Understanding VAT in Turkey: Rates, Taxpayers & Key Principles

In this article, we will provide detailed information about Value Added Tax (VAT) in Turkey. The VAT law, which came into effect in 1985, applies to almost every good and service in Turkey. We will cover the basic principles of VAT, who pays it, and how it is calculated.

What is Subject to VAT?

VAT is a tax applied on the delivery and importation of all types of goods and services. Commercial transactions, agricultural activities, and freelance income are all subject to VAT. Additionally, sectors like postal services and broadcasting are also under the scope of VAT in Turkey.

While some special cases, such as simple tax regime taxpayers and casual earnings, may benefit from VAT exemptions, VAT generally applies to almost all transactions.

Who Are VAT Taxpayers?

VAT taxpayers in Turkey are divided into two categories: statutory taxpayers and actual taxpayers. The statutory taxpayer is the entity responsible for paying VAT to the government, whereas the actual taxpayer is the one who ultimately bears the cost. In reality, VAT is borne by the final consumer. Sellers simply collect the VAT and pay it to the government. Thus, the VAT doesn't come out of the seller’s pocket but is added to the price that the consumer pays for goods or services.

What Triggers VAT Liability?

VAT liability arises when goods or services are delivered. For instance, when a product is shipped or an invoice is issued, the taxable event occurs. In some cases, VAT is triggered even before the actual delivery of goods, especially when an invoice must be issued beforehand. For example, in the case of pre-paid products like household appliances, VAT is due once the payment is made, even if the product hasn’t been delivered yet.

VAT on Imports in Turkey

VAT on imports is triggered when customs duties become payable. If no customs duties are applicable, VAT liability arises when the customs declaration is registered. In consignment sales, VAT is triggered when the goods are sold to the consumer, not when they are merely delivered to the store.

What is the VAT Base?

The VAT base is calculated based on the sale price of the goods or services. Any additional costs, such as packaging, transportation, and insurance, are also included in the VAT base. Even deferred payment charges must be included. Every expense associated with the product or service contributes to the VAT base.

However, unusual discounts or rebates that don’t follow commercial norms are excluded from the VAT base. The government mandates that sales must be made with a reasonable profit margin, and even in cases of loss-making sales, taxes are still calculated based on the reference market price.

Delivery & Barter Concepts

The concept of delivery refers to transferring the right to dispose of goods to the buyer. This includes handing over goods to a third party or arranging for their transportation.

Barter, or the exchange of one good for another, also requires VAT payment on both sides of the transaction. Even if no money is exchanged, both parties must pay VAT.

VAT Declaration & Payment Deadlines

VAT returns must be submitted by the 26th of each month, and payments must be made by the same date. For instance, VAT for August must be declared and paid by the 26th of September.

VAT Rates in Turkey for 2024

For the year 2024, VAT rates in Turkey are 1%, 10%, and 20%, depending on the nature of the goods or services.

This comprehensive overview of VAT in Turkey aims to clarify the scope, taxable events, and reporting requirements, helping businesses and consumers better understand their tax obligations.

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