VAT (KDV) in Türkiye: A Guide for Foreign Businesses

If your business deals with Türkiye, value-added tax — in Turkish, katma değer vergisi, or KDV — will usually touch your transactions, even when you have no office or company here. The core rule is simple: VAT in Türkiye is charged on goods and services delivered or used in the country, governed by the Value Added Tax Law (Katma Değer Vergisi Kanunu) No. 3065. Where it gets complicated for a foreign business is who accounts for the tax. Often it is not the foreign supplier but the Turkish customer who must declare and pay the VAT under a "reverse-charge" mechanism. This guide explains, in plain terms, when VAT applies to you, how the reverse charge works, how exports and refunds are treated, and what the e-invoice rules mean for you.

When does Turkish VAT apply to a foreign business?

Turkish VAT applies when a transaction takes place in Türkiye. Under the Value Added Tax Law (Katma Değer Vergisi Kanunu) No. 3065, the taxable events are, broadly, the delivery of goods and the performance of services within the country, as well as imports. The decisive question is not whether you have a Turkish company or office — it is whether the goods are delivered in Türkiye or the service is used or benefited from here.

This has a practical consequence many foreign businesses miss: you can become connected to Turkish VAT without ever registering a local entity. A few common situations:

• You import goods into Türkiye. Import VAT is assessed at customs, alongside any customs duty, before the goods are released.
• You supply services that are used in Türkiye. For example, software, consulting, licensing, advertising, or technical services provided to a Turkish customer. Even if you invoice from abroad, Turkish VAT may be due on that service.
• You sell goods within Türkiye after they have already been imported or are held locally.

Whether you must register and charge VAT yourself, or whether your Turkish customer accounts for it instead, depends on the type of transaction and on whether you have a presence in Türkiye. That distinction is the heart of the reverse-charge mechanism, covered next. Corporate and income tax sit on separate statutes — the Corporate Tax Law (Kurumlar Vergisi Kanunu) No. 5520 and the Income Tax Law (Gelir Vergisi Kanunu) No. 193 — and a transaction can trigger VAT obligations independently of whether it creates a corporate tax footprint.

The reverse charge: VAT on services bought from abroad

This is the mechanism that most often surprises foreign suppliers and Turkish buyers alike. When a Turkish business receives a service from a supplier that has no presence and no VAT registration in Türkiye, the VAT is generally not collected from the foreign supplier. Instead, the Turkish recipient calculates the VAT, declares it, and pays it to the tax office on the supplier's behalf. In Turkish practice this is called paying VAT "sorumlu sıfatıyla" — in your capacity as the responsible party — and it is filed on a dedicated VAT return (commonly referred to as the KDV-2 declaration).

Law No. 3065 places this responsibility on the recipient precisely because the tax authority cannot easily reach a supplier sitting outside Türkiye. The structure works like this:

• The foreign supplier issues its invoice without Turkish VAT.
• The Turkish customer self-assesses the Turkish VAT on the value of the service, declares it, and pays it over.
• If the Turkish customer is itself a VAT-registered business using that service for taxable activities, it can usually deduct the same amount as input VAT — so for a fully taxable business the reverse charge is often cash-flow neutral, not an added cost.

For you as a foreign supplier, the takeaway is twofold. First, you generally should not add Turkish VAT to your invoice in these cases — but you should make sure the contract is clear about who bears the tax, because reverse-charge VAT can become a real cost for a Turkish customer that cannot fully deduct it. Second, this is distinct from tevkifat (partial VAT withholding), a separate mechanism under which, for certain listed domestic services, the buyer withholds a portion of the VAT and pays it directly to the treasury. The categories and proportions for withholding are set by the tax administration and are revised periodically, so the specific list and ratios must be confirmed at the time of the transaction.

Standard and reduced VAT rates

Türkiye operates a standard VAT rate that applies to most goods and services, plus one or more reduced rates for specific categories — for example, certain foodstuffs, particular health and educational supplies, and selected other goods and services that the government has chosen to tax more lightly. Some transactions are exempt entirely (discussed below).

We are deliberately not quoting a number here, and you should be cautious of any source that states a Turkish VAT rate as if it were permanent. Rates and the lists of what falls into each rate band change — they are set and revised by government decision, sometimes more than once in a year. Pricing a contract or issuing an invoice against an out-of-date rate is a common and avoidable error.

Before you price, quote, or invoice anything connected to Türkiye, confirm two things for your specific goods or service:

• Which rate band applies — standard, a reduced rate, or exemption. Classification can be technical and product-specific.
• The current percentage for that band as of the transaction date.

Getting the classification right matters as much as the rate itself, because misclassification can lead to under-collected VAT that the tax office may later assess against you, together with interest and penalties under the Tax Procedure Law (Vergi Usul Kanunu) No. 213.

Exports and the VAT exemption

VAT is a tax on domestic consumption, so Türkiye does not want to export its own VAT inside the price of goods and services sold abroad. Under Law No. 3065, exports of goods are exempt from VAT, and certain services rendered to customers abroad and used outside Türkiye (often called "services exported" or hizmet ihracı) can also qualify for exemption when the statutory conditions are met.

The important feature of an export exemption is that it is usually a "full" exemption with a right of recovery. This means two things together:

• You do not charge Turkish VAT on the qualifying export sale.
• You can generally recover the input VAT you incurred on costs related to that export — for example VAT paid on goods or services you bought in Türkiye to produce or deliver the exported item.

That recovery is what makes the export regime valuable, but it is also where most disputes arise, because the exemption only holds if the conditions are properly documented. For a service to count as exported, for instance, the benefit of the service generally has to be used abroad — and the tax administration looks closely at whether that is genuinely the case. The precise conditions and evidence requirements are technical, and whether a given service truly qualifies as an export is fact-specific and often the subject of tax rulings (özelge). It is worth confirming the position in advance rather than assuming an exemption applies.

VAT refunds: recovering input VAT

Where you carry exempt exports or certain other refund-eligible transactions, the input VAT you cannot offset against output VAT can become refundable. The Turkish VAT refund system is real and used widely — but it is documentation-driven and scrutiny-heavy, and the practical experience depends almost entirely on how well the paperwork is prepared.

At a high level, a refund claim typically requires you to demonstrate, with supporting records, that:

• the underlying transaction genuinely qualifies for exemption or refund;
• the input VAT you are reclaiming was actually incurred and is properly linked to that transaction; and
• the supporting invoices and ledgers are consistent and complete.

Depending on the amount and the type of claim, the tax office may require a sworn-accountant certification report (in Turkish, a YMM tasdik raporu) or, in some cases, accept a guarantee while the claim is processed. Refunds may be paid in cash or applied against other tax debts. The thresholds that determine which procedure applies, and the time it takes, are set administratively and change — so these should be checked at the time you file. If a refund claim is rejected or reduced, the dispute is resolved first through the tax authority and then, if necessary, before the tax courts under the Administrative Procedure Law (İdari Yargılama Usulü Kanunu) No. 2577, which sets strict time limits for challenging a tax assessment or refund decision.

E-invoice and e-ledger compliance

Türkiye has moved a large part of its tax system onto mandatory digital documents, and this directly affects how you transact here. The main pillars are e-fatura (e-invoice) and e-arşiv fatura (e-archive invoice) for issuing invoices electronically, and e-defter (e-ledger) for keeping the statutory books in digital form. These obligations are anchored in the Tax Procedure Law (Vergi Usul Kanunu) No. 213 and the secondary regulations issued under it.

What this means in practice for a business connected to Türkiye:

• Whether you are inside these systems depends on your status and thresholds. Businesses operating through a Turkish entity above certain size or sector criteria are required to use e-invoice and e-ledger; the criteria are set by the tax administration and are revised over time, so they must be checked against your current figures.
• Valid invoices are the backbone of VAT recovery. If invoices are not issued or stored in the required electronic format, your right to deduct or refund the related VAT can be challenged.
• Non-compliance carries its own penalties under Law No. 213, separate from the underlying VAT — for example for failing to issue, transmit, or retain documents correctly.

For a foreign-owned business, the most common friction points are onboarding a Turkish entity into the e-invoice system correctly from day one, and making sure cross-border documentation lines up with what the Turkish system expects. These are operational details, but they have direct VAT consequences, so they are worth getting right before you start invoicing rather than after a refund is held up.

Practical steps for foreign businesses

VAT in Türkiye rewards businesses that plan the tax position before the first transaction, not after an assessment lands. A few practical priorities:

• Map each transaction to its VAT treatment early. Is it an import, a domestic supply, a service used in Türkiye, or an export? The answer drives who accounts for the VAT and at what rate.
• Decide who bears reverse-charge VAT in your contracts. Silence on this point creates disputes; a clear clause does not.
• Confirm the current rate and classification at transaction date — never carry forward a rate from a previous deal or an old article.
• Keep export and refund documentation immaculate. The exemption and the refund both stand or fall on the paperwork.
• Get e-invoice and e-ledger set up correctly from the outset if you operate through a Turkish entity.

Because Turkish VAT interacts with customs, corporate tax under the Corporate Tax Law (Kurumlar Vergisi Kanunu) No. 5520, and your contractual arrangements, it is sensible to take advice on your specific facts. This guide is general information about how the system works under Law No. 3065 and the related statutes; it is not a substitute for advice on your particular transactions, and the rates, thresholds, and procedural details referenced here should be confirmed as current before you rely on them.

Frequently asked questions