Withholding tax vs VAT withholding: who deducts, who pays?
The two are often confused. Withholding tax deducts income tax at source; VAT withholding deducts part of the VAT at source. Examples show who pays what.
The Turkish word "tevkifat" means "deduction", so it is used for both income tax withholding (stopaj) and VAT withholding, which is where the confusion comes from. The easiest way to tell them apart is to ask which tax is being deducted. Withholding calculator
In one sentence
- Withholding tax (stopaj, income/corporate tax withholding): when paying income to someone, the payer deducts the tax on that income and pays it to the tax office. Rent, salary, professional fees, dividends.
- VAT withholding: when buying goods or services, the buyer pays part of the VAT the seller should collect directly to the tax office.
Comparison
| Withholding tax | VAT withholding | |
|---|---|---|
| Which tax? | Income or corporate tax | Value added tax |
| Whose tax? | The income earner's (landlord, employee, professional) | The final consumer's; which the seller should collect |
| Who deducts? | The business making the payment | The buyer |
| Which return? | Withholding and premium service return (26th) | VAT return No. 2 (28th) |
| What next? | The income earner credits it in the annual return | The seller collects less VAT; may claim a refund |
| Rate | 20% (rent, professional fees), 15% (dividends), brackets (wages) etc. | 2/10 to 9/10; 10/10 for full withholding |
Example 1: Accountant's fee (withholding tax only)
A company pays its accountant a gross TRY 20,000 a month.
- VAT 20%: TRY 4,000 — paid by the client, paid over by the accountant with their own VAT return.
- Withholding 20%: TRY 4,000 — deducted by the company and paid with the withholding return; the accountant credits it against their tax at year end.
- Paid into the accountant's account: 20,000 − 4,000 + 4,000 = TRY 20,000.
Self-employment receipt calculator
Example 2: Cleaning service (VAT withholding only)
A company buys cleaning services for TRY 50,000 excluding VAT. Rate 9/10.
- VAT 20%: TRY 10,000. The buyer pays TRY 9,000 with return No. 2 and TRY 1,000 to the seller.
- The cleaning firm is a company; no withholding tax.
- Paid to the seller: TRY 51,000; to the tax office: TRY 9,000.
VAT calculator · VAT withholding rates
Example 3: Consulting to a designated buyer (both)
A self-employed professional provides consulting worth a gross TRY 100,000 to a bank.
- Withholding 20%: TRY 20,000 (deducted by the bank).
- VAT 20%: TRY 20,000; withholding 9/10 → the bank pays TRY 18,000 and pays TRY 2,000 to the consultant.
- Paid to the consultant: 100,000 − 20,000 + 2,000 = TRY 82,000.
Example 4: Commercial rent (withholding tax only)
If the landlord is an individual, the tenant business withholds 20%; there is no VAT. If the landlord is a company, there is no withholding tax, there is VAT, and no VAT withholding. Rent withholding calculator
Remember
- Withholding tax does not reduce the earner's tax; it is paid in advance. It is credited in the return.
- VAT withholding does not reduce the seller's tax; it reduces what the seller collects. If the seller cannot deduct VAT on purchases, a refund right arises. VAT refunds
- Whoever fails to deduct is liable. If a buyer required to withhold does not, the tax and penalty are claimed from the buyer.