of tax returns on electronic environment is subject to tax loss penalty and special irregularity penalty. In such a case, the special irregularity penalty is TRY11,800 (for 2024) per tax return and the tax loss penalty is the amount of the tax loss itself.
Late payment of taxes due is subject to late payment interest at the rate of 4.5% per month.
The penalty for the failure to account for VAT under the reverse-charge mechanism is the full amount of tax that has not been accounted for (i.e., 100% of the tax due). The amount of interest is calculated starting from the due date of the tax payment until the date on which the penalty notice is issued.
Penalties for errors. Penalties for errors should be evaluated based on the result of error. If, for example, the error causes a tax loss, then the tax loss penalty may apply. If the error does not cause a tax loss but is only related to form, such as not using the correct line of the return to declare a tax, then the irregularity penalties may apply. The amount of irregularity penalties varies depending on the type of irregularity.
The late notification or failure to notify the tax authorities of changes to a taxable person’s VAT registration details may result in a second-degree irregularity penalty of TRY11,800 (for 2024). For further details, see the subsection Changes to VAT registration details above.