How is VAT withholding calculated?
In a transaction subject to VAT withholding (KDV tevkifatı), VAT is first calculated on the tax base as usual. Then the portion of that VAT specified in the Communiqué (e.g. 4/10 or 9/10) is withheld by the buyer. The seller collects only the remaining VAT and reports it on its own return; the buyer declares and pays the withheld portion, as the party responsible for the tax, through the KDV-2 return (the VAT withholding return). The amount the buyer pays the seller is found by deducting the withheld VAT from the invoice total.
Legal basis
Withholding is based on the tax liability provision in Article 9 of VAT Law No. 3065 and Section I/C-2.1.3 of the VAT General Implementation Communiqué. The Communiqué also specifies for which services and supplies, and by which buyers, withholding must be applied: for some transactions, only "designated buyers" (public institutions, large-scale taxpayers and similar) apply withholding. No withholding applies to transactions below the amount threshold set out in the Communiqué; the current threshold should be checked on the transaction date. For certain supplies, such as scrap and waste, full (10/10) withholding applies.
Worked example
For construction work of 80,000 TL excluding VAT, VAT at 20% is 16,000 TL. With 4/10 withholding, 6,400 TL is declared by the buyer and the seller collects 9,600 TL of VAT. The invoice total is 96,000 TL, and the amount the buyer pays the seller is 89,600 TL. The invoice therefore shows the full VAT of 16,000 TL, the withheld portion of 6,400 TL and the remaining VAT of 9,600 TL separately. The seller reports the 9,600 TL on its KDV-1 return (the regular monthly VAT return), while the buyer reports the 6,400 TL on its KDV-2 return. In this way, the full 16,000 TL of VAT reaches the tax office, split between the two parties.
For transactions without withholding and for converting between VAT-inclusive and VAT-exclusive amounts, you can use the VAT calculator.