Value Added Tax (VAT) or KDV in Turkey stands out as the most well-known type of tax. KDV, which has been in effect since 1985, applies to both citizens and businesses. The responsibility for paying this tax, which is imposed by individuals who market any product or service, lies with the consumers. Therefore, there may be confusion regarding its calculation. So, how is KDV calculated, and what are the KDV rates for 2023?
What is KDV?
At every stage from production to the final step of products and services, a new value is created. The tax paid by taxpayers on the value added they create is called Value Added Tax, which must be paid every month. The government collects this tax to be used for public expenditures. Additionally, KDV is indirectly paid as a result of any purchase or sale of goods or services.
KDV Rates for 2023
The rate and method of KDV payment vary. There are three rates for KDV applied in Turkey. KDV is levied at rates of 1%, 8%, and 18% on products and services. The amount to be charged for each product or service varies. However, it is generally calculated based on the 18% rate. Below are examples of products and services for these three KDV rates:
- 1%: Basic consumer products such as wheat, bakery products, and bread. Residential properties up to 150 m², seedlings, and seeds fall into this category.
- 8%: Clothing, basic consumer products, museum and theater tickets, dairy products, non-alcoholic restaurants, accessory products, facilities and hotels with 3 stars and above are subject to this tax rate.
- 18%: Includes all products and services except for basic consumer products. White goods, furniture, jewelry, second-hand motor vehicle delivery, and electronic products fall into this category.
How is KDV Calculated?
There are two different formulas for calculating KDV because there is a distinction between KDV inclusive and exclusive prices. Below are the formulas for both calculations:
- Formula for KDV inclusive calculation: (Net amount) x (1 + KDV rate)
For example, if the net amount of a product is 500 TL and the KDV rate is 8%, the calculation would be: 500 x (1 + 8/100) = 500 x 1.08 = 540 TL. This gives the KDV inclusive price.
- Formula for KDV exclusive calculation: (Gross amount) / (1 + KDV rate)
For a product sold for 540 TL, to find the KDV exclusive price: 540 / (1 + 8/100) = 540 / 1.08 = 500 TL.
How is KDV Base Calculated?
VAT base is a subject of curiosity for many people. The monthly total of the KDV exclusive amounts on sales invoices is called the KDV base. The KDV base is obtained by dividing the KDV amount by one percent of the selected KDV rate.
KDV amount / (KDV percentage / 100)
For example, let’s assume a product or service that costs 500 TL with an 18% KDV. 500 / (18 / 100) = 2,777.78 TL
What is KDV Withholding?
KDV withholding refers to the process of paying the full or partial value of KDV directly to the tax office by deducting it from the main amount paid to the seller. With this practice, the tax recorded on the invoice is paid by sharing it between the seller and the buyer in certain proportions. The KDV withholding rate varies depending on the product or service sold. When calculating in this practice, the total amount of the product or service is considered, and then the rate related to the product or service is subtracted from the total price. The remaining amount is the amount to be paid to the seller, and the remaining KDV amount is paid directly to the tax office.
What is e-Declaration? When is it Submitted?
e-Declaration refers to the submission of taxes or documents such as KDV that are legally required to be submitted to the tax office via electronic means to the Revenue Administration. Since the introduction of the e-Declaration system in our country, many types of taxes can be submitted under the e-Declaration heading, including KDV. An e-Declaration holds the same legal value as a physical declaration. The following tax declarations must be submitted through the e-Declaration system:
- Corporate income tax return
- Annual income tax return
- KDV return
- Banking and insurance transaction tax return
- SCT return (Special Consumption Tax)
- Gambling tax return
- Correction returns for electronically submitted declarations
- Private communication tax return
- Temporary tax return
- Summary returns
How to Apply for e-Declaration? (e-Beyanname Başvurusu)
To apply for e-Declaration, the “Electronic Declaration Authorization Request Form” should be filled out. Then, this form is submitted to the Revenue Administration (GiB). The relevant form can be accessed through the Revenue Administration’s website. The form requires detailed information about the taxpayer to be provided.