Value Added Tax (VAT) is levied on goods delivered and services rendered in connection with commercial, industrial, and agricultural activities and professional services in Turkey, as well as on goods imported and professional services received from abroad. Persons who deliver such goods or perform such services are liable for VAT. In general, VAT arises when a service is performed, goods are delivered or an invoice is issued prior to delivery of goods or, in the case of imports, when import clearance document is filed with the Customs Authority.
Major exemptions are as follows:
VAT rates are shown in Table 11.01. VAT incurred on purchases of inventory, fixed assets, supplies and other goods and services are recorded as input VAT and offset against the output VAT calculated on deliveries of goods and services. When the output VAT calculated is greater than the input VAT paid/ incurred on purchases, the output VAT in excess of the input VAT is paid to tax office as “VAT Payable”. In cases when input VAT paid / incurred on purchases is greater than the output VAT calculated, the input VAT in excess of the output VAT is carried forward to the following months so as to be offset against the output VAT to be generated through sales in the following months.
11.01 Value Added Tax Rates
| Types of Supply | Rate (%) |
| Most supplies (including services)(1) | 18 |
| Basic foodstuffs, Books, Education Services by Private Schools, Touristic Services | 8 |
| Agricultural products sold as raw materials, newspaper, used cars, houses with a net area of up to 150 m2 (2) | 1 |
| Delivery of the textile and leather products | 8 |
| Luxury goods and entertainment services rendered by discos, bars etc. | 18 |
| Medical products and devices | 8 |
| Automobiles with cylinder capacity of more than 2000 cc | 18 |
(1) VAT rates for deliveries in certain sectors (e.g. computers, furniture, housing etc.) were provisionally reduced in March 2009 from 18% to 8% so as to support certain sectors in economic downturn.
(2) The VAT rate on delivery of houses with a net area of 150m2 or more shall provisionally be applied at 8% (instead of 18%) between 17 March-15 June 2009 to support construction/housing sector during the economic downturn.
Reverse Charge VAT Mechanism
If certain services (e.g. professional services like engineering, legal consultancy, design etc.) from non-residents are received or benefited by a resident company in Turkey under certain conditions defined by the VAT legislation, VAT is required to be paid by the resident company purchasing/importing the service under the “reverse charge mechanism” and monthly Reverse Charge VAT return (VAT Return No. 2) is required to be filed by the company for the monthly period in which the transactions are realized.
Turkish resident company treats the Reverse Charge VAT paid as an Input VAT and offsets it against the output VAT declared on the Regular VAT return (VAT Return No. 1). However, if there is no sufficient output VAT to offset, the VAT paid on a reverse charge basis constitutes a cash-flow burden on the Turkish company that has purchased the services concerned.
SCT is an indirect tax (excise tax) which has been introduced with effect from 1 August 2002. Unlike VAT, SCT is applied only at once by the party that becomes liable as a result of occurrence of the taxable event for the particular types of products as specified in the lists attached to SCT Law. Thus, SCT constitutes a cost for those parties who are not held liable to calculate and declare such tax however, incur the cost of SCT on their purchases from those taxpayers who are liable to calculate SCT on their deliveries.
SCT is applicable to only certain types of goods specified and enumerated in the lists attached to the SCT Law. There are four lists of products attached to the SCT Law.
| List No. |
Types of Products | Taxable Event | SCT Rates |
| List I (Sub-list A) |
Petroleum products, natural gas, LPG, petrol derivatives |
Importation and production of the goods concerned |
Fixed amount depending on the Customs Tariff Position Number (CTPN) of the product |
| List I (Sub-list B) |
Solvent and various types of solvent derivatives (toluen, exxsol, solvent- naphta etc.) |
Importation and production of the goods concerned | Fixed amount depending on the CTPN of the product. |
| List II | Vehicles subject to registration |
First Acquisition | Proportional Tax: Rates vary between 0.5-84% depending on the CTPN of the vehicle. (The SCT rates for certain vehicles were provisionally reduced in March 2009 so as to be applied until 15 June 2009 in order to support the automotive industry during the economic downturn) |
| Vehicles not subject to registration | Importation, or delivery of the vehicles by its manufacturer, auction sale of the vehicles before SCT is levied on. | ||
| List III (Sub-list A) |
Alcoholic drinks, non-alcoholic beverages |
Importation or delivery of the goods by its manufacturer and auction sale of the goods before SCT is levied on. | Higher of proportional tax / minimum fixed amount, per liter of alcohol in goods: rates vary between 25-275.6% depending on CTPN. |
| List III (Sub-list B) |
Cigarettes, tobacco products | Importation or, delivery of the goods by its manufacturer, auction sale of the goods before SCT is levied on. |
Both fixed amounts and proportional SCT: The rates are 30% and 58%. |
| List IV | Those consumer goods which
are used to be subject to high
VAT rate (26%) prior to 1
August 2002 such as
cosmetics, perfumes, fur, airconditioners,
refrigerators,
receivers, recorders and
various electronic appliances etc. |
Importation or, delivery of the goods by its manufacturer, auction sale of the goods before SCT is levied on. | Proportional: 6.7% or 20% depending on the CTPN of the goods.(The SCT rates for certain items in this list-air conditioners, white goods, electrical home appliances, radio/television etc. were provisionally reduced to zero in March 2009 to be applied until 15 June 2009 in order to support certain sectors during the economic downturn) |
Property tax is levied on buildings (0.1% for houses; 0.2% for business premises) and land (0.1% for undeveloped/regular land; 0.3% for parceled land) located in regular districts based on their annual value in Turkey. These rates are applied as twice in the districts which are located in metropolitan municipality border line. There is a partial exemption at a rate of 25%, if the related property is used as residence.
Inheritance and transfer tax is levied on free transfers such as gifts and inheritances and varies between 1% and 30%, depending on the amount of the transfer concerned and the way the property is transferred (as inheritance or gift). The inheritance and transfer tax rates to be applied to inheritance and free transfers for the year 2009 are provided below:
| Inheritance / Transfer Tax Base | Inheritance Tax Rate (%) | Transfer (Gift) Tax Rate (%) |
| First TL 160,000 | 1 | 10 |
| Next TL 350,000 | 3 | 15 |
| Next TL 760,000 | 5 | 20 |
| Next TL 1,500,000 | 7 | 25 |
| Above TL 2,770,000 | 10 | 30 |
Stamp taxes are levied on a wide range of transaction documents. The maximum limit of stamp tax to be imposed per document is TRL 1,136,904.10 (for 2009). A brief summary of stamp taxes relating to major business transactions are shown in Table 11.05. below:
| Taxable Document |
Stamp Tax Rate |
| Contracts with a monetary amount | 0.75% of the amount concerned (*) |
| Letters of guarantee | 0.75% of the amount (*) |
| Payrolls | 0.6% of the gross salary |
(*) The stamp tax amount per document may not exceed TRL 1,136,904.10 are (effective for the year 2009).
Motor Vehicle Tax is levied annually on motorized vehicles and boats, according to a specific tariff. The individuals and the entities registered as the owners of motor vehicles are obliged to pay motor vehicle tax. The payments are made in two equal installments in January and July of each year. The amount of tax varies depending on the age, engine capacity and type of vehicle or boat.
Bank and insurance transaction tax (BITT) is levied on any favorable amount which arises from the transactions carried out by banks and insurance companies. The general rate of BITT is 5% of the favorable amount received by a bank or insurance company as a result of a transaction subject to BITT. The BITT rate is applied as 1% on the following transactions:
a) favorable amounts received from deposit transactions among banks,
b) favorable amounts received from money market transactions between banks and brokerage companies operating according to the Capital Market Law,
c) favorable amounts received as a result of purchase and sale as well as repurchase (“repo”) transactions of government securities,
d) favorable amounts received as a result of sale of government securities prior to maturity.
The Council of Ministers is authorized to amend these rates.
There is no longer BITT applied on foreign currency sales since the BITT rate used to be applied at 0.1% on foreign currency sales has been reduced to zero with effect from 1 May 2008.
Companies which sign concession agreements with the Telecommunications Authority, pursuant to the Telegram and Telephone Law, or establish or operate telecommunications infrastructure or provide telecommunications services via general license or authorization granted by the Telecommunications Authority are required to pay special communication tax.
The following transactions are subject to special communication tax.
a) Every kind of mobile telecommunication operation services (including sales of prepaid cards): 25%
b) Radio and television broadcasting services via cable and satellite platforms: 15%
c) Cabled, wireless and mobile internet service providing activities: 5% (effective from 1 March 2009)
d) Other telecommunication services (i.e. those outside the scope of the services defined in a), b) and c) above): 15%
Special communication tax return is filed on a monthly basis and the tax is paid on the 15th of the following month. Special communication tax is treated as non-deductible expense and it cannot be offset against other taxes.