VAT rates in Turkey

VAT rates in Turkey

Nowadays it is common for entrepreneurs to look for opportunities in foreign countries and many eye-catching targets are available for these ready to take a risk. One such country is Turkey. With large population maintaining its growth and low average age it presents itself as quite attractive place to make an investment.

Is it worth it?

It was already mentioned that Turkey is a tempting target for expansion of business activities, but there is another thing to keep in mind – stance of authorities towards foreign entities. Any entrepreneur interested in investment will find himself quite welcome and might be eligible for many benefits as government offers many incentives to the investors. Key to these is Investment Incentive Certificate and there are many companies offering help with applying and acquiring them. It is worthwhile to mention that there are VAT exemptions related to taxable supplies delivered to entrepreneurs owning investment incentive certificate.

VAT – value-added tax

In this age it is uncommon to find someone who has never heard of VAT. Very few countries do not make use of this system in some way or form. To make it clear VAT payable on imports and purchases made locally is called input VAT, while VAT associated with sales is referred to as output VAT. The values of the two offset each other when VAT return is filed. There is no VAT refund in case of excess input VAT, instead balance is carried forward to the next month, although this situation may differ in certain cases some of which are reduced rates or fully exempt goods and services.

VAT registration

VAT registration in Turkey is required to be made before an activity of business or commercial nature takes place. Registration takes place in tax office with jurisdiction over the area in which your permanent establishment or place of business is located. If multiple businesses are involved, registration for VAT purposes must be done by tax office authorized to deal with such case.

For foreign entities registration process must be completed by local tax representative with appointed proxy status. It is important to remember that unlike many countries, where doing it in person might be inconvenient due to language barriers or lengthy and complicated processes, in Turkey direct registration is simply not possible.

Is registration always necessary?

When it comes to necessity of registration for VAT purposes in Turkey, some confusion might appear as due to reverse charge mechanism in case of entity not being registered, the Turkish purchaser of goods and services will be obliged to have the VAT settled. As the previous case applies mostly to B2B, in case of B2C transactions especially digital services without business center in Turkey – a registration is necessary, which must be done through appointed representative. Another incentive to register is the fact that only entities registered for VAT purposes can import goods into Turkey.

VAT threshold

There is no turnover VAT threshold in Turkey as such anyone who performs an activity falling under the scope of Turkish VAT law is obliged to notify the local tax office. It is compulsory to register in Turkey for VAT purposes if taxable supplies are made.

Deadlines

You are obliged to file VAT returns by the 24th day of the month following the end of taxation period and tax must be paid on the 26th of the same month. In Turkey in general you are expected to file VAT tax returns on the monthly basis, even if no transactions subject to VAT took place and they are submitted in electronic or paper form.

VAT rates in Turkey

Turkish VAT law provides three groups for VAT rate purposes. VAT tax base rate is set at 18% and two reduced rates 8% and 1%. It might be worthwhile to take a look at detailed lists of products and services as products within range of your company activity might be included in one of reduced rates. Corporate income tax as of 2022 is set at 23% rate, however that is due to temporary changes – main tax is 20% and is expected to return to base value in 2023 unless changes in legislation take place. When it comes to financial sector tax rate is 25% according to the Turkish tax laws.

Additional advantages of expanding in Turkey

The previously listed benefits are not all that this country has to offer for entities interested in performing business activities there. One of the most enticing ones is the existence of the free zones – areas, where companies are exempt from the VAT. There are also many taxable supplies that are exempt from the VAT. Some interesting examples include certain healthcare services provided to foreigners and purchase of equipment and machinery related to R&D in specific zones.

With all of that in mind Turkey is certainly a very enticing option for expanding entrepreneur, although it does require employing a local representative to complete the process. For these interested in such opportunity there are many companies offering their services in making the process as smooth as possible and providing advice for parties in need. Such aid extends from helping in acquiring Investment Incentive Certificate to registration and settling the duties related to VAT.