e-Invoice Withholding Codes and VAT Withholding Calculation Guide

What is VAT Withholding and its purpose of application

Value Added Tax (VAT) Withholding; It is a system where the tax calculated on the invoice is deducted by the buyer at the rates determined by the Revenue Administration (GİB), instead of being paid to the state by the seller, and declared and paid directly to the tax office with VAT Declaration No. 2. The main purpose of this application is to ensure tax security and prevent tax loss/evasion.

Designated recipients (public institutions, listed companies, banks, etc.) and VAT liable businesses; It is obliged to issue or accept invoices with withholding for the purchase of goods and services specified by law. It is a legal obligation for invoices with withholding to include the special 3-digit withholding code determined by the Revenue Administration depending on the transaction type.

Most frequently used Revenue Administration withholding codes and rates table

The following table lists the most frequently encountered Revenue Administration Withholding Codes, withholding rates and application areas in commercial life:

Withholding invoice calculation logic and formula

In the invoice with withholding tax, the grand total is calculated with the following steps (Example: 10,000 TL Base Cleaning Service - Code: 608, Rate: 7/10, VAT: 20%):

1st Base (VAT Excluded): 10,000 TL

2. General VAT Amount (20%): 10,000 x 0.20 = 2,000 TL

3. Withheld VAT: 2,000 x (7 / 10) = 1,400 TL (This amount is paid directly to the tax office by the buyer with VAT No. 2)

4. VAT to be collected: 2,000 x (3 / 10) = 600 TL (VAT share to be paid to the seller)

5. Total Invoice to be Paid: 10,000 + 600 = 10,600 TL

As a result of this calculation, 10,600 TL is credited to the seller's current account, while the remaining 1,400 TL is transferred to the tax office.

Rules for issuing invoices with withholding in the ERP system

When the invoice type is selected as 'DRAWBACK' in the BYM Cloud ERP system, the system activates the withholding codes on a line basis. As soon as the relevant Revenue Administration code (Ex: 608) is selected, the system automatically calculates the VAT amount, withheld share and the net amount to be collected.

While the invoice is transferred to the electronic environment, '<cbc:CalculationRate>' and 'GIB-coded '<cbc:TaxTypeCode>' tags are produced without any errors under the '<cac:TaxSubtotal>' node in the XML structure in accordance with the UBL-TR standard. Thus, the invoice sent to the Revenue Administration via the integrator is approved instantly.

Withholding lower limit and matters to be considered

In accordance with the Value Added Tax General Application Communiqué, withholding is not applied to purchases of goods and services whose total amount, including VAT, does not exceed the determined lower limit (limit updated with annual notifications). In addition, if transactions subject to withholding and transactions without withholding are included in the same invoice, correct VAT distinction must be made on a line-by-line basis.

Since tax penalties may arise for both parties if the wrong withholding code is selected or an invoice that requires withholding is issued without withholding, the company's financial advisor should be consulted in doubtful cases.