VAT (KDV) in Türkiye: A Foreign Operator's Guide to Rates, Refunds and Withholding

Value Added Tax — KDV (Katma Değer Vergisi) — is the tax your Turkish subsidiary will touch most often. It's filed monthly, runs at three different rates, and includes a withholding mechanism that doesn't exist in many other jurisdictions. Foreign operators who treat it like a flat sales tax run into trouble fast. This is a practical, sourced guide to the essentials.

The three rates

Since 10 July 2023 (Presidential Decision No. 7346), Türkiye applies three VAT rates, unchanged into 2026:

• 20% — standard rate. Applies to most goods and services unless specifically reduced. Electronics, furniture, vehicles, most services.
• 10% — reduced rate. (Raised from 8% in 2023.) Certain food items, accommodation/tourism, some health and education services.
• 1% — lowest rate. Basic foodstuffs (bread, flour, milk, eggs, fresh produce, legumes, unprocessed meat), books, newspapers and journals, and residential deliveries up to 150 m² net area.

The rate is determined by what is sold, not who buys it. Each product or service has its correct rate; a single invoice can legitimately carry multiple rates (e.g., a 20% service line and a 10% product line).

Monthly filing rhythm

VAT is filed monthly. The VAT return for a given month is filed by the 26th of the following month, with payment due shortly after. Miss it and penalties plus interest apply automatically — there's no informal grace period.

For a foreign parent, the practical point is cadence: this is not a quarterly or annual event. Your Turkish finance team or CPA files VAT every single month, and the data feeding that return must be clean and complete each month.

The withholding mechanism (KDV tevkifatı) — the surprise

This is what catches foreign operators off guard. In certain sectors and for certain buyers, VAT is partially withheld by the buyer rather than fully paid to the seller. The buyer then remits the withheld portion directly to the tax authority via a separate return (KDV2).

Examples of sectors where withholding commonly applies: construction/contracting, cleaning services, labour supply, consulting to specified buyers, scrap metal, and fabrication work. The withholding ratio varies by sector (for instance, a large share of the VAT is withheld on cleaning and labour services).

Why it matters to you:

• If your subsidiary buys such services, you may be the party responsible for withholding and remitting part of the VAT — and filing the KDV2 return monthly by the 26th.
• If your subsidiary sells such services to specified buyers, your invoice must show the withholding correctly, or it will be disputed.

Getting withholding wrong is one of the most common Turkish VAT errors. The fix is to define, per supplier and per service type, whether withholding applies — and let the system apply it automatically.

VAT refunds

If your subsidiary makes sales at the reduced rates (1% or 10%) while paying 20% VAT on its inputs, it accumulates a VAT credit that can be refunded. For 2026, the lower threshold for refunds arising from reduced-rate transactions is 164,000 TRY; amounts below that are used as offsets rather than cash refunds.

Exporters are a special case: exports are generally zero-rated, so exporters accumulate input VAT that becomes refundable. For a foreign-owned exporter, managing this refund well is real cash flow — the input VAT you can recover is money, and tracking which input relates to which export is what makes the refund claim succeed.

What your finance team must get right

• Correct rate on every line — set per product/service, not entered manually each time
• Withholding profiles — per supplier and service type, applied automatically
• Monthly VAT return data clean by the 26th
• KDV2 (withholding) return filed monthly where applicable
• Refund tracking — linking input VAT to reduced-rate or export sales

How Birasyo helps

Birasyo ERP assigns the correct VAT rate per product and applies it automatically on every invoice line, including mixed-rate invoices. Withholding is configured per supplier and service type, so KDV tevkifatı is applied and the KDV2 data prepared without manual judgement. Monthly VAT and KDV2 summaries are produced for your CPA, and input VAT is tracked against reduced-rate and export sales to support refund claims.

Explore Birasyo for foreign-owned operations →

Summary

Turkish VAT is not a flat sales tax: three rates set by product, monthly filing by the 26th, a withholding mechanism that can make the buyer responsible, and refunds that are real cash for reduced-rate sellers and exporters. Get the rate-per-product and withholding-per-supplier set up correctly at the source, and monthly VAT becomes routine instead of a recurring source of errors.

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Sources: VAT rate change under Presidential Decision No. 7346 (Official Gazette, 7 July 2023; effective 10 July 2023) raising the standard rate to 20% and the reduced rate to 10%; current rates and the 2026 reduced-rate refund threshold of 164,000 TRY per Gelir İdaresi Başkanlığı (gib.gov.tr) and Turkish CPA sources. General information, not tax advice — confirm specifics with a licensed Turkish CPA.