What Does Offset (Mahsup) Mean, and How Does It Work in Tax Refunds?

The short answer to the question “what does mahsup edilen (offset) mean?” is this: it is the portion of a receivable that is closed by deducting it from the same person’s debt. An offset (mahsup) is the process of netting mutual receivables and debts between two parties against each other on account, without any money changing hands. In tax, this means that an amount you are owed by the state (a refund receivable, tax withheld, an overpayment) is credited against your debt to the tax office. No money leaves your bank account, yet the debt is still closed.

The word is of Arabic origin and is used in everyday Turkish to mean “deducting from an account.” In tax legislation, however, it is a technical procedure subject to specific rules, deadlines and petitions. In this article, we explain in turn which debts an offset can be applied to, what the “to be offset” (mahsup edilecek) line on a return means, and the four types of tax offset companies encounter most often.

What does offset mean, and how does offsetting against a tax debt work?

In tax, an offset is the crediting of a taxpayer’s receivable from the state against their debt to the state. If the receivable is larger than the debt, the remainder is either offset against another debt or, where the conditions are met, refunded in cash. If the debt is larger than the receivable, the debt remaining after the offset is paid in the normal way.

The tax office carries out the procedure, but the request comes from the taxpayer. The laws separately set out which debts a refund receivable can be credited against, which documents are required and as of which date the offset takes effect. For this reason, the assumption that “I have a receivable, so my debt closes automatically” is often incorrect. Unless the offset request is made in writing, the debt is deemed not paid on its due date and late payment interest may continue to accrue.

At Akal CPA, the situation we see most often with our clients is a company with a refund receivable paying its withholding (muhtasar) or SGK debt in cash in the same month. Cash leaves the business while the receivable sits waiting on the other side. A well-timed request to offset against a tax debt prevents this double tie-up of cash.

What is the amount offset, and what does “to be offset” mean?

The two expressions describe different stages of the same procedure. The amount “offset” (mahsup edilen) is the portion actually deducted from the debt and recorded. The amount “to be offset” (mahsup edilecek) is the receivable not yet deducted, shown on a return or petition for deduction.

The “taxes to be offset” section of the annual corporate income tax return is a typical example. This section shows advance (provisional) tax paid during the year, taxes withheld at source and taxes paid abroad. When the return is assessed, these amounts are deducted from the calculated tax, and the amount “to be offset” becomes the amount “offset.”

If you see the phrase “paid by offset” (mahsuben ödendi) on the assessment slip or the tax office debt statement, you know that the debt was closed not with cash but by deduction from one of your receivables. This distinction also matters in the accounting records. A receivable to be offset remains on the balance sheet as a receivable and is closed together with the debt account when the offset takes place.

What is payment by offset?

Payment by offset is the payment of a debt by deducting it from an existing receivable instead of through a bank or cashier’s desk. In tax practice, this is called “payment by offset” (mahsuben ödeme) and has the same result as a cash payment: the debt is deemed paid as of the date the offset takes effect.

The word also has a second use. Article 47 of Law No. 6183 on the Collection Procedure of Public Receivables sets the order in which a debtor’s voluntary payment is credited to debts. Receivables that will become time-barred at the end of the calendar year, and debts that fall due earlier and are unsecured or insufficiently secured, take priority. In other words, even when you pay in cash, which debt your payment is “offset” against is determined by this rule.

4 examples of offsetting against a tax debt

The concept of offset appears in many places in tax legislation. Below, we cover the four types encountered most often in the day-to-day operations of companies. Each has a different legal basis, deadline and outcome.

1. Offsetting a VAT refund receivable against tax and SGK debts

A VAT receivable arising from transactions that give rise to a refund right, such as exports, reduced-rate sales or transactions subject to withholding, can be credited against debts instead of waiting for cash. Under the Revenue Administration (GİB) VAT refund rules, this receivable may be offset against public receivables followed up by tax offices, taxes collected on imports and SGK premium debts. If the company is an ordinary partnership, general partnership or ordinary limited partnership, the receivable may also be credited against the partners’ debts in proportion to their shares.

This type has two important limits. First, as a rule, a VAT refund receivable cannot be offset against debts arising under the Special Consumption Tax (ÖTV) Law; a receivable arising from the reduced-rate supply of goods subject to ÖTV is the only exception to this rule. Second, for an offset against an SGK premium debt, the petition and documents must reach the tax office by the last day of the month in which the VAT return is filed.

If the tax office notifies a deficiency, the 30-day period is decisive. For a taxpayer who remedies the deficiency within this period, the offset request is executed as of the date the petition was submitted, and no late payment interest applies. We explain which transactions give rise to a refund right in our article What is a VAT refund , and the details of receivables arising from transactions subject to withholding in our VAT withholding refund guide.

2. Offsetting taxes withheld at source against corporate income tax

On certain payments made to your company, the payer withholds tax and pays it with its own withholding (muhtasar) return. This withholding is an advance tax paid on your behalf. Article 34 of the Corporate Income Tax Law provides that these taxes withheld from profits included in the return are offset against the corporate income tax calculated on the annual return.

If the amount to be offset is larger than the calculated tax, the difference is not lost. The tax office notifies the taxpayer in writing, and the difference is refunded if an application is made within one year of service. A taxpayer who does not apply within one year loses the receivable arising from this difference by law. For individuals, the same rule is found in Article 121 of the Personal Income Tax Law.

According to the Revenue Administration’s 2026 Corporate Income Tax Filing Guide, the offset of the remaining amount against other tax debts is carried out without requiring an audit report or collateral, regardless of the amount. The request is made with the 1A refund request petition annexed to General Communiqué on the Tax Procedure Law No. 429. According to the same guide, for cash refunds in 2026, the portion exceeding 426,000 TL is subject to an audit report; that is why the offset route delivers faster results for most companies.

3. Offsetting taxes paid abroad

A fully liable corporation earning profit through a branch, place of business or subsidiary abroad may deduct the tax similar to corporate income tax it paid in that country from its tax in Turkey. The legal basis is Article 33 of the Corporate Income Tax Law. This offset prevents the same profit from being taxed in full in two countries.

The offset has a ceiling. According to the example in the Revenue Administration’s guide, a corporation that earns 2,000,000 TL abroad and pays 600,000 TL in tax there at 30% may offset at most 500,000 TL, calculated at the 25% rate, in Turkey. The 100,000 TL difference cannot be offset either in that year or in later years.

Tax that stays below the ceiling but cannot be deducted in that year may be used until the end of the third following accounting period. The offset requires a document showing that the tax was paid in the foreign country, certified by a Turkish embassy or consulate. If the profit earned abroad is exempt in Turkey, the foreign tax paid on that profit cannot be offset.

4. Offset of overpaid or wrongly paid tax after correction

When more tax than required is paid due to a calculation error, duplicate payment or incorrect filing, the correction provisions in Articles 116 to 126 of the Tax Procedure Law apply. Under Article 120 of the Law, the head of the tax office decides on the correction, and the tax collected in excess is returned to the taxpayer. If no application is made within one year of service of the correction slip, this right lapses.

The amount to be returned is not always paid in cash. Article 23 of Law No. 6183 states that public receivables that must be returned for a legal reason are returned by offsetting them against the entitled person’s due (muaccel) debts to the same administration. If you have an overdue debt, your overpayment is first credited against that debt, and the remainder is paid to you.

In practice, this type is common in return corrections and after returns filed with voluntary disclosure. When an overpayment is noticed, submitting the correction request in writing with reasons clarifies against which debt and on which date the offset will be made.

What outcome does each type of offset produce?

The table below compares the four types in terms of legal basis, deadline and what happens to the remaining amount. The deadlines in the rows are based on the provisions of laws and communiqués in force as of October 2026.

Why should advance tax and loss offsets be kept separate?

Advance (provisional) tax is a prepayment made during the year on quarterly profits and deducted from the tax calculated on the annual return. Here, the right to offset arises only for the amount actually paid. An advance tax that has been assessed but not paid on its due date is not deducted from the tax calculated at year-end.

The situation for prior-year losses is different. A loss incurred in one period may be deducted from the profit of the following five accounting periods; the right lapses for losses that cannot be absorbed within five years. This is also called “loss offset,” but it reduces the tax base (the profit on which tax is calculated), not the tax debt. A loss of 100 TL deducted from the base has a tax effect of 25 TL at a 25% rate, whereas 100 TL offset against tax reduces the debt directly by 100 TL.

How does offsetting work in the compliant taxpayer discount?

A lesser-known use of offset is in the tax discount granted to compliant taxpayers. According to the Revenue Administration’s 2026 Corporate Income Tax Filing Guide, corporations that meet the conditions calculate a discount of 5% of the corporate income tax calculated on the return. For returns due from 1 January 2026, this discount may not exceed 12,000,000 TL.

If the discount amount exceeds the tax payable, the remainder may be offset against other taxes assessed on the taxpayer’s own returns within one full year following the date the return was due. Any amount that cannot be offset within this period is not returned or refunded. A company with an excess discount therefore needs to plan the offset by tracking its VAT, withholding and advance tax assessments over the following twelve months.

Common mistakes companies make in offset requests

The mistakes we see often in practice arise less from technical details than from a lack of follow-up. The points below summarize situations that erode an offset receivable or lead to unnecessary late payment interest:

• Submitting the petition late: Even if the receivable appears on the return, the debt is not deemed paid unless the offset request is made in writing.
• Missing the one-year deadline: For refunds of excess withholding and refunds after correction, the receivable lapses if the one-year application period passes.
• Leaving the SGK debt to the last day: To have the VAT receivable credited against a premium debt, the documents must reach the tax office before the end of the month in which the return is filed.
• Trying to deduct unpaid advance tax: Only advance tax paid in cash or by offset is offset on the annual return.
• Confusing a tax base deduction with a tax offset: A loss offset and a tax offset have different cash effects; the cash plan should be built accordingly.

The common solution to these mistakes is to track receivables and debts in the same table. Determining at the start of the month which receivable will be credited against which debt, on which date and with which petition leaves no surprises on the payment date.

Sample scenario: an exporter with a refund receivable

For example, consider a fictional limited liability company in Ankara that manufactures machine parts and exports part of its output. Suppose the company’s 500,000 TL VAT refund receivable arising from exports has been finalized together with its documents. In the same month, the company has a 180,000 TL withholding (muhtasar) return assessment and a 120,000 TL SGK premium debt.

In its refund request, the company selects both the offset and cash options. 180,000 TL is offset against the debt to the tax office and 120,000 TL against the SGK premium debt; for the SGK part, the documents are submitted to the tax office by the last day of the month in which the VAT return is filed. The remaining 200,000 TL is assessed under the cash refund rules.

In this scenario, the company closes a debt of 300,000 TL without taking any money out of its cash. Paying the same amount in cash and waiting for the refund would have tied up working capital unnecessarily for several weeks. The amounts are illustrative; in a real file, the scope of the refund right and the document set are reviewed separately based on the company’s transactions.

Tracking offset records correctly in the accounts

An offset must appear correctly not only in the tax office records but also in the company’s books. A refund receivable sits in the receivables account until the offset takes place; when the offset is made, both the receivable and the related debt account are closed. Keeping the records consistent with the tax office’s offset letter and dates prevents discrepancies in the year-end reconciliation.

We carry out this tracking as part of our general accounting services , on a monthly basis together with the refund file and debt statement. You can access our other articles on tax filing, refunds and withholding from the Tax Legislation category .

Details of the offset and refund rules for corporate income tax are in the Revenue Administration 2026 Corporate Income Tax Filing Guide , and the offset of VAT refund receivables is covered in the Revenue Administration’s Common Issues in VAT Refunds document.