In this article, we will continue to provide information about taxes in Turkey. In our previous article, we discussed the issue of Corporate Tax in Turkey.
Do foreign companies pay VAT in Turkey?
Yes. The nationality, residence, or the presence of a legal domicile, branch, or business center in Turkey does not hinder the taxation of transactions falling within the scope of VAT. According to this provision, as long as the transaction is carried out in Turkey, it is subject to taxation regardless of who performs it. Furthermore, exemptions and exceptions in other tax laws are not applicable according to the VAT Law.
Which types of transactions fall within the scope of VAT in Turkey?
1- In the framework of commercial, industrial, agricultural, and liberal professions, for deliveries and services made,
2- In imports,
3-For deliveries and services arising from other activities (communication, games of chance, art and sports activities, oil and gas transportation, etc.).
In which types of transactions in Turkey is VAT required to be paid?
According to the Turkish VAT law, for a transaction to be subject to VAT, the transactions must have taken place in Turkey. In the case of goods deliveries, the goods must be present in Turkey at the time of delivery, and for service performances, the service must either be provided in Turkey or utilized in Turkey.
What is the VAT rate in Turkey?
The general VAT rate in Turkey is 20%. Reduced VAT rates are 10% and 1%.
1- For products listed in the first list known as the 1st list in the VAT law, the VAT rate is 1%. Generally, basic food, agriculture/livestock, and certain production machinery are listed in this category.
2- For products listed in the second list known as the 2nd list in the VAT law, the VAT rate is 10%. Typically, textile materials, along with some health, transportation, and art activities, are listed in this category.
3- For all other deliveries and services not listed in the 1st and 2nd lists, the VAT rate is 20%.
Are VAT exemptions applied in Turkey?
Permanent and temporary VAT exemptions are applied based on sectors and products, especially in the case of export of goods and services.
How and when is VAT paid in Turkey?
VAT1: It is the VAT declaration submitted monthly by resident companies in Turkey for their own deliveries and services. It must be submitted by Certified Public Accountant in Turkey and paid by midnight on the 28th day following the relevant month.
VAT2: It is the VAT declaration submitted monthly by resident companies in Turkey when they receive services falling within the scope of VAT from non-VAT registered foreign companies, or when they make VAT withholding for services received from suppliers specified in the VAT law. It must be submitted by midnight on the 21st day following the relevant month and paid by midnight on the 23rd day.
VAT3: It is the VAT declaration submitted monthly by companies without residence, branch, legal domicile, or business center in Turkey for electronic services provided to individuals not subject to VAT in Turkey in exchange for payment. It must be submitted and paid by midnight on the 24th day following the relevant month.
[OUR SERVICES] Simplify Your VAT Compliance in Turkey
Value Added Tax (VAT) in Turkey can be a complex area for foreign businesses, given the range of applicable rates and reporting requirements. Ensuring accurate VAT compliance is essential to avoid penalties and maintain smooth operations. Our services are tailored to help your business manage VAT obligations effectively and in full compliance with Turkish regulations.
- Preparation and submission of monthly VAT returns to meet Turkish tax deadlines
- VAT-specific advisory to ensure accurate VAT calculations and application
- Monthly management reporting to provide clear visibility on VAT liabilities
- Financial statement analysis to ensure correct VAT reporting and alignment with Turkish GAAP
- Training for your accounting team on VAT requirements to foster in-house compliance capabilities
Reach out for professional guidance on VAT compliance, so you can focus on growing your business.
FAQ
1. What is the standard VAT rate in Turkey?
Answer:
The standard VAT rate in Turkey is 20%. This rate applies to most goods and services. However, there are reduced VAT rates of 10% and 1% for specific items like basic food products, medical supplies, and certain types of real estate.
2. Which goods and services are subject to reduced VAT rates in Turkey?
Answer:
In Turkey, reduced VAT rates of 10% apply to items such as basic food products, pharmaceuticals, and some health services. A 1% VAT rate applies to specific goods like newspapers, books, and certain residential properties. The exact classification of goods and services is defined by Turkish tax regulations.
3. Are there any VAT exemptions in Turkey?
Answer:
Yes, certain transactions in Turkey are exempt from VAT. These include exports, international transportation services, services provided to non-residents, and specific transactions within free trade zones. Additionally, educational services and financial services are often exempt from VAT.
4. How is VAT refunded to foreign investors in Turkey?
Answer:
Foreign investors can apply for a VAT refund on goods purchased in Turkey for export. To qualify, the goods must be exported within three months of purchase, and the original VAT invoices must be presented. The refund process is facilitated by the Turkish tax authorities, usually through an authorized intermediary.
5. How often must businesses in Turkey file VAT returns?
Answer:
Businesses in Turkey must file VAT returns monthly. The returns are due by the 28th of the following month, and any VAT owed must be paid by the 28th. Accurate and timely filing is crucial to avoid penalties and interest charges.
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