Value Added Tax (VAT) is an essential part of Turkey’s tax system, affecting a wide range of goods and services. VAT in Turkey is applied at different rates depending on the type of goods or services, with a standard rate, reduced rates, and exemptions designed to support various sectors of the economy.
VAT Rates in Turkey
Turkey’s VAT system includes the following key rates:
| VAT Rate | Percentage | Description |
|---|---|---|
| Standard Rate | 20% | Applies to most goods and services, providing the primary source of VAT revenue in Turkey. |
| Reduced Rate | 10% | Applies to specific goods and services, including food, textiles, educational services, medicines, and certain machinery. |
| Second Reduced Rate | 1% | Applies to essential items like unprocessed agricultural products, specific types of residential housing, and funeral services. |
| Zero Rate | 0% | Applied to certain goods and services, such as exports, ensuring they are not subject to VAT to enhance competitiveness. |
Details on Reduced VAT Rates
Goods and services subject to the 10% reduced rate include:
- Food Items: Certain foods like meat, milk, dairy products, and produce.
- Textiles and Accessories: Textiles, footwear, bags, and other accessories.
- Educational Services: Provided by universities and private schools.
- Entertainment: Tickets for cinema, opera, and ballet.
- Healthcare: Medicines and medical products and services.
- Catering: Food catering in specific cafes, restaurants, and similar venues (excluding alcoholic beverages).
- Machinery: Specific machinery supplies for agriculture, construction, and garment industries.
- Residential Housing: Certain types of residential housing.
- Infrastructure: Bridge tolls on bridges built under the build-operate-transfer model.
- Furniture: Select furniture supplies.
Goods and services subject to the 1% reduced rate include:
- Residential Housing: Certain types of residential housing supplies.
- Agriculture: Unprocessed agricultural products like dried/fresh fruits, nuts, seeds, and grains.
- Wholesale: Wholesale distribution of chicken eggs and fish.
- Food Products: Wheat flour and bread products.
- Animal Husbandry: Frozen animal sperm.
- Secondhand Vehicles: Various types of secondhand vehicles.
- Asphalt: Selected asphalt products.
- Funeral Services: Funeral services.
- Transportation: Leasing of transportation vehicles.
- Construction: Construction services provided to cooperative societies.
- Financial Leases: Various financial leases and supplies of goods to leasing companies.
Exemptions and Zero-Rated Goods
In addition to the above, certain goods and services in Turkey are either exempt from VAT or are zero-rated, meaning they are not subject to VAT. This includes some exports, which helps boost the competitiveness of Turkish goods on the international market.
Purpose and Impact
Turkey’s VAT system is structured to:
- Generate Revenue: The VAT system is a major source of government revenue, supporting public services and infrastructure.
- Support Essential Sectors: Reduced rates are applied to essential goods and services, making them more affordable for consumers and supporting critical industries.
- Enhance Competitiveness: The zero-rate on exports and some services helps Turkish businesses remain competitive in global markets.
Understanding the VAT rates in Turkey is crucial for businesses and consumers to manage their tax obligations effectively and ensure compliance with Turkish tax laws.