Is there VAT withholding on a software invoice in Türkiye?
Whether a software invoice carries VAT withholding (tevkifat) depends on who the buyer is. For software services, partial withholding, where the buyer pays part of the VAT straight to the tax office instead of to the supplier, applies to the buyer types named in the Communiqué: public bodies, banks and insurance companies, among others. An ordinary company that is not on that list does not withhold, and pays the supplier the full VAT.
Withholding means that part of the VAT is declared and paid by the buyer "in the capacity of a liable party" rather than by the seller. The rule comes from the VAT General Implementation Communiqué, and its legal basis is Article 9 of VAT Law No. 3065. The Communiqué has no separate withholding section for "software". Software work falls into one of the existing sections, depending on what it is. So two questions decide the outcome: who is the buyer, and what type of service is it?
According to the Communiqué, everything in its partial withholding sections is a "service"; a "delivery" of goods is caught only if it appears in a separate list. That is why it matters whether a software contract is a service or a licence sale: the invoice line decides the treatment. Writing the lines clearly in the contract and on the invoice reduces later disputes.
The rates and sections below follow the text of the Communiqué as published in 2026. It changes often, so check the current text and your accountant's view before you issue an invoice.
Withholding table by buyer and service type
The table summarises the situations that come up most often in software projects. "5/10" means the buyer pays half of the VAT to the tax office, and "9/10" means nine tenths.
| Buyer | Service | Withholding |
|---|---|---|
| Public body, bank, insurance company | Custom software development | May fall under "other services": 5/10 |
| Designated buyer such as a public body | Software analysis, consulting, planning | May fall under consulting: 9/10 |
| Designated buyer such as a public body | Operating-system software maintenance and updates | 7/10 in the Communiqué's example |
| Borsa Istanbul-listed company, foundation university | Custom software development | Not named under "other services"; check separately |
| Company that is not a designated buyer | Software development, maintenance, SaaS | No partial withholding |
| Turkish buyer, foreign seller | Software service bought from abroad | Buyer declares the whole VAT |
A note on the first row: the Communiqué's "other services" section covers, at 5/10, every service not specifically defined elsewhere. Custom software development is not named separately, so it is generally assessed under this section. The result can change with the contract's content, so confirm it with your accountant (mali müşavir).
Who withholds, and under what conditions?
Start with the buyer. The Communiqué lists "designated buyers" separately: general-budget bodies and other public institutions, revolving-fund organisations, state economic enterprises, banks, insurance and pension companies, foundation universities, companies whose shares are traded on Borsa Istanbul, development agencies and similar bodies. Some service sections cover only part of this list. For example, the "other services" section does not name listed companies or foundation universities.
Then check three rules.
- Amount threshold: If the VAT-inclusive value of the transaction does not exceed the invoice issuing limit set under Article 232 of the Tax Procedure Law, no withholding applies. The limit is reset each year; check the article in Law No. 213 and the current figure with your accountant.
- No splitting: You cannot avoid withholding by splitting the fee. Amounts for the same job are added together, and if the limit is exceeded, withholding applies to the whole amount.
- Status of the parties: Designated buyers do not withhold on services they provide to one another. Transactions exempt from VAT are not subject to withholding either.
A buyer that is not a VAT taxpayer does not withhold unless it is among the designated buyers.
Which part of a software project falls under which section?
A single project can contain several kinds of work. Listing them as separate lines is the easiest way to apply withholding correctly.
- Custom software development: It is not named specifically, so it can be assessed under "other services" (5/10).
- Analysis and consulting: The Communiqué sets 9/10 for technical consulting and planning-and-design services.
- Training: Training provided as a continuation of a delivery or service, with its fee set separately, is treated as consulting under the Communiqué. Whether you show user training as its own line can change the rate.
- Operating-system software maintenance and updates: In an example about a public automation project, the Communiqué says 7/10 of the VAT on this fee is withheld.
- Licences and SaaS subscriptions: Whether they count as a service or a delivery depends on how the contract is built. Get your accountant's view in writing for this line.
Transactions with and without withholding can appear on a single invoice. In that case the value, the VAT and the withheld amount of the withholding transaction must be shown separately.
What must the invoice and the VAT return show?
The seller shows each field listed in the Communiqué separately on the invoice. The buyer declares and pays the withheld VAT on VAT return No. 2 (2 No.lu KDV beyannamesi).
- The seller writes on the invoice: the transaction value, the calculated VAT, the withholding rate, the VAT to be withheld by the buyer, the total including withholding and the total excluding withholding.
- The amount owed after withholding is written on the invoice in figures and in words.
- The buyer files VAT return No. 2 for the period of the transaction and pays the withheld VAT. No deduction can be made on this return.
- The seller shows the VAT that remains with them on the normal return. A refund claim for VAT accumulated because of withholding is possible; the procedure is in the refund section of the Communiqué.
If you use e-invoice or e-archive, test the withholding fields with a trial entry in your integrator's system before the first real invoice.
What if I buy software services from abroad?
If you buy a service from a company that has no workplace or head office in Türkiye, and you use the service in Türkiye, the whole VAT is declared and paid by you as the liable party. The Communiqué says this applies to buyers who are not VAT taxpayers too, and gives as an example a computer software service provided from abroad to a public body that is not a VAT taxpayer. If the service also falls within partial withholding, this section takes precedence.
Example: a TRY 500,000 custom software project
For example, a software company develops custom software for a bank for TRY 500,000 (excluding VAT), and the job is assumed to be subject to 5/10 withholding under "other services". A VAT rate of 20% is assumed. All figures are hypothetical.
- Transaction value: TRY 500,000
- Calculated VAT (20%): TRY 100,000
- Withholding rate: 5/10
- VAT withheld by the buyer: TRY 50,000
- Total including withholding: TRY 600,000
- Amount the bank pays the software company: TRY 550,000
The bank pays TRY 50,000 to the tax office on VAT return No. 2. The software company shows the remaining TRY 50,000 of VAT on its own return. If a TRY 40,000 analysis and consulting part of the same project is invoiced as a separate line and qualifies as consulting, 9/10 of its TRY 8,000 VAT, that is TRY 7,200, is withheld, and the software company collects TRY 40,800 for that line. Separating the lines therefore changes the amounts.
Common mistakes
- Assuming every software invoice carries withholding. If the buyer is not a designated buyer, there is none.
- Looking only at the general buyer list and not at the list within the service section. The "other services" section does not name listed companies or foundation universities.
- Splitting the fee over several invoices to stay under the threshold. The tax office looks at the total.
- Writing licence, development, maintenance and training as one line. It becomes unclear which rate applies.
- Leaving withholding fields out of the invoice. The Communiqué requires six items to be shown separately.
- Using a previous year's rate or threshold. The Communiqué changes; read the current text before every contract.
How Hatson Tech helps
Hatson Tech does not give tax advice; your accountant makes the invoicing and withholding decision. We structure a software project so that the invoice lines are clear: analysis, development, maintenance and training appear as separate items in the proposal. The first meeting and discovery are free, we do not publish fixed prices, and we quote after discussing the scope. We approach your project with the method described on our custom software development page. To think through cost items together, see our guides on what an AI project costs and buying versus building AI.