Value Added Tax is levied on all goods and services supplied as a business activity. The Turkish name for Value Added Tax is Katma Deger Vergisi and it is abbreviated to KDV.

All of the following transactions realized in Turkey are subject to KDV:

·         Importation of all goods and services

·         Delivery of goods and services related to industrial, commercial, agricultural activities

·         Sales realized in auction places and warehouses

·         Organization of concerts and sport activities

Imports of goods and services are subject to tax at the customs clearing. Goods are considered movable and immovable, property and supplies are almost all business transactions. The KDV is applied on the invoice. The KDV born on purchases is credited against the KDV on sales. The balance is payable to the tax office in the following month.

Certain supplies are exempt from tax, in particular the export of goods and services and the purchase and repair of air, sea and rail means of transport. International transport of goods may be exempted on a reciprocal basis.

There is not a single value added tax rate in Turkey. There are multiple tax rates in the Turkish tax system and the Council of Ministers can change the taxes rates in certain limits. The standard rate of KDV is 18%. Other rates are:

- On financial leases and agricultural products, etc…..1%;

- On goods regarded as essential such as food medicine, etc…… 8%;

- On many educational goods and services,     8%.

As an investment incentive, KDV on machinery and equipment imported and purchased locally are exempted.

Exporting companies can recover the KDV borne on goods and services purchased if they prove that they are attributable to goods exported. Goods for re-export can be invoiced to exporters without any KDV charge, but the export of the goods must be documented.

Banking and insurance activities are not subject to KDV. A special transaction tax at the rate of 5% applies to all kinds of bank charges and insurance premiums.

Value Added Tax (KDV) Collection

The Ministry of Finance has the authority to make all the collection of KDV and liable for the payment of KDV.

Obligations of the KDV payer start when the place of business is declared to the tax office in Turkey. The parties who are involved in activities which are subject to KDV are considered as taxpayers even if they do not register.

Determination of Tax for Transactions in Foreign Currencies

If the tax is determined in terms of a foreign currency, the foreign currency amount will be converted to Turkish Lira by using the foreign exchange buying rate prevailing on the day of realization of the taxable event.