Turkey VAT and Customs Optimization: Key Factors for Foreign Businesses

I. Introduction

For all businesses engaged in international commercial activities with Turkey or sourcing goods or services from the country, understanding and implementing effective Turkey VAT and Customs optimization strategies are integral to successfully managing operational processes and financial outcomes. This complex body of regulations governing cross-border transactions directly shapes the costs, risks, and overall supply chain efficiency not only for companies resident in Turkey but also for global players purchasing from the Turkish market. Particularly in the realm of VAT, the correct application of export exemptions, efficient management of VAT refund processes, and an understanding of special mechanisms like export-registered sales play a critical role in companies’ cash flow and competitive advantage.

On the other hand, the Customs Law and related sub-regulations determine the procedures, financial obligations, and potential advantages for the entry and exit of goods into and out of Turkey. Customs tariffs, the relationship with the European Union within the Customs Union, signed Free Trade Agreements (FTAs), and trade policy measures such as anti-dumping present both opportunities to optimize import costs and risks of unexpected additional liabilities.

From the perspective of foreign-based companies regularly sourcing goods from Turkey, the effectiveness with which Turkish suppliers manage these processes has become a strategic factor directly impacting final product costs and the reliability of delivery processes. The complexity of these regulations and their tendency for continuous updates necessitate that all relevant parties act based on current and accurate information to minimize operational risks and make the most of available opportunities. Successful international trade operations and supply chain management require a mastery of the fundamental dynamics and nuances of this legislation.

To help you navigate this detailed guide on VAT and customs optimization for Turkey trade and sourcing, please use the table of contents below. Click any topic to jump directly to that section:

II. VAT Applications for Goods and Services Sold Abroad

In Turkey, Value Added Tax (VAT), regulated under VAT Law No. 3065, is applied to the delivery of goods and services carried out within Turkey. However, specific VAT exemptions are provided for export transactions, making these transactions exempt from tax. For the correct management of tax liabilities and the smooth execution of VAT refund processes, it is necessary for exporters to meticulously follow the relevant legislation.

2.1. VAT Exemption for Export Deliveries

Pursuant to Article 11/1-a of the VAT Law, deliveries of goods abroad are exempt from VAT. However, certain conditions must be met to benefit from this exemption:

• The buyer must be located abroad: Sales made to a company resident in Turkey, even if subsequently sent abroad, cannot be considered directly within the scope of the export exemption.
• The goods must physically exit Turkey: It must be documented via a customs declaration that the relevant goods have exited Turkey.
• Export deliveries must be completed within the legal period: The VAT exemption is valid only for exports realized within a specific timeframe.

If any of these conditions are not met, the sales transaction in question will be subject to VAT.

2.2. VAT Exemption for Service Exports

Service exports are also exempt from VAT under certain conditions. However, the mere provision of the service in Turkey is not sufficient for the exemption; the essential criterion is that the benefit of the service is utilized abroad.

Within the framework of Article 11/1-b of the VAT Law, for the exemption to apply to service exports, these services must be performed for a customer abroad, and no benefit from the services should be derived within Turkey.

2.3. VAT Refunds and Processes

Businesses engaged in export can claim a refund for the VAT they incurred on the goods subject to export. The VAT refund is a mechanism allowing the taxpayer to recover the VAT not collected due to exported goods and services. Successful management of this process requires adherence to specific procedures.

VAT refund processes can be carried out in two ways, depending on the taxpayer’s preference. Firstly, it is possible to offset the amount through the deduction method. In this method, the claimed VAT refund amount can be used by offsetting it against another VAT liability of the business. Alternatively, the taxpayer can request a cash refund, and after certain procedures are completed, the relevant amount can be paid directly to the company.

However, tax offices can conduct comprehensive reviews during refund processes, may request a Sworn-in Certified Public Accountant (Sworn-in CPA / YMM) report in some cases, and may ask for additional documents from taxpayers. Especially for large-scale exporting companies, conducting refund processes in full compliance with tax legislation is crucial to avoid any delays or rejection decisions.

2.4. Export-Registered Sales and VAT Applications

Manufacturing companies operating in Turkey can make deliveries to exporting companies on an “export-registered” basis. This practice allows sales to exporting companies without collecting VAT.

For an export-registered sale to be valid, the following conditions must be met:

• The sale must be made by a manufacturer resident in Turkey.
• The invoice must bear the phrase “İhraç Kayıtlıdır” (Export-Registered / Subject to Export Condition).
• The export must be realized within the determined legal period following the sale. (Note: This period is generally 3 months following the month of delivery).

If the actual export is not realized within the relevant legal period, the manufacturing company will be obliged to pay the VAT to the tax office. Therefore, careful management of procedures by both manufacturers and exporters is crucial in export-registered sales transactions.

2.5. Tax Risks and Practical Problems Encountered

The application of VAT exemption in export transactions is subject to strict formal requirements, and even minor errors can lead to serious tax consequences. In reviews conducted by the tax administration, situations such as missing or incorrect customs declarations, failure to meet the necessary conditions for service exports, or exceeding the time limit for export-registered sales can lead to the rejection of VAT refund claims or additional tax liabilities.

For foreign-capital companies operating in Turkey, the correct application of VAT legislation related to export transactions is critically important both for optimizing costs and preventing potential tax risks.

Successfully navigating these VAT regulations, especially the procedures for recovering incurred VAT, is crucial for cash flow and profitability. The following table summarizes the key aspects of VAT refund eligibility and primary considerations across the main export-related scenarios discussed:

VAT Refund – Key Scenarios Overview

III. Customs Duties and Other Customs Charges

In Turkey, customs duties and other import-export charges are regulated under Customs Law No. 4458, shaping the tax and administrative obligations for the entry and exit processes of goods subject to international trade into and out of Turkey.

Customs duties vary depending on the country of origin of the goods imported into Turkey, their nature, and current international trade agreements. For exports, customs duty is generally not directly applied, but additional financial obligations and charges may apply in certain sectors and product groups.

Foreign companies planning commercial activities in Turkey or sourcing goods from Turkey need to closely follow the relevant regulations regarding customs duties and charges and shape their commercial processes accordingly.

3.1. Customs Duty Applications in Imports

The customs duty rates applicable to goods imported into Turkey are primarily determined according to the HS Codes (Harmonized System Codes, known locally as GTİP) assigned based on the technical and commercial characteristics of the products. HS Codes are the fundamental criterion not only for customs duty rates but also for determining other administrative practices such as additional customs duties, anti-dumping duties, surveillance measures, and quotas.

Since Turkey is part of the Customs Union with the European Union, customs duties are not applied to the import of industrial goods originating from the EU into Turkey. Furthermore, within the framework of Free Trade Agreements (FTAs) in force with countries such as the United Kingdom, South Korea, and Switzerland, there are advantages of reduced or zero-rated customs duties for specified product groups.

For imports from third countries, the customs duty rates determined based on the HS code are applied, generally ranging between 0% and 40%. For certain product groups, additional obligations such as supplementary customs duties and surveillance measures may be imposed to protect the domestic economy. Therefore, conducting careful tax analysis based on the HS codes of the relevant products before import is critically important to prevent potential tax risks.

3.2. Customs Duties and Other Charges in Exports

Generally, customs duties are not collected on export transactions from Turkey. However, for certain product groups and sectors, additional charges and fund deductions may be applicable during export.

Particularly in the agriculture, mining, and industrial sectors, certain fund payments and legal obligations may arise for some export transactions. Such regulations can vary depending on the country of export, the nature of the product, and sectoral regulations.

Additionally, export procedures require the issuance of customs declarations, proper management of logistics processes, and adherence to international trade rules.

3.3. Anti-Dumping and Safeguard Measures

In import transactions in Turkey, anti-dumping duties and safeguard measures can be applied in certain sectors to protect domestic producers.

Anti-dumping duties are additional financial obligations applied to imports from countries found to be selling goods to Turkey at low prices, thereby harming domestic producers. Within this framework, additional taxation mechanisms can be activated for specific product groups to ensure fair international trade practices.

Especially in the steel, textile, chemical, and automotive sectors, anti-dumping investigations can be initiated for import transactions, and additional tax liabilities may be imposed on certain product groups. Companies supplying goods to Turkey should act cautiously regarding products potentially subject to dumping investigations and may benefit from applying for reviews if they meet the conditions.

IV. Importance of Export-Registered Invoices

The export-registered invoice system arranged for exporting companies in Turkey stands out as a special type of invoice enabling manufacturing companies to sell goods to exporter companies without collecting VAT.

This practice aims to increase the competitiveness of goods produced in Turkey in international markets and accelerate export processes, and it can only be applied if certain conditions are met.

For companies issuing export-registered invoices, VAT calculations and tax refund processes must be conducted in compliance with legal legislation. Errors encountered in practice can lead to the rejection of VAT refunds or the imposition of additional liabilities by the tax administration.

4.1. Legal Basis and Fundamental Principles of Export-Registered Invoices

The fundamental legal framework for export-registered sales is based on the VAT Law and Tax Procedure Law No. 213. In line with these regulations, sales made by manufacturing companies to exporters can be carried out without collecting VAT, provided certain conditions are met.

However, for export-registered sales to be valid, the following basic conditions must be fulfilled:

• The export-registered sale must be carried out only by manufacturing companies.
• The sale must be made directly to an exporting company, and the invoice must include the phrase “İhraç Kayıtlıdır” (Export-Registered / Subject to Export Condition).
• The relevant goods must be physically exported within the determined period. (Note: This period is generally 3 months following the month of delivery).
• Upon completion of the export, the manufacturing company can claim a refund from the tax office for the VAT incurred due to this sale.

If these conditions are not met, the export-registered sale loses its validity, and the manufacturing company must revise its VAT calculations.

4.2. Areas of Use for Export-Registered Invoices

The export-registered invoice practice provides a significant cost advantage for companies producing in Turkey and selling to exporting firms, and it is widely used, especially in the following sectors:

• Industry and machinery production
• Textiles and ready-to-wear apparel
• Food and agricultural products
• Electronics and technology

For manufacturing companies, the correct execution of the export-registered invoice issuance process is crucial for the smooth completion of VAT refund procedures.

4.3. Tax Effects and VAT Refund Process for Export-Registered Invoices

In export-registered sales transactions, although VAT is not collected, the manufacturing company can recover the VAT paid during production. However, the completion of this process requires the export transaction to be realized within the specified period.

If the export is not completed within the specified period, the manufacturing company must pay the uncollected VAT to the tax office. Therefore, timely preparation of customs declarations and planned execution of export processes are necessary for export-registered sales transactions.

The VAT refund is evaluated within the framework of procedures determined by the tax administration, and for refund requests to be accepted, the relevant export transactions must be fully compliant with the legislation.

V. General Assessment

As discussed, the VAT and customs practices forming the cornerstones of Turkey’s foreign trade regime contain dynamic and detailed processes that multi-dimensionally affect the financial performance and strategic operational decisions of companies operating internationally or having commercial ties with Turkey. The complete fulfillment of VAT exemption conditions and the successful operation of complex refund mechanisms stand out as significant working capital sources and cost management tools for exporting companies. Concurrently, special applications like the export-registered sales system both alleviate the VAT financing burden for domestic manufacturers and can indirectly impact the supply chain costs and commercial relationships of foreign buyers procuring goods from these producers.

Similarly, import duties applied under customs legislation, tariff advantages obtainable through the Customs Union or FTAs, and trade policy instruments such as anti-dumping or safeguard measures are factors that cannot be ignored in cost calculations and market strategies for firms importing goods into Turkey or sourcing strategically from Turkey. The procedural requirements encountered at every stage of these processes – correct HS Code determination, complete documentation, adherence to legal deadlines, accurate declarations – are vital for the smooth progression of operations and avoiding unexpected sanctions.

Therefore, whether a Turkey-based exporter/importer or a global player sourcing from the Turkish market, it is essential for all stakeholders to take the right steps within this complex legislative system. Considering the dynamic nature of the legislation and potential practical difficulties, possessing up-to-date knowledge on VAT and customs matters, managing a meticulous compliance process, undertaking strategic planning, and seeking expert insight when necessary constitute the most reliable approach to achieving sustainable success in international trade and effectively protecting against potential financial and administrative risks.

To further emphasize the critical areas requiring vigilance, the following table outlines key risk checkpoints and compliance considerations commonly encountered in international trade involving Turkey:

Key Risk & Compliance Checkpoints in TR Trade

Area of Activity	Potential Risk	Key Compliance Checkpoint
Goods Export (VAT)	Loss of Exemption / VAT Penalty	Correct Buyer Status, Timely Physical Exit Doc (Customs Decl.)
Service Export (VAT)	Loss of Exemption / VAT Penalty	Proof of Foreign Customer & Benefit Utilization Abroad
VAT Refund Claim	Rejection or Delay	Complete Documentation, Correct Calculations, YMM Report (if needed)
Export-Registered Sale	Manufacturer Liable for Uncollected VAT + Penalty	Buyer Exports Within 3 Months, Correct Invoice Notation
Import Duty Payment	Incorrect Duty Payment (Over/Under)	Correct HS Code Classification, Correct Origin Declaration
Anti-Dumping Exposure	Unexpected High Duties Imposed	Monitoring Investigations, Correct Origin/Pricing Info