FAQ about VAT in Turkey

Does VAT apply to service provisions in Turkey?

Yes, in Turkey, VAT (Value Added Tax) generally applies to service provisions, just as it does to the delivery of goods. The Turkish VAT system is governed by VAT Law No. 3065, and VAT rates vary depending on the type of goods and services. Here are some key points regarding VAT on service provisions in Turkey:

1. Standard VAT rate: The standard VAT rate in Turkey is 20%. This rate applies to most services, except for those with legal exemptions.
2. Reduced rates: Certain services benefit from reduced rates, such as:
   • 8% for specific services, such as tourism services or certain cultural activities.
   • 1% for very limited categories of goods or services.
3. VAT exemptions: Some service provisions may be exempt from VAT, including:
   • Exported services (i.e., services provided to foreign clients outside Turkey under certain conditions).
   • Financial and banking services, public education services, and certain healthcare services.
4. Tax liability:
   • If the service provider is established in Turkey, they are generally required to charge and collect VAT.
   • If the provider is established abroad and provides services to businesses or individuals in Turkey, these services may be subject to a reverse charge mechanism, where the Turkish client accounts for the VAT.
5. Declaration and payment: Companies in Turkey must declare and remit the collected VAT through monthly declarations.

If I am a foreign company domiciled abroad, and the service provider is based in Turkey, and the service is performed in Turkey, does Turkish VAT apply?
Yes, in the situation you describe, Turkish VAT generally applies because the service is performed in Turkey. Here are the details of this situation:

General rule: VAT territoriality
In Turkey, VAT applies to services provided if:

1. The service provider is based in Turkey.
2. The service is performed or used in Turkey.

In your case, since:

• The provider is based in Turkey.
• The service is provided within Turkish territory.
  Turkish VAT is applicable.

Role of the Turkish provider
The Turkish provider is responsible for:

1. Charging VAT at the applicable rate (generally 20%, unless exceptions apply).
2. Declaring and remitting this VAT to the Turkish tax authorities.

Situation of the foreign company (client)
As a foreign company domiciled abroad:

1. You have no direct VAT obligations in Turkey.
2. The Turkish provider will include VAT in the invoice issued to you.

Exceptions or exemptions
Certain services may be exempt from VAT if they meet specific conditions. For example:

• If the service is related to exports (e.g., services directly linked to goods intended for export), an exemption may apply.
• Purely intellectual services, such as consultancy, could be exempt if the recipient is foreign and the service is used outside Turkey.

However, since the service is performed in Turkey and used within Turkish territory, these exemptions generally do not apply in your case.

If the service involves providing personnel, and the invoice includes salary and social security contributions, does Turkish VAT apply in this case?
Yes, the provision of personnel, even if the invoice includes salary and social security contributions, is generally considered a service provision in Turkey and is subject to Turkish VAT. Here is a detailed explanation of this specific case:

Nature of the service: personnel provision

• Personnel provision is classified as a service according to Turkish VAT legislation.
• Even if the invoiced amount includes gross salary and social security contributions, these elements form part of the taxable base for VAT.

Applicable VAT

• The standard VAT rate in Turkey, which is 20%, applies to the total amount invoiced by the Turkish company for the personnel provision.
• This includes all costs (salary, social security contributions, administrative fees, etc.) related to the service.

Role of the Turkish provider
The Turkish provider, as a registered entity in Turkey, is responsible for:

1. Applying VAT on the invoice.
2. Declaring and remitting it to the Turkish tax authorities.

Particular situation of the foreign company (client)

• As a foreign company domiciled abroad, you will receive an invoice that includes Turkish VAT, which is not recoverable for you unless you have a tax presence in Turkey allowing VAT registration.

Possible exemptions or specific treatments
There may be exceptions or exemptions in very specific circumstances, for example:

• If the service is directly related to VAT-exempt activities (e.g., certain activities in free zones or services linked to exports).
• If an international or bilateral agreement between Turkey and the foreign company’s country provides for specific tax treatment.

However, in the standard situation you describe (provision of personnel within Turkish territory), VAT will normally apply.