VAT Rate Changes in Turkey: From 18% to 20%
On July 7, 2023, the Turkish government announced an increase in the standard Value Added Tax (VAT) rate from 18% to 20%, effective from July 10, 2023. This change reflects Turkey's ongoing efforts to align its fiscal policies with international standards and ensure sustainable economic growth by enhancing state revenues. Despite the overall increase, Turkey has retained lower VAT rates for certain essential goods to safeguard affordability for its citizens.
For instance, basic food items such as bread are subject to a reduced VAT rate of 1%, ensuring that essential nutrition remains accessible to the broader population. Similarly, products like meat, milk, and eggs are taxed at a rate of 10%. These tiered VAT rates demonstrate the government's commitment to maintaining a balance between fiscal needs and social equity, prioritizing basic needs even amidst broader tax reforms.
A notable aspect of Turkey's VAT policy is the exemption granted to international projects. When services are provided to clients outside of Turkey, a VAT rate of 0% is applied. This means that companies delivering services for international clients do not need to pay VAT on these transactions. This exemption serves to encourage the export of services and enhance Turkey’s competitive position in global markets. It is especially beneficial for businesses operating in sectors such as construction, consulting, and event organization, as it reduces the overall cost burden for international clients.
This policy aligns with global best practices, as seen in many countries that encourage the export of services by exempting such transactions from domestic VAT. By offering this incentive, Turkey aims to attract more international projects and promote its services on a global scale
Turkey's VAT structure is designed to balance fiscal responsibility with social equity. The recent increase to 20% for the standard VAT rate demonstrates a focus on revenue growth, while reduced rates for essentials and exemptions for international projects highlight the government’s commitment to economic inclusivity and competitiveness. Businesses operating in Turkey should familiarize themselves with these changes to optimize their tax strategies effectively. For additional guidance, consult the official resources provided by global financial authorities or engage with a professional tax advisor.
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