In businesses that export, sell at reduced rates or issue invoices subject to VAT withholding, the VAT paid on purchases is often higher than the VAT charged on sales. If the conditions are met, the difference is a refund claim. A refund is not obtained through a single line on the return but through a file built transaction by transaction and supported by documents.
Which transactions give rise to a refund?
| Transaction | Legal basis (VAT Law No. 3065) | Note |
|---|---|---|
| Export of goods | Art. 11/1-a, Art. 12/1 | Based on the customs declaration and actual exit |
| Export of services | Art. 11/1-a, Art. 12/2 | Customer abroad and benefit abroad |
| Delivery for export | Art. 11/1-c | Manufacturer-seller; the export must take place within the deadline |
| International transport | Art. 14 | With transport documents |
| Delivery of machinery and equipment under an investment incentive certificate | Art. 13/d | Scope of the certificate and lists |
| Diplomatic and international organisation exemptions | Art. 15 | With an exemption certificate |
| Reduced-rate deliveries | Art. 29/2 | On an annual basis, for the part above the set threshold |
| Sales subject to partial withholding | Art. 9/1 | The seller claims the refund |
For exemptions without the right of deduction (for example certain financial transactions) there is no refund; the VAT on these transactions is added to cost.
How is the refundable amount determined?
- VAT incurred: VAT on purchases directly attributable to the refund-generating transaction, plus a share of general expenses and depreciable assets.
- Upper limit: For exempt transactions, the refundable VAT cannot exceed the amount calculated by applying the standard rate to the transaction value.
- Period limit: The refund is limited to the VAT that could not be offset by deduction in the relevant period. Carried-forward VAT is reduced by this amount.
- Exchange differences and returns: An exchange difference after the sale or a return of goods changes the VAT charged and incurred; the file is updated accordingly.
Related calculators: VAT calculator · Exchange difference invoice and VAT
By offset or in cash?
| Refund by offset | Cash refund | |
|---|---|---|
| What happens? | The refund claim is applied to tax debts, social security premium debts and certain payments | The amount is paid to the bank account |
| Documentation | Lighter; no report required for many types | A guarantee, a YMM VAT refund certification report or a tax inspection report; claims below the threshold set in the Communiqué may not require a report |
| Speed | Usually faster | Depends on reports and checks |
| Guarantee | Usually not required | A refund obtained against a guarantee releases the guarantee once the report is submitted |
Thresholds and documentation requirements vary by refund type and are updated; before the claim we check the Communiqué provisions for that period. If a YMM report is required, it is issued by an independent sworn financial advisor (YMM); our job is to make the file ready for the report.
Parts of the refund file
- Return: Declaring the refund-generating transactions on the correct lines of the VAT return for the period.
- Standard refund request petition: Through the Internet Tax Office, according to the refund type.
- Lists: List of deductible VAT, list of VAT incurred, list of sales invoices; electronically.
- Transaction-specific documents: Customs declarations; for service exports, contracts and records of collections from abroad; for deliveries for export, exporter details; for withholding, buyer lists.
- Report or guarantee: If required for a cash refund.
The lists are automatically matched against counterparties' returns in the Revenue Administration (GİB) risk analysis system. If there is a negative finding about a seller, the VAT on purchases from that seller is examined separately.
Process and follow-up
| Stage | What is done |
|---|---|
| Period closing | Identifying refund-generating transactions and the amount |
| Preparation | Allocating VAT incurred, preparing the lists, checking documents |
| Claim | Submitting the petition and lists; choosing offset or cash |
| Review | Answering the tax office's deficiency letters on time |
| Result | Tracking the refund or offset in the accounts |
The refund must be claimed within the period set by the Law and the Communiqué; missing the deadline may cost the right to a refund. That is why we track the periods that give rise to a refund on a separate list at every period closing.
Common problems
- Understating the refund because no share of general expenses was allocated.
- Not documenting the "benefit abroad" condition for service exports.
- The export not being completed in time after a delivery for export, and the VAT being claimed back.
- Lists inconsistent with the buyer's return in sales subject to withholding.
- Letting carried-forward VAT build up for years without using the refund option.
- Not answering deficiency letters on time.
For the general rules of VAT: VAT practice. If the refund is examined or rejected: Tax disputes and litigation.
Sources
VAT Law No. 3065 (Art. 9 withholding, Art. 11–15 exemptions, Art. 29 deduction, Art. 32 refund); VAT General Implementation Communiqué (refund provisions); Tax Procedure Law No. 213.