This content is from: Turkey

Important changes in the Turkish VAT system

The Turkish government has introduced a draft law amending the Turkish VAT Law. This is the most comprehensive amendment to the Turkish tax system since the VAT Law was first introduced in 1986.

The draft law has been submitted to the Turkish Grand Assembly for approval and it is expected that this draft law amending the Turkish VAT Law will be enacted.

We understand that the draft law introduces full VAT exemptions for:

  • Deliveries and services to donors;
  • Warehousing and terminal services;
  • Health services offered for non-residents; and
  • Delivery of machinery and equipment to research and development (R&D) centres and technology development zones (TDZs);

and partial VAT exemptions for:

  • Conversion of partnerships to equity companies; and
  • Delivery of apparel clippers.

However, the most important changes in the Turkish VAT system are related to deferred VAT, which is not refundable under the existing law, and to the period for VAT deduction.

A new VAT mechanism, which allows group VAT liability, will be introduced to the Turkish VAT system as well.

Deferred VAT will be refundable

Under the existing VAT Law, excess amounts of input VAT can be deferred to the following tax period, but VAT refunds are not available. This has been creating huge problems in the Turkish VAT system.

With the new provisions of the draft law, excess VAT can be deferred and if it cannot be deducted within a 12-month period it will be refunded on the condition that the taxpayer claims the VAT and applies for a refund within six months following the relevant 12-month period.

VAT deduction period is extended

Under the prevailing VAT Law, the right to deduct VAT can be exercised during the period in which the relevant documents are entered in the company books, provided that the VAT deduction takes place within the same calendar year that the action subject to the VAT occurred.

This will be changed under the draft law which provides an extension of the VAT deduction period. Accordingly, it will be possible to exercise the VAT deduction up to the end of the calendar year following the calendar year in which the taxable event took place provided that the relevant documents are entered in the company books in line with prevailing laws.

Introduction of group VAT liability

The draft law introduces a new VAT mechanism that allows group VAT liability. In this regard, the Ministry of Finance is authorised to register 'group VAT liability', which allows corporate income taxpayers to file a consolidated VAT declaration for all group companies.

Under this mechanism, it is required that a company holds at least a 50% share of group companies. Companies will also be able to deduct the VAT of other group companies as they compute their own VAT base.

A company may register for group VAT liability and will be responsible for the assessment of group VAT. Nevertheless, all members of the group are jointly responsible for the VAT payment.

This mechanism is optional. For that reason, we recommend that companies evaluate their VAT position before applying for this mechanism.


The draft law introduces comprehensive changes in the Turkish VAT system. For instance, game development in TDZs is exempted from VAT. Thus, it is advisable that taxpayers monitor these expected VAT changes with a view to determining their VAT position in Turkey.

Burçin GözlüklüRamazan Biçer

Dr Burçin Gözlüklü ( and Ramazan Biçer (
Centrum Consulting
Tel: +90 216 504 20 66

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