VAT withholding: which work, which rate, who declares?
The logic of VAT withholding, partial and full withholding, who must withhold, how it is shown on the invoice and the filing steps on the buyer's and seller's side.
You bought a cleaning service from a firm for TRY 100,000 + 20% VAT. Instead of issuing you an invoice for TRY 120,000, the firm writes on the invoice with the note "VAT withholding 5/10": VAT TRY 20,000, of which TRY 10,000 has been withheld, amount payable TRY 110,000. You pay the remaining TRY 10,000 to the tax office. This is VAT withholding: part of the tax is declared by the buyer to reduce the risk of non-collection.
Who must withhold?
Withholding is not mandatory for every buyer, only for designated buyers set by the Revenue Administration. Groups such as public bodies, VAT payers, banks and businesses of a certain size are on this list. Whether a transaction is subject to withholding is also determined by the type of work.
| Type | Who applies it | Example |
|---|---|---|
| Partial withholding | Designated buyers | Cleaning, security, catering, construction work, types of consulting, labour supply |
| Full withholding | All buyers who are VAT payers | Situations such as a service bought from a company abroad, or renting business premises where the landlord is not a VAT payer |
Depending on the type of work, partial withholding rates can be 2/10, 3/10, 4/10, 5/10, 7/10 or 9/10. Which rate applies to which work is listed item by item in the VAT General Implementation Communiqué; on this site you can find the current list on the VAT withholding rates page.
Small transactions may fall outside withholding: partial withholding does not apply to transactions whose VAT-inclusive price is below the threshold set in the communiqué. Whether the threshold is exceeded is decided on the total price, without splitting the transaction.
What the buyer does
- Declare the VAT withheld on the invoice with the KDV-2 return. KDV-2 is filed by the 25th of the month following the month of the transaction; if the last day falls on a holiday, it moves to the next working day.
- After paying it, show the same amount as deductible VAT on your own VAT return.
- Pay the seller the "amount payable" on the invoice; do not pay the seller the part you withheld.
Note: a buyer who is a VAT payer declares transactions under full withholding (e.g. services from abroad) with VAT return No. 2; once paid, this amount can be deducted on the No. 1 return for the same month. For advertising invoices from abroad specifically: Meta and Google advertising invoices
What the seller does
- Show the withholding rate, the VAT withheld and your receivable after withholding clearly on the invoice. In e-Invoice, the withholding code is selected.
- Fill in the transactions subject to withholding section of the VAT return. You declare only the part not withheld as VAT charged.
- If VAT you cannot deduct because of withholding builds up, you may request a VAT refund arising from withholding where the conditions are met.
Frequently asked questions
What if the buyer did not withhold? If a designated buyer does not withhold, the tax and penalty can be claimed from the buyer. So the party issuing the invoice should also ask whether the buyer is required to withhold and issue the correct invoice.
Is VAT withholding the same as income tax withholding? No. Income tax withholding (stopaj) is the deduction of income or corporate tax at source; VAT withholding (tevkifat) is the declaration of part of the VAT by the buyer. The difference: Withholding tax versus VAT withholding
Is there stamp duty on an invoice with withholding? The invoice is not subject to stamp duty; however, the contract underlying the work may be: Stamp duty calculator
Legal basis: VAT Law No. 3065 art. 9; VAT General Implementation Communiqué section I/C.