Value Added Tax (VAT)

VAT in Turkey is a vital focus that reflects its economic and tax directions and its influence is evident in stimulating investments and directing production, which makes it not just a tax mechanism but a strategic partner in achieving economic balance and financing development and infrastructure projects.

We will take a deep look at the effects of value-added tax in Turkey, and how it has contributed to developing the economy and stimulating entrepreneurial initiatives and we will also explore recent challenges and developments that may form a key part of the tax landscape in the future.

What is value added tax in Turkey?

Value-added tax, according to Value-Added Tax Law No. 3065 of 1984, is imposed at varying rates on spending, with companies being obligated to pay this tax based on the sales profits they achieve and although the financial responsibility falls on businesses, this tax is primarily deducted from the pockets of the final consumers of the goods and this means that they are ultimately recovered from the individuals who consume those goods.

The mechanism for imposing VAT applies almost universally, and the rates at which it is imposed vary by country and in Turkey, for example, the tax is levied according to different rates ranging from 1% to 8% and 18%, where the amount of the tax depends on the necessity of the goods consumed.

Exclusive information: Turkey raises value-added tax

Turkey seeks to increase government revenues and finance economic recovery needs through new adjustments to the tax system and according to a report published by the official newspaper on Friday, the government decided to raise the value-added tax rate by two percentage points, rising to 20% from 18% and taxes on some essential goods, such as paper towels, detergents and diapers, also saw an increase to 10% from 8%.

In an immediate announcement published in the Official Gazette whose decisions took effect immediately, President Recep Tayyip Erdogan signed a set of decisions, including increasing the insurance and banking transaction tax applied to personal loans to 15% from 10%.

Other measures in this package include a 228% increase in registration fees for mobile phones received from abroad, rising to 20,000 liras ($765.74) from 6,091 liras and in addition, Turkey decided to exempt dividend payments on treasury shares purchased by companies listed on the Istanbul Stock Exchange from withholding tax.

These measures come in the context of putting forward a draft law in Parliament that aims to increase corporate taxes to 25% from 20%, with the aim of providing financing for needs related to reconstruction after the two earthquakes that struck southern Turkey in February and causing the death of more than 50,000 people and the displacement of millions of others, and estimates indicate that reconstruction efforts may cost more than a hundred billion dollars.

Features of VAT in Turkey

1. The value-added tax in Turkey follows a system based on grading, where different percentages are determined to apply the tax to different types of goods and services and this staging allows for balancing the impact of the tax on different categories of consumers and businesses.
2. VAT represents an effective way to direct tax towards final consumers and although the tax is paid by businesses, it is ultimately recovered from the consumer who purchases the goods and services.
3. The value-added tax system in Turkey encourages companies to register for tax, as it allows them to recover the tax paid on purchases and submit the tax due on sales.
4. VAT is also charged on exported goods and services and this enhances the competitiveness of Turkish products in international markets.
5. The VAT system is multi-stage, as the tax is applied to each stage in the production and distribution chain and this contributes to reducing opportunities for tax evasion and achieving a balance in bearing tax burdens.
6. Turkey takes into account the economy's need for continuous development, and therefore makes periodic updates and amendments to the value-added tax system to ensure its adaptation to economic developments and tax needs.

VAT on real estate in Turkey

The rate of this tax is set at 18% for commercial properties, while the value-added tax rate for residential properties varies according to their area, regardless of their location.
As for residential properties, if the area of ​​the residential property does not exceed 150 square meters, the added tax rate is 8%, while the tax rate changes for residential properties that exceed this size, as their value increases by 20% for each additional meter.

Exemption from value-added tax on real estate in Turkey 

For foreign investors seeking to benefit from the value added exemption on real estate, they must fulfill the following conditions:
1. Proof that the foreign investor has not previously resided in Turkey.
2. The foreign company does not have a headquarters in Turkey.
3. The investor must not have spent more than 6 months in Turkey during the year preceding the purchase of the property.
4. It is prohibited to sell the property benefiting from the value added exemption again within a period of one year.

Types of taxes in Turkey

Turkey, like any other country, depends on a variety of taxes to finance government expenditures and achieve its economic and social goals and here are some of the main types of taxes in Turkey:

Personal income tax:

1. It is imposed on personal income earned from sources within Turkey.
2. Tax returns are submitted annually to determine the level of income that is subject to tax.

Corporate tax:

1. It is imposed on the profits made by companies within the borders of Turkey.
2. It is calculated based on a specific percentage of net profits.

Value Added Tax (VAT):

1. It is imposed on value added at all stages of production and distribution.
2. It is collected from the end consumer, but is mainly paid by businesses.

Real estate tax:

1. It is charged on the value of real estate.
2. Real estate is valued regularly to determine the tax value.

Car fees:

1. It is imposed on vehicles and depends on the engine capacity.
2. The amount is determined according to specific categories.

Ultimately, VAT is emerging as a vital driver of the global economy, playing an inescapable role in achieving tax balance and financing public services, as developments continue in global markets, understanding the nature of VAT remains essential for individuals and businesses alike, to ensure their tax compliance is verified and to contribute to sustainable economic growth.

Related articles:

Renewal of real estate residence in Turkey 2023
Cheap villas in Turkey for sale 2023
Buying real estate in Turkey in installments
Endless options within the Turkish real estate market
The fastest way to obtain Turkish citizenship
Apartments for Sale in Istanbul
Successful real estate investment in Turkey 2023
Luxury real estate for sale in Istanbul 2023
Buying real estate in European Istanbul 2023
Obtaining Turkish Citizenship Through Real Estate Investment
Real Estate Investment in Istanbul 2023
Types of Turkish passport and the characteristics of each
Feature of residential apartments in Turkey
Advantages of buying a property in Turkey with Ist Homes
Commercial lands for sale in Istanbul

#Istanbul_apartments   #real_estate_investment