Understanding VAT Rates and Refunds in Türkiye for 2024-2025

Türkiye applies a multi-tiered Value Added Tax (VAT) system that varies depending on the product or service category. Entrepreneurs looking to do business in Türkiye should be aware of the applicable VAT rates and potential refunds to optimize their financial planning. Below is a comprehensive guide on Türkiye’s VAT system for 2024-2025.

VAT Rates in Türkiye

Türkiye’s VAT system operates at three different levels:

• %1 VAT Rate: Applies to essential products such as flour-based goods, some nuts, plant seeds, wheat and similar products, unpackaged legumes, religious books including the Quran, general food products, and residential properties up to 150 square meters.
• %10 VAT Rate: This rate is applied to items like meat, fresh fish, dairy products, eggs, honey, potatoes, clothing (both inner and outerwear), footwear, handbags, and suitcases. Additionally, it covers healthcare services, tea, biscuits, theaters, cinemas, museum entry fees, hotel accommodations, and restaurants that do not sell alcoholic beverages. Some previously 8% taxed goods were raised to 10% as of recent changes.
• %20 VAT Rate: This covers businesses such as licensed restaurants serving alcohol, luxury items like gold and diamond products, electronics including computers, tablets, and smartphones, and household appliances like refrigerators, washing machines, and dishwashers. Furniture and several other consumer goods also fall under this category. Notably, in July 2023, the 18% VAT category was increased to 20% for some specific goods.

VAT Refunds in Türkiye

Businesses operating in Türkiye can benefit from VAT refunds under specific conditions, mainly categorized as follows:

Refunds for Reduced VAT Rate Transactions

Companies dealing with reduced VAT rate transactions may accumulate excess VAT that cannot be deducted. The refundable portion of this amount for 2025 is set at 130,700 TL. This threshold is updated based on the annual revaluation rate.

Export VAT Refunds

Businesses engaged in exports can recover VAT paid for locally procured goods and services that are incorporated into exported products but not passed on to international buyers. Exporters are eligible for two types of VAT refunds:

• Cash Refund: The VAT incurred on export-related expenses is refunded directly to the exporter’s bank account. To qualify, the export transaction must be completed, all required documents must be submitted, and a tax review process needs to verify the claim. Refund amounts below 10,000 TL do not require a tax audit report or a Certified Public Accountant (CPA) report.
• Offset Refund: The incurred VAT amount is adjusted against other tax liabilities of the exporter. Similar to the cash refund process, this requires submission of relevant documentation to facilitate the refund. For offset refund claims, no CPA report or tax audit report is needed, regardless of the amount.

These refund mechanisms provide essential support to exporters, improving cash flow and facilitating smooth commercial operations.

For further details on VAT procedures and legal updates, businesses should consult Türkiye’s Revenue Administration (Gelir İdaresi Başkanlığı). Entrepreneurs planning to enter the Turkish market should integrate VAT strategies into their financial planning to ensure compliance and maximize tax benefits.