Turkish Withholding Tax and VAT on Cross-Border Service Payments: SaaS, Consulting and Intercompany Fees
When a Turkish company pays a foreign service provider, two separate taxes can arise — corporate withholding tax and reverse-charge VAT. Most disputes come from mixing them up.
Key takeaways
- Withholding is a tax on the foreign provider’s income, collected by the Turkish payer; reverse-charge VAT is a consumption tax the Turkish payer self-assesses.
- A treaty can remove withholding. It never removes Turkish VAT.
- If the contract says “net of taxes”, withholding must be grossed up — 20% becomes 25% of the net fee.
- Services used abroad (e.g. marketing in foreign markets) are outside Turkish VAT.
Key facts
| Item | Rule (October 2026) | Source |
|---|---|---|
| Professional services fees to non-residents | 20% withholding | Corporate Tax Law Art. 30/1-b; Decision 2009/14593 |
| Royalties to non-residents | 20% withholding | Corporate Tax Law Art. 30/2 |
| Internet advertising fees to non-residents | 15% withholding | Corporate Tax Law Art. 30/1-ğ |
| Business profits of non-resident without PE | No withholding | Corporate Tax Law Arts. 3 and 30 |
| Withholding moment | On payment or accrual, whichever first | Corporate Tax Law Art. 30 |
| Withholding return | Monthly withholding and premium return, by the 26th of the following month | Tax Procedure rules |
| VAT on services performed or used in Turkey | 20%, self-assessed by recipient | VAT Law Arts. 1, 6/b, 9 |
| VAT return No. 2 | By the 28th of the following month; deductible on return No. 1 for the period in which it is paid | VAT General Implementation Communiqué |
Withholding tax vs reverse-charge VAT: two different questions
| Corporate withholding tax | Reverse-charge VAT | |
|---|---|---|
| Whose tax? | The foreign provider’s income tax | Consumption tax on the service |
| Who pays it to the tax office? | Turkish payer, deducted from the fee | Turkish payer, on top of the fee |
| Real cost to the payer? | None if deducted; full cost if grossed up | Usually neutral — deductible on return No. 1 |
| Treaty relief? | Yes | No |
| Key test | Classification of income | Where the service is performed or used |
Withholding tax by payment type
| Payment | Domestic withholding | Treaty effect (typical) |
|---|---|---|
| Consulting, legal, accounting, engineering advice | 20% | Often 0% without PE / fixed base / 183-day presence |
| Custom software development | 20% | Often 0% under Article 7 or 14 |
| Software licence with rights to copy, modify or distribute | 20% | Royalty cap, commonly 10% |
| Standard software for internal use only | Generally none (commercial purchase) | — |
| Support, maintenance, training | 20% | Often 0% without PE |
| Internet advertising (e.g. ad platforms) | 15% | Often 0% under Article 7 |
| Trademark, know-how, patent licence | 20% | Royalty cap |
Treaty relief requires a residence certificate in the payer’s file — see how to apply a Turkey tax treaty to a payment. For the full rate table, including dividends and interest, see our Turkish withholding tax guide.
Reverse-charge VAT on imported services
Under VAT Law Art. 6/b, a service is treated as performed in Turkey if it is performed in Turkey or benefited from in Turkey. When the foreign provider has no residence, place of business, legal seat or place of management in Turkey, the Turkish recipient declares the VAT as a “responsible party” (Art. 9) on VAT return No. 2 and pays it. If the recipient is a VAT-registered business using the service for taxable activity, it deducts the same VAT on return No. 1 for the period in which the reverse-charge VAT was paid.
Two things often surprise foreign providers. First, the recipient does not have to be VAT-registered to owe reverse-charge VAT. Second, services performed abroad and used abroad — for example marketing in foreign markets for a Turkish exporter — are outside Turkish VAT. Where a foreign provider sells electronic services to Turkish consumers (B2C), the provider itself must register under the simplified VAT procedure; see VAT registration for non-resident companies.
Worked example
A Turkish company pays a UK consulting firm a fee of 100,000 for strategy advice delivered remotely and used in Turkey. The UK firm has no Turkish PE.
| Scenario | Withholding | Paid to UK firm | Reverse-charge VAT |
|---|---|---|---|
| No residence certificate, gross contract | 20,000 (20%) | 80,000 | 20,000 declared on No. 2, deducted on No. 1 |
| No certificate, contract says “net of Turkish taxes” | 25,000 (gross-up: 100,000 / 0.80 × 20%) | 100,000 | VAT base follows the grossed-up fee |
| Valid UK residence certificate, treaty applies | 0 | 100,000 | 20,000 declared on No. 2, deducted on No. 1 |
The treaty changes the withholding outcome entirely; it does not change the VAT outcome at all.
SaaS subscriptions: the grey zone
Turkish published rulings classify software payments by the rights granted: custom development is professional services; acquiring rights to reproduce, modify or distribute is a royalty; buying standard software for internal use is a commercial purchase. Cloud subscriptions fit none of these perfectly. The decisive facts are usually: whether the customer receives any copyright-type right, whether there is customisation, and how support is priced. Draft the contract so that each component is identifiable — that is what a tax office will read first.
Intercompany fees to a Turkish subsidiary
Management fees, shared-service recharges and IP charges paid by a Turkish subsidiary to its parent trigger all three layers: withholding (usually as professional services or royalties), reverse-charge VAT, and transfer pricing under Corporate Tax Law Art. 13 — the charge must be at arm’s length and supported by evidence that the services were actually received. See transfer pricing in Turkey.
Common mistakes
- Applying a treaty rate without a residence certificate on file.
- Treating a whole bundled contract as a royalty.
- Forgetting to gross up when the contract is “net of taxes”.
- Not declaring reverse-charge VAT because “there is no VAT on a foreign invoice”.
- Withholding on internet advertising at 20% instead of 15%.
- Assuming the foreign provider can credit the Turkish withholding at home in full.
What drives the cost of a payment review
Fixed and confirmed privately. Drivers: number of contracts and payment streams, whether historical payments need correction, the treaty involved, and whether a refund or voluntary disclosure (pişmanlık) is part of the work. See the Turkish tax opinion service.
How other countries treat the same payment
| Country | Domestic WHT on cross-border service fees | Reverse-charge VAT |
|---|---|---|
| Turkey | 20% on professional services and royalties; none on business profits | Yes, 20% |
| Germany | Generally none on services; withholding on royalties | Yes (B2B) |
| United Kingdom | Generally none on services; withholding on certain royalties | Yes (B2B) |
| United Arab Emirates | None | Yes (5% VAT) |
Turkey’s broad domestic withholding on professional services is the main difference foreign providers notice — which is why classification and treaty paperwork matter more here than in most EU markets.
Case analyses
- Facts
- A Turkish online retailer paid several foreign ad platforms and declared nothing.
- The obvious answer
- “Foreign invoices without VAT — nothing to declare.”
- Why that failed
- Internet advertising paid to non-residents carries 15% withholding, and the services were used in Turkey, so reverse-charge VAT applied.
- Structure adopted
- Voluntary disclosure with reduced penalties, monthly booking of reverse-charge VAT (recovered on return No. 1) and a treaty review per platform for withholding going forward.
- Facts
- A Turkish subsidiary paid a lump-sum annual management fee to its European parent.
- The obvious answer
- “Intercompany, so just a book entry.”
- Why that failed
- No service evidence, no allocation key and no withholding analysis — the fee was at risk of disallowance, with withholding and VAT exposures on top.
- Structure adopted
- A service agreement with a cost-plus allocation key, quarterly evidence packs, treaty-based nil withholding with the parent’s residence certificate, and monthly reverse-charge VAT.
What happens if…
What happens if the Turkish payer did not withhold and should have?
The payer is assessed for the tax plus a tax loss penalty and late-payment interest; contracts usually do not allow recovery from the foreign provider after the fact.
What happens if reverse-charge VAT was missed?
It is assessed with penalty and interest. If the payer was entitled to deduct it, the net tax effect is often a timing issue, but the penalty is real — voluntary disclosure (Tax Procedure Law Art. 371) reduces it.
What happens if the foreign provider also charged its home VAT?
That is an invoicing error on the provider’s side for B2B services; the Turkish payer still self-assesses Turkish VAT and should ask for a corrected invoice.
Frequently asked questions
Do Turkish companies withhold tax on payments to foreign service providers?
Yes for professional services and royalties (20% under Corporate Tax Law Art. 30) and internet advertising (15%), unless a tax treaty reduces or removes it. Business profits of a foreign company without a Turkish PE are not subject to withholding.
Is VAT due when a Turkish company buys services from abroad?
Yes, if the service is performed or used in Turkey. The Turkish recipient self-assesses 20% VAT on return No. 2 and normally deducts it on return No. 1.
Does a tax treaty remove Turkish VAT on imported services?
No. Treaties cover income taxes only. They can remove withholding tax but not reverse-charge VAT.
How is withholding calculated if the contract is net of taxes?
The fee is grossed up: net fee divided by (1 − withholding rate). At 20%, the withholding equals 25% of the net fee.
Is there withholding on SaaS subscriptions paid from Turkey?
It depends on the rights granted. Pure access without copyright-type rights points to business profits (no withholding without a PE); rights to reproduce, modify or sub-license point to a royalty.
When are the withholding and reverse-charge VAT returns due?
The withholding return by the 26th of the following month and VAT return No. 2 by the 28th of the following month.
Get a written Turkish tax position before you decide
Send us the facts, the contract and the question. We confirm scope, the documents we need and the delivery date in a fixed-scope proposal — fees are confirmed privately, never published.
WhatsApp a Turkish CPA Email info@ozmconsultancy.com Request a proposalPrimary sources
- Corporate Tax Law No. 5520 (Kurumlar Vergisi Kanunu) — Arts. 3, 13, 30, 32, 35
- VAT Law No. 3065 (Katma Değer Vergisi Kanunu) — Arts. 1, 6, 9
- Tax Procedure Law No. 213 (Vergi Usul Kanunu) — Arts. 114, 156, 157, 344, 369, 370, 371, 413
- Turkish Revenue Administration (GİB) — legislation, treaties and published özelges
- Official Gazette (Resmî Gazete) — Presidential Decisions on withholding rates
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This page is general information on Turkish tax law as in force in October 2026. It is not a tax opinion and does not create an engagement. A written opinion is issued only after a fixed-scope engagement, on the specific facts and documents provided, and states its own assumptions and limitations.
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