Value-added tax: How is it calculated and exemptions

Information on value-added tax in Turkey

It is a tax imposed in three different ratios, 1%, 5% and 18%, on expenditure in accordance with the Value Added Tax Act No. 3065 of 1984, where this tax is deducted from the final consumers of the goods, and in Turkey, it is charged according to the necessity of the goods consumed.

Turkey imposes this tax symbolized by (KDV) on all products sold within Turkey, including on all commercial and industrial activities, self-employment, even goods imported into Turkey, as well as goods and services for other activities.

How is VAT calculated in Turkey?

The value-added tax (VAT), coded KDV, is calculated by multiplying the price of the single product by the rate of the tax, so the price of the final product can be known after adding the value of the added tax.

Example: We have a vacuum cleaner priced at 500 TL and the tax rate was 18%, the final rate after the tax increase is 590 TL.

That is, the calculation is as follows: 1.18 × 500 = 590 TL.

Calculation of VAT not included in Turkey

In order to calculate the unlisted VAT, it is sufficient to replace the multiplication process with the partition process, i.e. split the price of the product by one, plus the tax ratio.

Example: We have a vacuum cleaner priced at 500 TL and the tax rate was 18%, the final rate after the tax increase is 590 TL.

Its pre-tax rate is 500 TL.

The calculation is as follows: 1.18 × 500 = 590 TL.

Products with 1% duty

It is imposed on wheat flour and its derivatives, which are essential consumables, as well as on housing units not exceeding 150 square meters.

Products with 8% duty

Imposed on basic consumables not included in welfare products, such as meat and its derivatives, milk and its derivatives, eggs and beans, honey, jam, molasses, candy, tahini, certain animals, and other products and services.

Products with 18% duty

Products that are not considered essential consumables are subject to certain exceptions, such as communications products, furniture, electrical appliances, some animals, some spices and other products and services.

To access the full product list, visit the following link

Goods and services exempt from VAT in Turkey

• Exports of goods and services from Turkey

• Mobile phone roaming services, on Turkish territory, are provided to arrivals from outside Turkey, but on condition of reciprocity by the resident state, in accordance with international travel agreements.

• Free zone manufacturers

• Oil exploration activities

• Port and airport services for ships and planes

• Imported machines and equipment within the scope of an "investment certificate"

• Transit transport

• Deliveries of goods and services by diplomats and representatives of foreign consulates, subject to reciprocity, as well as for international organizations subject to tax exemption and their staff.

• Insurance and bank transactions.

Reductions on VAT in Turkey

The Turkish government launched the "Economic Stability Shield" package and reduced VAT on domestic flights from 18% to 1% for three months.

In July 2020, the Turkish government reduced the value-added tax (VAT) of the service sector. The discount tax on rental premises was also reduced from 20% to 10%, VAT on services and several sectors such as passenger transportation, wedding organization, home maintenance, dry cleaning and sewing from 18% to 8%.

In addition, VAT on accommodation and restaurant services, as well as cultural activities such as entrance fees for cinema, theatres and museums, has been reduced to 1%. These reductions were extended until 31 May 2021, after having expired on 31 December 2020.

On the other hand, Turkish President Recep Tayyip Erdoğan decided to reduce the value of the added tax on education services from 8% to 1%, with the decision to continue until 30 June 2021.

VAT on real estate for foreigners in Turkey

Over the past three years, foreign investments in Turkish real estate have grown significantly, with Arab investors having the largest share, hence the need to clarify the value-added tax on real estate for foreigners in Turkey.

There are some detailed criteria for the size and location of the property, under which VAT falls from 18% to 8% or 1%.

There are also exceptions from VAT in Turkey on every residential property or workplace defined in its construction permit as house, residence, shop, office, floor apartment, and that's when it's sold for the first time.

All of the above types of real estate must be attached to the floor easement and ready for use by the buyer who will receive them.

The beneficiaries of the real estate tax reductions in Turkey are:

• Turkish citizens who have resided abroad for more than six months on the condition that they have an exit and employment permit.

• Foreign citizens not residing in Turkey.

• Legal persons and institutions.

How to get the value of VAT back from Turkey's airports?

The VAT on products can be recovered during purchase, for any foreign passenger, or any Turkish official resident outside Turkey.

We note that the value of the tax varies according to the quality of the products and ranges from 1% to 18%.

The price of the product whose tax value is to be restored must exceed 100 TL.  Therefore, when purchasing a product, make sure to request a tax-free bill with the e-bill (e-fatura) logo. If a person does not obtain the electronic bill logo, the airport customs department must be reviewed to certify the bill.

A person must also obtain several copies of this bill, valid for three months, and ensure that your information is written as recorded in the passport.

Here we advise a passenger who is considering restoring value-added, to go to the airport early before the plane takes off, to search the Tax-Free Point office at the airport, and to request a refund.

We note that sometimes the office requests to verify that you take the product with you while leaving Turkey.

Important note: Tax recovery services are provided at several points within Turkish cities, and can be verified by the following link.

Edited by Gars Consulting Company

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