Katma Deger Vergisi (KDV) is the Turkish name for international VAT and was introduced for the first time in 1985. The VAT must be paid for every good and service that is supplied in Turkey in commercial, industrial and agricultural field. VAT is also applied for professional activities and for import of different products and services.
The standard rate fot VAT in Turkey is 18%, but there are reduced rates for some goods and services and exemptions.
For the following products, the VAT is 8%:
- raw for products sold in pharmacies;
- accommodation in tourism entities, such as motels, hotels or every other unit that offers similar facilities.
The lowest VAT rate is 1% and is available for some agricultural products. In Turkey there are a few exemptions from VAT ant they are related to exports, international transportation, roaming for clients outside Turkey, equipments delivered to entrepreneurs who owns an investment incentive certificate and who pay VAT, specific services in harbors and airports. The government and other public entities can deliver goods for educational, cultural and health purposes without the obligation of paying VAT. The same exemption is valid for services in free zones and for banking and insurance transactions.
A foreign investor who registers his company for paying the usual taxes doesn’t have to register separately for VAT. The obligation of registering for VAT is applied for investors in commercial, industrial, agricultural and other independent activities. This procedure must be accomplished before doing business in Turkey, no matter the country of residence of the entrepreneur. A foreign investor must register his company for taxes even if he opens a branch or a subsidiary of his parent company.
If a foreign entity is not registered for paying taxes in Turkey, then reverse charge mechanism is applied, but these companies can’t import goods or services into Turkey.
When the entrepreneur has forgotten to register for taxes or he doesn’t respect the deadline, he can be fined. He will have to pay the double amount of the tax or penalties of 1.40% per month.
If you need more details about the VAT registration or any other information about the taxes in Turkey, you may contact our Turkish lawyers.