Turkish VAT Refund Calculation: How VAT Borne Is Built from Direct Costs, Overheads and Fixed Assets

Ahmet Göktaş

4 days ago

10 min read

Short answer: In a Turkish VAT refund calculation, the refundable amount is set by the VAT borne (yüklenilen KDV): the VAT paid on purchases that go into a refund-eligible transaction, meaning the production, acquisition and delivery of the goods. The calculation has three components: VAT on direct costs, a share of overheads and a share of depreciable fixed assets (ATİK).

This article covers how VAT borne differs from deductible input VAT, how each component is calculated, the situations that complicate the calculation and a worked numerical example. The last section explains why the data stays scattered in companies running SAP and how that affects refund lead times.

What is VAT borne?

Turkey’s VAT General Implementation Communiqué limits the refund to the VAT that goes into refund-eligible transactions and cannot be offset through deduction. VAT borne arises from expenses directly or indirectly related to the production, acquisition, storage and delivery of the goods. Exports, deliveries with export registration, deliveries under an Inward Processing Authorisation Certificate (DİİB) and reduced-rate transactions are the main transactions for which this calculation is made.

Three rules frame the calculation:

Deduction first, refund second: VAT borne is first offset through deduction; the portion that cannot be offset within the period becomes refundable.
The purchase need not be in the same period: A raw material may have been bought and stocked in an earlier period. As long as it actually goes into the exported product, its VAT is included in VAT borne.
There is a ceiling: As a rule, the refund cannot exceed the amount found by applying the general VAT rate (currently 20%) to the value of the refund-eligible transaction. Claims above this ceiling are finalised on the basis of a tax inspection report.

The order of calculation is also fixed: VAT on expenses that go directly into the transaction comes first; if the ceiling has not been reached, a share is given from overheads and then from fixed assets.

How does VAT borne differ from deductible input VAT?

VAT borne is a subset of deductible input VAT (indirilecek KDV) and cannot exceed it. Deductible input VAT covers all purchases of the period; VAT borne shows the portion of those purchases that falls on the refund-eligible transaction.

Topic	Deductible input VAT	VAT borne
Scope	VAT on all goods and services bought in the period	VAT that goes into the refund-eligible transaction
Period link	The period in which the invoice is recorded	The purchase may come from earlier periods
Place in the filing	Deductions section of the VAT return	Refund claim and VAT borne list
Effect on the refund	Indirect; the refund is taken out of this total	Direct; it determines the refund amount
Related list	Deductible input VAT list	VAT borne list

In practice this distinction also works as a reconciliation check: every invoice on the VAT borne list must also appear on the deductible input VAT list and in the accounting records.

How is VAT on direct costs calculated?

Direct costs are the goods and services that form the input of the refund-eligible transaction. This component usually makes up the largest part of the calculation, and it is the only area where the refund ceiling can be exceeded.

Trading transactions

When goods are exported in the form they were bought, the calculation is relatively simple: the goods on the export invoice are matched with the related purchase invoice, and the VAT on the quantity sold is included. If only part of a purchase invoice was sold, only the VAT on that part is included; the remaining quantity is carried to later periods.

Manufacturing: bill of materials and actual consumption

In manufacturing companies, the exported product is made of several raw materials, semi-finished goods and services. How much of each input goes into the product is read from the bill of materials (BOM). When production involves scrap, substitute materials or off-recipe consumption, the standard recipe and actual consumption diverge. The refund calculation is based on the quantity that actually goes into the product, so the actual consumption in production records is used and compared against the standard recipe.

Inventory valuation method

When the same raw material is bought on different dates at different prices, a method determines which purchase invoice the consumed quantity comes from. The most common methods in practice are first in, first out (FIFO) and weighted average. The method chosen must match the company’s inventory records and be applied consistently from period to period; a change of method is among the first things questioned in an inspection.

Inventory carried over from earlier periods

VAT borne need not arise in the period of the refund-eligible transaction. The VAT on a raw material bought last year and held in stock is included in the period in which it goes into the product. This requires inventory movements to be tracked without gaps across periods and quantities already used in earlier refunds to be separated.

How is the overhead share allocated?

If VAT on direct costs has not reached the refund ceiling, a share from overheads can be given for the difference. Overheads are expenses related to the company’s production and administration, such as electricity, water, rent, transport, fuel, stationery, cleaning, accounting and advertising. VAT on expenses unrelated to the refund-eligible transaction is excluded.

The portion of overheads that falls on the refund-eligible transaction is set by an allocation key. The most common key in practice is the revenue ratio:

Overhead share = Overhead VAT of the period × (Value of refund-eligible transactions ÷ Total revenue)

In a company that only exports, the ratio is 1 and all of the period’s overhead VAT can be included. In a company that also sells domestically, only the share of overhead VAT that falls on exports is included. Whichever key is chosen, it must be used consistently across periods and the calculation must be explainable with supporting documents. The overhead share cannot be used to exceed the refund ceiling.

How is a share given from fixed assets?

VAT on depreciable fixed assets used in production, such as machinery, equipment and buildings, can also enter the refund calculation. The first condition is that the asset is actually used in the refund-eligible transaction. For assets the company manufactures or builds itself, the share is given from the period in which the asset starts to be used. Like the overhead share, the fixed asset share cannot exceed the refund ceiling.

The amendment made to the VAT General Implementation Communiqué by Serial No. 55 moved the fixed asset share to a cumulative, asset-by-asset structure:

Cumulative ratio: From the asset’s capitalisation date to the end of the refund period, the value of refund-eligible transactions in which the asset was used is divided by the value of all transactions in which it was used.
Maximum cumulative share: The asset’s VAT is multiplied by this ratio.
Share for the period: The amount already refunded from the same asset in earlier periods is deducted from the maximum cumulative share. If the result is negative, no share is given from this asset for the period.

This method requires a separate history for each asset: capitalisation date, VAT amount, the value of transactions in which the asset was used and the shares taken in earlier periods. We explain the method step by step with a worked example in fixed asset share calculation under Communiqué No. 55.

Situations that complicate the calculation

Even when the method is known, four situations commonly lengthen the calculation and raise the risk of error:

Purchases under DİİB: Purchases made without paying VAT under an Inward Processing Authorisation Certificate must be separated from VAT borne. When the same raw material is bought both under and outside the certificate, which one went into the product must be separated at inventory level.
Duplicate allocation: The same quantity of the same purchase invoice must not be included in two different periods or two different refund types. This is why tracking the used and remaining quantity per invoice is essential.
Partial exports and customs declarations in another period: The export invoice and the customs export declaration (GÇB) may fall into different periods, or one invoice may be closed by several declarations. Without matching, it is unclear which period gives rise to the refund right.
Later corrections: An invoice cancelled or corrected after the refund file is prepared changes the list and the refund amount. Which period’s file the correction affects must be tracked.

Each of these situations is among the main reasons refund files come back with a deficiency notice. We cover the most common errors and a pre-submission checklist in Turkish VAT refund errors in SAP.

Worked example: VAT borne for one export period

The figures below are illustrative and built to show the order of the calculation. A manufacturer makes TRY 1,000,000 of exports and TRY 250,000 of domestic sales in the period. Total revenue is TRY 1,250,000, and exports account for 80% of revenue.

Step 1: Refund ceiling. TRY 1,000,000 × 20% = TRY 200,000

Step 2: Components.

Component	Calculation	VAT borne	Running total
Raw materials (actually consumed)	TRY 600,000 × 20%	TRY 120,000	TRY 120,000
Packaging	TRY 50,000 × 20%	TRY 10,000	TRY 130,000
Subcontracted production	TRY 100,000 × 20%	TRY 20,000	TRY 150,000
Overhead share	TRY 40,000 overhead VAT × 80%	TRY 32,000	TRY 182,000
Fixed asset share (one machine)	TRY 200,000 VAT × 75% cumulative ratio = TRY 150,000; less TRY 140,000 taken in earlier periods	TRY 10,000	TRY 192,000

Step 3: Ceiling check. Direct costs and the overhead share total TRY 182,000; the remaining room under the ceiling is TRY 18,000, so the full TRY 10,000 fixed asset share is included. Total VAT borne is TRY 192,000.

Step 4: Refundable amount. The refund is the lower of VAT borne and the VAT that could not be offset through deduction in the period. If the company has TRY 220,000 of carried-forward VAT at period end, the refund claim is TRY 192,000; the remaining TRY 28,000 carries forward to the next period.

In this example the fixed asset share did not hit the ceiling. Had the overhead share been higher, the share available from fixed assets would have been limited to the room left under the ceiling.

How is the VAT borne list prepared?

The VAT borne list is one of the lists submitted to the Revenue Administration (GİB) through the Internet Tax Office together with the refund claim. It contains an invoice-by-invoice breakdown of the VAT borne by the refunded transaction and is prepared in the format published by GİB.

A well-prepared list has three qualities:

Components are visible separately: Direct costs, overhead share and fixed asset share appear on separate lines.
Every line links to a source: Each purchase invoice can be traced to the sales invoice or export transaction it was allocated to.
It is consistent with the other lists: Invoices on the list also appear on the deductible input VAT list and in the accounting records; totals equal the refund amount on the VAT return.

When the tax office or an inspector questions a line, these links are where the answer comes from. If the list lacks these qualities, requests for additional information extend the refund timeline.

What does this mean for companies running SAP?

All the data needed for VAT borne is in SAP, spread across different modules:

Data	Source in SAP
Purchase invoices and VAT amounts	FI
Inventory movements and valuation	MM
Bill of materials and actual consumption	PP
Fixed assets and capitalisation dates	Asset Accounting
Export invoices and customs declaration data	SD and foreign trade processes

Extracting this data with reports every period and combining it in Excel is the longest step of refund preparation. A calculation built in Excel makes it hard to trace back to the source document and forces cross-period checks such as duplicate allocation to be repeated by hand every period. The cumulative fixed asset calculation introduced by Serial No. 55 adds to this load, because it requires a multi-period history for each asset.

Finpro İade KDV runs the VAT borne calculation inside SAP in a single cockpit. Bill of materials and actual consumption data, customs declaration matching, DİİB separation, overhead and fixed asset shares and duplicate checks run in the same flow, and the GİB refund lists are prepared with every line linked to its source document.

Frequently asked questions

Can VAT borne exceed deductible input VAT?

Not in total: every invoice that makes up VAT borne must have been recorded as deductible input VAT in some period. Within a single period, however, VAT borne can exceed that period’s deductible input VAT because of inputs bought and stocked in earlier periods. In that case the refund amount is assessed together with carried-forward VAT.

Which allocation key should be used for the overhead share?

The most common key in practice is the ratio of refund-eligible transaction value to total revenue. Whichever key is chosen, it must have a demonstrable link to the transaction, stay the same across periods and be explainable with supporting documents.

If the bill of materials and actual consumption differ, which one applies?

The quantity that actually goes into the product applies. The bill of materials is the starting point; if there is scrap, substitute material or off-recipe consumption, it is corrected with the actual consumption in production records.

Is all of the calculated VAT borne refunded?

Not always. The refund is subject to two limits: the ceiling found by applying the general VAT rate to the transaction value, and the VAT that could not be offset through deduction in the period. Claims above the ceiling require a tax inspection report; any part above the VAT that could not be offset is not refundable.

How does VAT on inventory from earlier periods enter the calculation?

The VAT on an input held in stock is included in the period in which it goes into the product and the product becomes the subject of a refund-eligible transaction. This requires inventory movements to be tracked without gaps across periods and quantities already used in earlier refunds to be separated.

Conclusion

The VAT borne calculation adds up three components in a set order: direct costs, overhead share and fixed asset share. The method rests on a few clear rules; the real effort lies in each component’s data sitting in a different place and in cross-period checks being rebuilt every time. Teams that build the calculation linked to source documents complete refund files faster and are better prepared for inspection questions.

To review your VAT borne calculation in SAP with us, contact us through the Finpro İade KDV page.