How Is VAT Withholding Applied in Transportation Services?

 

The Revenue Administration has introduced significant updates regarding Value Added Tax (VAT) withholding practices. With the communiqué published in the Official Gazette on January 22, 2022, new regulations that directly affect companies providing and receiving freight and transportation services came into force. Let’s take a closer look at the current limits and application rules.

 

Transportation VAT Withholding Threshold for 2025

As of 2025, the minimum invoice amount subject to VAT withholding in transportation services has been aligned with the e-Invoice issuance threshold. Accordingly:

• VAT withholding applies to invoices exceeding 9,900 TRY

For freight invoices issued above this amount, VAT withholding must be applied at the prescribed rate.

What If the Buyer Is Not an e-Invoice Taxpayer?

If the service recipient is not registered in the e-Invoice system, a different practice applies for 2025:

• Paper invoices may be issued up to 3,000 TRY.

• However, this practice will end in 2026.

• As of 2026, all invoices issued to non–e-Invoice taxpayers must be arranged as e-Archive invoices, regardless of the amount.

 

 

VAT Withholding Rate in Transportation Services

 

For freight and cargo transportation services provided to buyers within the scope of withholding:

• 2/10 of the calculated VAT is withheld by the buyer

• This withheld amount must be declared and paid to the tax office through the VAT Return No. 2

 

 

Example of Transportation VAT Withholding Calculation

 

Let’s clarify the subject with a practical example:

For a transportation service from Adana to Istanbul:

• Transportation fee: 4,000 TRY

• VAT rate: 20%

•  

• Calculation:

•  

• Total VAT:
  4,000 × 20% = 800 TRY

• VAT to be withheld (2/10):
  800 × 20% = 160 TRY

• Remaining VAT payable to the carrier:
  800 − 160 = 640 TRY

• Total amount payable to the transportation company:
  4,000 + 640 = 4,640 TRY

As a result:

• 160 TRY is paid to the government by the buyer via VAT Return No. 2.

• 4,640 TRY is paid to the transportation service provider.

 

 

What Does a Withheld Transportation Invoice Look Like?

 

A transportation invoice issued with VAT withholding clearly shows:

• Service amount

• Total calculated VAT

• Withheld VAT amount

• Net amount payable to the seller

Accounting software systems automatically display and record these details on withheld invoices.

 

 

Who Is Obliged to Apply VAT Withholding?

 

Not every buyer is required to apply VAT withholding. The following entities are defined as liable buyers:

• Banks

• Professional organizations with public institution status

• Public institutions and organizations established by law

• Development and investment agencies

• Institutions transferred to the Turkish Wealth Fund and its sub-funds

• Provincial special administrations

• Revolving fund organizations

• Companies whose shares are traded on Borsa Istanbul

• Foundation universities

• Trade unions

• Insurance and reinsurance companies

• Mobile electronic communication operators

These buyers must apply VAT withholding when purchasing transportation services.

 

 

How to Add VAT Withholding to a Transportation Invoice

 

The process of issuing a withheld invoice is quite simple:

1. Create a sales invoice.

2. Enter the service details.

3. Select the option to add VAT withholding.

4. Choose the 2/10 withholding rate.

5. Save and issue the invoice.

With just a few steps, a withheld transportation invoice can be prepared.

 

 

Transportation Services Exempt from VAT Withholding

 

According to the communiqué issued by the Revenue Administration, VAT withholding is not applied in the following cases:

• Transactions below the specified threshold

• Transportation services not performed by road

• Cargo transportation services provided by licensed cargo companies

• Taxpayers subject to the simple taxation regime

• Tax-exempt tradesmen, artisans, and farmers

• Services provided to final consumers

⚠️ Additionally, if transportation services are artificially split to avoid VAT withholding, the Ministry of Finance may impose administrative penalties.

 

 

Key Points on VAT Withholding in Transportation Services

 

To summarize the essential information:

• Withholding rate: 2/10

• 2025 threshold: 9,900 TRY

• Payment method: VAT Return No. 2

• Parties cannot mutually agree to avoid VAT withholding.

• Artificially dividing transportation services to evade withholding is subject to penalties.