What is KDV (Katma Deger Vergisi)?

Katma Deger Vergisi is Turkey's consumption tax, regulated under KDV Law No. 3065. It applies at each stage of production and distribution, with registered businesses deducting input KDV paid on their purchases (indirilecek KDV) from output KDV charged to customers (hesaplanan KDV), remitting only the net difference.\n\n**Rate structure (post July 2023)**\nThree rates apply:\n- 20% standard rate: applies to most goods and services including software, professional services, construction, manufactured goods, luxury items\n- 10% reduced rate: food items not in the 1% category, private health services, educational services, hotel accommodation, agricultural machinery, books and publications\n- 1% basic rate: unprocessed agricultural products, fresh and frozen vegetables, legumes, wheat flour, bread, certain animal products, newspapers\n\nThe July 2023 rate increases from 18%/8%/1% were the first major KDV rate change since 2002 and significantly increased the tax burden on the majority of business transactions.\n\n**Registration**\nAll businesses with taxable turnover (with very limited exceptions for small traders under simplified regime) must register for KDV. Unlike some EU VAT systems, Turkey does not have a simple turnover registration threshold for most business types — registration is effectively mandatory at incorporation.\n\n**Input KDV deduction**\nInput KDV on business purchases is generally deductible in the period the purchase invoice is received (not when payment is made). However, several categories of input KDV are non-deductible: KDV on passenger cars (except for rental companies, dealers, and driving schools), KDV on non-business entertainment, and KDV on purchases related to exempt supplies.\n\n**KDV filing and payment**\nKDV declarations are filed monthly via the GIB e-Beyanname system. The declaration is due by the 26th of the following month, with payment due by the 26th as well. Monthly filing is mandatory for all registered businesses regardless of size. There is no quarterly or annual KDV filing option for regular businesses.\n\n**KDV refunds**\nWhere input KDV consistently exceeds output KDV (common for exporters, since exports are zero-rated), a refund claim can be made. Refunds require supporting documentation and are subject to audit. Exporters can obtain accelerated refunds through the Certified Taxpayer (Onaylanmis Kisi Statusu) scheme. Routine credit balances can be offset against other tax liabilities.\n\n**E-fatura and KDV compliance**\nTurkey's e-invoice mandate (e-Fatura) intersects directly with KDV compliance. Businesses above certain thresholds must issue invoices through the GIB e-invoice portal. KDV amounts must be separately stated on every invoice above TRY 3,000. The e-Arsiv system applies to smaller businesses not yet on e-Fatura.\n\n**Special regimes**\nSmall traders under the simplified (Goturu Usul) regime pay a fixed KDV contribution rather than filing periodic returns. Certain sector-specific regimes apply to tourism (special margin scheme), second-hand goods dealers, and precious metal traders.