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Turkey: Draft law changes for VAT; electronically supplied services

Turkey: Draft law changes for VAT

A draft law (numbered 3065) would make changes to the value added tax (VAT) regime in Turkey.


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Included in the legislative measures in the draft law are provisions concerning the following items.

  • The VAT base for land for residential housing or workplace 
  • Group VAT liability
  • “Duty-free deliveries” deemed as exports
  • A full VAT exemption for warehousing and terminal services and for deliveries and services by donors to charities 
  • A full VAT exemption for health services for non-residents of Turkey
  • A full VAT exemption for the delivery of machinery and equipment to R&D centers and technology development zones
  • A partial VAT exemption on the conversion of a partnership to a corporation
  • A partial VAT exemption on the delivery of apparel clippers 
  • A definition of the VAT base on the sale of used motor vehicles and of real estate and housing construction
  • Allowing a refund for deferred VAT
  • Broadening of the VAT deduction limit
  • Allowing a deduction of VAT on worthless receivables 
  • A two-year limitations period for VAT refund claims
  • Expanded authority for VAT refunds 
  • Allowing interest on late refunds of VAT
  • An expanded list of exempt products in technology development zones to include games


Read a March 2018 report [PDF 302 KB] prepared by the KPMG member firm in Turkey

VAT on electronic services supplied by non-residents

New provisions (1 March 2018) were included in the VAT general implementation communique as rules to regulate transactions of parties without any residency, permanent establishment, legal centre or business centre in Turkey.

Electronic services provided to individuals in Turkey by these non-resident parties, for payment provided electronically, are subject to VAT. If a permanent establishment arises during the procurement of the services, then under general terms of the Turkish law, a VAT return must be filed.

Those non-resident parties that fall within the scope of the new regulation must register as “special VAT liability of electronic service providers” and remit the amount of VAT related to these transactions with a VAT return (the VAT-3 return) filed online. The VAT-3 return is available on the government website. VAT-3 returns are to be filed monthly, and similar to other VAT returns, the VAT-3 return for each month is filed on or before the close of the 24th day of the following month with the actual VAT amount being payable and paid until the close of business on the 26th day of that month. For the first three months of 2018, entities are allowed to file VAT-3 returns until 24 April 2018. If the parties  do not have any transactions within the subject monthly periods, they do not have to file a VAT-3 return. If VAT is calculated using a foreign exchange rate, the amount of VAT must be converted into Turkish lira with the Central Bank of the Turkish Republic, based on a foreign exchange rate for buying lira on the transaction date.            

A special VAT liability will be established for the service provider, a user code and password will be provided, once the VAT-3 return is filed electronically. These entities are not required to have their VAT-3 return approved by a certified public accountant, and are not required to maintain certain records. However, they must calculate the amount of VAT due based on the applicable VAT rate in Turkey for fees paid for electronic services provided to “real persons.” In return, the service providers can deduct the amount of VAT paid to the other VAT-payers for goods and services purchased, provided that such goods and services are related to the electronic services provided to Turkish individuals. Any related invoices and documents must be maintained pursuant to provisions of tax law. 

In instances when the provider of the electronic services is not clearly identified or is not determined by an agreement between the parties, or when the services and information regarding the electronic services provider are not listed on the invoices, the amount of VAT must be remitted by the parties that “mediate” the services.  Yet, entities that are authorized to request payment from customers, that can determine the general conditions for the services or that are liable for providing such services are deemed to be the electronic services provider.


For more information, contact a tax professional with the KPMG member firm in Turkey

Mert Öner | +90 (212) 316 60 00 Ext:9248 |

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