What Is VAT (KDV) in Turkey?
VAT (Katma Değer Vergisi — KDV) is a consumption tax applied to goods and services sold in Turkey. It is governed by VAT Law No. 3065. Turkey’s VAT system is broadly aligned with EU VAT principles, making it familiar to European investors, though several Turkey-specific rules apply.
VAT collected from customers is output VAT (hesaplanan KDV). VAT paid on business purchases is input VAT (indirilecek KDV). The difference — output VAT minus input VAT — is the net VAT owed to the tax authority.
VAT Rates
| Rate | Category |
|---|---|
| 20% | Standard rate — applies to most goods and services |
| 10% | Reduced rate — applies to certain food products, hospitality, healthcare services, agricultural inputs |
| 1% | Super-reduced rate — basic food staples, residential property (≤150 m²), press, agricultural products |
Key examples:
- Restaurant meals: 10%
- Accommodation services: 10% (verify current rate — has been adjusted)
- Residential property first sale (≤150 m² net): 1%
- Commercial property: 20%
- Professional services: 20%
- Exports: 0% (zero-rated)
Always verify specific product/service rates at gib.gov.tr as rates are subject to change by presidential decree.
VAT Registration
Who Must Register?
Any business conducting VAT-taxable activities in Turkey must register for VAT with the local tax office (vergi dairesi). This includes:
- Turkish companies (LLC, JSC, branch)
- Sole proprietors with taxable activities
- Foreign companies providing digital services to Turkish consumers (special registration — see below)
There is no minimum turnover threshold for mandatory VAT registration in Turkey. You must register before commencing taxable activities, not after reaching a turnover threshold.
Registration Process
VAT registration occurs automatically when you register your company at the tax office and is included in the standard company formation process. You do not file a separate VAT registration — the tax office assigns your VAT registration when it processes your corporate tax registration.
Your company’s tax number (vergi numarası) is used as your VAT registration number.
Monthly VAT Declarations
Filing Frequency
VAT declarations are filed monthly:
- Filing deadline: 28th of the month following the declaration period
- Payment deadline: 26th of the month following the declaration period (note: payment is due before filing — verify with your accountant for the correct electronic filing/payment sequence)
Content of the VAT Declaration
The monthly VAT declaration (KDV Beyannamesi) includes:
- Total taxable sales (by rate)
- Total output VAT collected
- Total deductible input VAT from qualifying purchases
- Special reverse-charge (sorumlu sıfatıyla KDV) entries
- Net VAT payable or carried forward as deductible balance
VAT Refunds
If input VAT consistently exceeds output VAT (e.g., for export-oriented companies), the taxpayer can apply for a VAT refund. Refund applications require detailed documentation and are subject to review by the tax authority.
Exempt Supplies
Certain supplies are exempt from VAT (VAT-free):
- Export of goods and services (zero-rated, not exempt — the distinction matters for input VAT recovery)
- Financial services (banking, insurance activities)
- Educational services (provided by licensed private educational institutions)
- Medical services (provided by licensed health professionals)
- Delivery of goods to free zones
- Certain real estate transactions (used property sales between individuals)
Zero-rated supplies (exports) allow input VAT recovery. Exempt supplies do not allow input VAT recovery on related costs.
E-Invoice and E-Archive Invoice Obligations
E-Invoice (e-Fatura)
The e-invoice system (e-fatura) is Turkey’s electronic invoicing infrastructure managed by the Revenue Administration (GİB). Once registered, companies must issue e-invoices to other e-invoice registered companies. Key points:
- Mandatory for companies with annual turnover above the threshold (verify current threshold at gib.gov.tr — currently approximately 3 million TRY)
- Also mandatory for specific sectors (retail above 30 million TRY turnover, online marketplace operators, etc.)
- Real-time integration with GİB system — invoices are transmitted digitally
E-Archive Invoice (e-Arşiv Fatura)
For sales to consumers or non-e-invoice registered businesses:
- Companies above the e-invoice threshold must issue e-archive invoices (digital format, preserved electronically)
- Lower threshold companies may issue paper invoices but are encouraged to use e-archive
E-Ledger (e-Defter)
Companies required to use e-invoice must also maintain e-ledgers (e-defter) — digital accounting books (journal and ledger) in structured XML format, submitted to GİB monthly.
Reverse Charge Mechanism (Sorumlu Sıfatıyla KDV)
The reverse charge mechanism applies when a Turkish VAT-registered company purchases services from:
- A foreign supplier (non-resident) who provides services in Turkey
- Specific domestic reverse-charge categories (construction subcontracting, metal scrap, certain agricultural products)
Under reverse charge, the Turkish buyer — not the foreign seller — declares and pays VAT to the tax office (at the applicable rate). The buyer simultaneously records this as input VAT (if they have full input VAT recovery rights), making the transaction tax-neutral but requiring proper declaration.
Digital Services from Foreign Providers
If your company subscribes to foreign software (e.g., SaaS tools, cloud services, advertising platforms), you must apply reverse charge VAT at 20% on each payment and declare it in your monthly VAT return.
VAT for Foreign Digital Service Providers
Foreign companies providing digital services (apps, streaming, software, online advertising) to Turkish consumers must register for VAT in Turkey and collect and remit Turkish VAT. This applies even without a physical presence in Turkey.
Registration is done through a simplified portal at GİB (gib.gov.tr). Quarterly declarations apply. This is separate from the standard VAT registration for Turkish-resident businesses.
Common VAT Mistakes to Avoid
- Forgetting reverse charge: Many companies miss the reverse charge obligation on foreign software subscriptions
- Incorrect rate application: Verify rates for each product/service category — especially for mixed operations
- Missing export documentation: Zero-rating of exports requires customs export declarations and shipping documents; without these, standard VAT applies
- Delayed input VAT deduction: Input VAT must generally be deducted in the period the purchase invoice is received; late deductions may be challenged
Frequently Asked Questions
Is VAT registration automatic when I register my company? Yes. When your company completes tax office registration as part of the formation process, it is automatically enrolled for VAT. No separate application is required.
Can I recover input VAT on all business purchases? Generally yes, for VAT-registered companies making taxable supplies. However, input VAT on certain expenses is non-deductible (luxury cars, entertainment expenses with no business connection, items used for exempt supplies).
How do I register for the foreign digital services VAT system? Foreign companies providing digital services to Turkish consumers register through the GİB’s special portal for non-resident digital service providers. The process is done online without requiring a Turkish legal entity.
What is the deadline for a VAT refund application? VAT refund applications are processed on a rolling basis. The timing of actual refund receipt varies — cash refunds typically take 3–12 months after application, while set-off against other tax liabilities is faster.