Reduced VAT refund procedures are regulated under Article 29/2 of the VAT Law General Communiqué No. 3065. This regulation allows companies operating in certain sectors to reclaim the portion of VAT arising from reduced-rate transactions (1% – 10%) that cannot be recovered through deduction.
Sectors Covered by Reduced VAT Refund
Companies operating in the following sectors and sub-sectors are entitled to request a refund for VAT arising from reduced rates:
| Sector Code | Sector / Sub-Sector |
|---|---|
| 100 | Construction – Delivery of apartments under 150 m², construction contracting services |
| 110 | Textile – Ready-to-wear, cotton, yarn, fabric, leather deliveries, subcontracting services |
| 120 | Cinema |
| 130 | Food – Beverages, bakery products, meat and dairy products, ready-to-eat meals, fruit and vegetable deliveries |
| 140 | Tourism |
| 150 | Healthcare – Pharmaceuticals, medical devices, healthcare services |
| 160 | Education – Delivery of books, stationery, and education services |
| 170 | Financial Leasing |
| 180 | Agricultural and Work Machinery – Delivery of agricultural and work machinery |
| 190 | Newspapers and Magazines |
| 200 | Fertilizers and Feed – Fertilizers, feed, and raw materials |
| 210 | Others |
Reduced VAT Refund Threshold for 2025
In 2025, the portion of input VAT arising from reduced-rate deliveries and services (1% – 10%), exceeding TRY 130,700, may be refunded.
- During the year → Refunds can be requested through offsetting (mahsuben).
- At year-end → Refunds can be requested in cash (nakden) or through offsetting.
- Amounts below this threshold cannot be refunded and can only be deducted.
How Does the Refund Process Work?
- Calculation of input VAT → Identify the VAT incurred on reduced-rate transactions.
- Comparison with output VAT → The difference between input VAT and output VAT must exceed the TRY 130,700 threshold.
- Application method:
- During the year → offsetting,
- At year-end → cash or offsetting.
- Preparation of documents → Relevant invoices, returns, and other supporting documents must be prepared and submitted to the tax office.
Why Is Professional Support Important in Reduced VAT Refunds?
- Refund procedures require accurate reporting and meticulous documentation.
- Errors or missing documents can delay the refund process.
- Sector-specific practices often require expert knowledge.
At OzbekCPA, we provide professional consultancy services to companies from different industries for managing reduced VAT refund procedures in Turkey.