How to Get a VAT Withholding Refund in Turkey: Cash vs. Offset Refund

If you add VAT to your invoice but your customer withholds part of that tax and pays it with its own return, the way to recover the VAT that accumulates on your side is a VAT withholding refund (tevkifat iadesi). A VAT withholding refund is the return to the seller, by offset or in cash, of the VAT that the buyer declared and paid as the responsible party on a sale subject to partial withholding, up to the amount the seller cannot recover through deduction. The upper limit of the refund is the tax withheld by the buyer. How quickly each route delivers a result depends on the type of work you do.

This article covers only refunds arising from partial withholding: how the amount is calculated, the precondition on the buyer’s side, the offset and cash refund limits and how the file is built in five steps. We explain the general framework of the refund system and the other refund routes in our What is a VAT refund guide.

Why does partial withholding cause the seller’s VAT to accumulate?

Partial withholding is a practice, based on the authority in Article 9 of the VAT Law, that makes the buyer pay a certain portion of the tax on certain transactions. The seller shows the full VAT on the invoice. But it collects only the portion not withheld from the customer and declares only that portion as calculated tax on VAT return No. 1.

The problem starts on the purchase side: the seller pays the full VAT on materials, subcontractors, rent and energy, while on the sales side part of its tax has slipped out of its hands. Under the VAT General Implementation Communiqué issued by the Revenue Administration (GİB), in construction works the buyer itself declares 4/10, or 40%, of the calculated VAT. A cut at this rate is enough for a contractor with high inputs to carry VAT forward every month.

As a rule, VAT carried forward is not refunded; it waits to be deducted from the calculated tax of subsequent periods. Partial withholding, however, is one of the transactions listed in the law that give rise to a refund right. A VAT withholding refund lets you recover the part of this accumulation that arises from withholding. We discuss how withholding works in general in our what is VAT article, and the rates by transaction type in a separate article.

How is a VAT withholding refund calculated?

The calculation is built on two caps. The first cap is the VAT withheld by the buyer for that transaction. The second cap is the VAT the seller could not recover through deduction in the relevant period. The refund amount is the smaller of the two; the portion exceeding the cap is carried over to the next month as VAT carried forward.

The Communiqué states this rule clearly: the refund is not calculated on the tax embedded in the transaction; the tax withheld is the basis. So, unlike exports, you do not need to prepare a VAT incurred calculation table. What you need is to present the invoices for your sales subject to withholding and the period’s deduction list consistently.

Let’s look at a hypothetical example. A subcontractor issues a construction works invoice of 1,000,000 TL excluding VAT, and in the example we assume a VAT rate of 20%. The VAT on the invoice is 200,000 TL. The buyer withholds 4/10 of this, or 80,000 TL, and pays it with its own return, while the seller declares the remaining 120,000 TL as calculated VAT.

The amounts in the table were constructed to illustrate the logic of the process. In a real file, your sales not subject to withholding in the same period are also added to calculated tax and reduce the amount not recoverable through deduction.

VAT return No. 2: the precondition for the refund right on the buyer’s side

In a VAT withholding refund, half of the file is in the buyer’s hands. The Communiqué requires the seller to declare the VAT not withheld with return No. 1, and the buyer to report the withholding it made to the tax office with VAT return No. 2. And that is not all: the buyer having paid the tax assessed on this return is a condition for the refund.

In practice, this means your customer’s tax payment discipline affects your cash flow. If the buyer files the return but delays payment, the tax office will not refund that amount. For work done for administrations within the general budget, the rule is different; it is sufficient for the progress payment certificate to have been approved by the authorizing officer, and no separate declaration and payment is required.

Discussing this risk at the contract stage is easier than rescuing the refund file later. We recommend making it an internal procedure to request from your private sector customers the period in which they declared the withholding and the payment receipt.

What is a refund by offset, and which limits apply to withholding?

The short answer to what a refund by offset means: instead of your refund receivable being paid to you in cash, it is deducted from your debts to the tax office, customs or SGK. In a VAT withholding refund, an offset can be requested for the debts listed in the refund section of the VAT General Implementation Communiqué. This route generally requires fewer documents and less security.

The Communiqué divides the offset limits into three groups by transaction type. Which group you are in is determined by the transaction type on the invoice, not by the name of the contract.

Services group: cleaning, consulting, labor supply

Cleaning and landscaping, machinery and vehicle maintenance and repair, catering and event organization, survey, planning-design and consulting, contract textile manufacturing, building inspection, transportation, printing, commercial advertising and labor supply fall into this group. Offset requests of up to 50,000 TL arising from these services are fulfilled without a tax inspection report, a YMM report or collateral. Requests exceeding this amount are subject to a tax inspection report. If you have a full certification agreement concluded on time for the year in which you performed the transaction, the offset can also be concluded with a YMM report.

Construction works and sports club revenues

For construction works and the engineering-architecture and survey-design services provided together with them, offset requests of up to 50,000 TL are also concluded without a report or collateral. Requests exceeding this amount are fulfilled on the basis of a tax inspection report or a YMM report. For a refund requested with a YMM report, if you provide collateral for the portion exceeding 50,000 TL, the refund is made without waiting and the collateral is released according to the report’s outcome.

Metal, scrap, cotton, wood and iron-steel deliveries

Deliveries of metal ingots, copper, zinc, aluminum and lead products, scrap and waste and raw materials obtained from them, cotton, mohair, wool, leather, wood and forest products, and iron and steel fall into this group. Offset refund requests arising from these deliveries are fulfilled without a tax inspection report, a YMM report or collateral, regardless of the amount. For a metal supplier with regular tax and premium debts, this is the fastest route to a VAT withholding refund.

If the tax office finds documents missing in your offset request, it notifies you in writing. If you complete the deficiency within 30 days of notification of the letter, your requests that do not require a report or collateral are concluded as of the petition date and no late payment interest accrues. If you miss this period, the offset shifts to the date on which you remedied the deficiency.

What is a cash refund, and who is it open to for withholding?

The answer to what a cash refund means is that the refund receivable is paid into your bank account. In a VAT withholding refund, the cash route is subject to stricter rules than offset, and there is a clear distinction between the services group and the deliveries group.

For transactions in the services group, a cash refund can be obtained only with collateral and/or a tax inspection report; there is no lower threshold below which no report is required. If you provide collateral for the full amount of the request, the collateral is released according to the outcome of the tax inspection report. For those with a full certification agreement, a cash refund can also be requested with a YMM report.

For construction works, sports clubs’ broadcasting and advertising revenues, and metal, scrap, cotton, wood and iron-steel deliveries, cash refund requests of up to 50,000 TL are fulfilled without collateral or a report. According to the amendment notes in the Revenue Administration (GİB) Communiqué text, this limit was raised from 10,000 TL to 50,000 TL from 31.10.2024 by Communiqué Serial No. 52. Requests exceeding this amount are concluded on the basis of a tax inspection report or a YMM report; if collateral is provided for the excess, the refund is made first.

You can have part of your refund receivable offset and request the rest in cash. In this case, the offset portion does not count toward the limit for cash refunds without collateral. If you want your receivable to be paid to a third party, a notarized assignment of receivables agreement is required.

Offset vs. cash refund: comparison by transaction group

The table below brings together in one place the limits in the section of the VAT General Implementation Communiqué on VAT withholding refunds.

The table is a decision aid, not a roadmap on its own. If you have other transactions giving rise to a refund right in the same period, their refunds are concluded separately under their own procedures.

VAT withholding refund in 5 steps: how is the file built?

The flow below summarizes the order we follow when building the refund file for a company making sales subject to partial withholding:

• Step 1: Sort invoices subject to withholding by transaction type. Check which transaction type code each invoice was issued with; this code determines the offset and cash limits.
• Step 2: Confirm buyers’ returns No. 2 and payments. Verify with private sector customers the period in which the withholding was declared and the payment; for public administrations, add the approved progress payment certificate to the file.
• Step 3: Complete two tables on return No. 1. Enter the transaction in the “Transactions Subject to Partial Withholding” table in the tax base tab, and the amount withheld by the buyer in the “VAT Subject to Refund” field of the “Other Transactions Giving Rise to a Refund Right” table.
• Step 4: Submit the lists and file the petition. Submit the breakdown of sales invoices subject to withholding and the period’s deductible VAT list through the Internet Tax Office; in the standard refund request petition, choose offset, cash or both.
• Step 5: Monitor the review outcome and deficiency letters. Respond to a deficiency letter within 30 days; if you chose the collateral or YMM report route, follow up on the report and the release of collateral.

The “Notification of Transactions Within the Scope of Partial Withholding” attached to the return must also have been submitted. Under the Communiqué, a refund cannot be requested before this notification and the return containing the refund amount have been filed; nor does the request have effect until the documents are complete.

Minimum amount, request deadline and change of preference

There is a threshold for small refunds. Under the VAT General Implementation Communiqué, Presidential Decree No. 6775 set the minimum amount for which a refund can be requested at 2,000 TL from February 1, 2023. If your request for a period is below this amount, you still declare it; the tax office does not process the request until its total with subsequent periods exceeds 2,000 TL.

The request period is long but not unlimited. You must show the refund arising from partial withholding on the return and apply with the documents by the end of the second calendar year following the period in which the transaction subject to withholding took place. For example, for a withholding invoice issued in May 2026, the deadline is December 31, 2028. For refunds requested with a YMM report, the report must be submitted within six months from this date.

You can also change your preference. If you did not request a refund in the relevant period and later change your mind, you can file an amended return for the period in which the transaction took place and request a refund. Conversely, it is also possible to withdraw after declaring a refund, until the process is completed. In both cases, the tax office is notified by petition.

Refund receivables are requested separately for each tax period; you cannot combine several months’ receivables into a single request. If the same transaction is subject to both a reduced rate and withholding, the receivable arising from withholding is refunded first.

Update (October 2026): According to the note the Revenue Administration (GİB) added to the current text of the Communiqué, the Third Chamber of the Council of State (Danıştay), by its decision dated February 4, 2026, annulled the sentence in the withholding section stating that “offset refund requests to be made with collateral or a YMM report become valid on the date on which these are submitted in full”. For offset requests with collateral or a YMM report, the date to be used should therefore be assessed file by file.

VAT withholding refund mistakes we often see in practice

The delays we encounter in VAT withholding refund files mostly stem from document consistency:

• Issuing the invoice with the wrong transaction type code and planning the refund under another group’s limit
• Realizing after the file has been built that the buyer filed return No. 2 but did not pay the tax
• Calculating the refund amount on the VAT embedded in the transaction instead of the VAT withheld
• Leaving the “VAT Subject to Refund” field blank on the return and assuming the filing is a refund request
• Requesting a refund without correcting withholding made by the buyer unduly or in excess

For the last item, the Communiqué’s route is clear: tax withheld in excess or unduly is first refunded by the buyer to the seller. A file built without this correction is returned at the review stage.

We would like to draw attention to one more point. If the seller’s VAT refunds are subject to tax inspection because of negative reports or findings about it, refund requests arising from withholding are also concluded under the procedure the Communiqué provides for this situation. The buyer having declared and paid the withholding does not change this procedure.

Hypothetical scenario: a subcontractor working for a municipality

Consider a hypothetical example. A limited liability company in Ankara doing landscaping performs part of its work for a general budget public administration and part for a private construction firm. The company’s material and machinery rental costs are high, and its VAT carried forward grows every month.

For invoices issued to the public administration, an approved progress payment certificate is sufficient for the refund. For those issued to the private firm, the refund depends on that firm declaring the withholding with return No. 2 and paying it. If the company tracks the two customer groups separately, it can have the amount whose refund is finalized each month offset against its SGK premium and withholding tax debts. This scenario was constructed only to illustrate the logic of the process and does not constitute advice.

Final assessment on VAT withholding refunds

A VAT withholding refund is a process that works predictably when the buyer’s and seller’s filings corroborate each other. Three things are decisive: the transaction type on the invoice, the buyer’s payment and calculating the refund amount limited to the tax withheld. You can find our other articles on VAT returns and refunds on our Tax Legislation knowledge base page. For the official text of the limits and the document list, the current text of the VAT General Implementation Communiqué issued by the Revenue Administration (GİB) is the primary source.

At Akal CPA, we manage the refund files of companies making sales subject to withholding, from invoice checks to buyer confirmation and offset follow-up. You can find the scope of our services in this area on our VAT refund services page.