What is withholding, who applies it, and how to issue a withholding invoice? A practical overview with sample ratios.
What is withholding and a withholding invoice? Who applies withholding? How do you issue a withholding invoice? Answers below.
What Does Withholding Mean?
TDK defines “tevkifat” as deductions on money matters. In taxation, the VAT due is shared between seller and buyer so collection/reporting becomes more regular.
Types of Withholding
Income Tax Withholding
Article 94 of the Income Tax Law lists income types; rates are set by secondary legislation. (As of 22 Dec 2024, a 10% rate was updated to 15%.)
VAT Withholding
For defined goods/services, part or all of VAT is declared and paid by the buyer as tax responsible.
Corporate Tax Withholding
Regulated by Articles 15 and 30 of the Corporate Tax Law for certain payments. (As of 22 Dec 2024, a 10% rate was updated to 15%.)
e-Commerce Withholding
1% withholding on certain payments via e-commerce intermediaries (effective 1 Jan 2025) can be offset in returns.
Which Transactions Are Subject?
Examples include construction and related engineering/architecture, cleaning/landscaping, private security, repair/maintenance of machinery & vehicles, catering, consultancy & audit, building inspection, shuttle transport, advertising, certain metals and scrap-derived raw materials, etc.
Who May Apply Withholding?
Public bodies and institutions listed in legislation (ministries, municipalities, banks, SOEs, listed companies, etc.).
What Is a Withholding Invoice?
An invoice where calculated VAT is split between buyer and seller; the buyer declares/pays the withheld portion.
How to Calculate?
Use the sector ratio (e.g., 3/10, 5/10, 9/10). Example 5/10: for 2,000 TL + 20% VAT (=400 TL), the 400 TL VAT is split equally between buyer and seller.
Sample Ratios
- Construction + design/engineering: 3/10
- Repair & maintenance of machinery/vehicles: 5/10
- Contracted textile & brokerage: 5/10
- Shuttle transportation: 5/10
- Printing services: 5/10
- Catering & organization: 5/10
- Entities in Law No. 5018 schedules: 5/10
- Forest administration services: 5/10
- Press announcements: 5/10
- Copper, zinc, aluminum deliveries: 7/10
- Environment/cleaning/landscaping: 7/10
- Bullion metal deliveries: 7/10
- Consultancy/plan/project/study/audit: 9/10
- Labor supply: 9/10
- Building inspection: 9/10
- Tourist-shop customer sourcing: 9/10
- Sports clubs’ media/ads/naming rights: 9/10
- Scrap deliveries & raw materials from scrap: 9/10
- Cotton, mohair, wool, untanned hides/leather: 9/10
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