KDV

KDV, or Katma Değer Vergisi, is Turkey’s value-added tax (VAT), a broad-based consumption tax applied to most goods and services within the country. It is administered by the Turkish Tax Authority, known as Gelir İdaresi Başkanlığı (GİB), and is governed by Law No. 3065 on VAT. The tax is designed to be collected at multiple stages of production and distribution, with the final statutory burden typically falling on the end consumer.

How KDV works: Businesses charge KDV on their sales and may deduct the KDV they have paid on inputs. The net amount is remitted to the tax authority on a periodic basis. Exports are generally zero-rated or exempt, meaning no VAT is charged on the sale to foreign buyers, while some services and financial activities may be exempt or subject to reduced rates. The system is designed to avoid cascading taxes by allowing input tax credit for taxable purchases.

Scope and rates: KDV applies to a wide range of goods and services, though certain items are exempt or taxed at reduced rates. The law provides standard, reduced, and sometimes zero-rating or exemption classifications depending on the category of goods or services. Rates and exemptions can change with new legislation, so businesses and individuals rely on official updates from the GİB.

Administration and compliance: Registered businesses collect KDV from customers and file periodic VAT returns. They must maintain proper invoicing, maintain records of inputs and outputs, and remit the net tax to the treasury. Import VAT is typically assessed at customs, while domestic transactions follow the standard VAT procedures.

Origin and significance: Introduced in 1985, KDV is a central component of Turkey’s tax system and revenue, reflecting the country’s approach to taxation on consumption across sectors.