Invoicing no-shows and cancellation fees: service, compensation or deposit kept?

Turkish tax law does not explicitly define the character of no-show fees for hotels. The answer turns on what the money is: payment for a service, compensation for a broken contract, or a deposit held against a future stay. VAT and accommodation tax follow the service; compensation carries neither. Your policy wording and the documents you issue decide which reading applies, so confirm your own case with an accountant or legal adviser.

A guest never arrives. The card on file is charged one night, the reservation closes, the room goes back to inventory, and the front office moves on. Then the accountant asks which document to issue for the no-show fee, and the honest answer is that the law does not say clearly. This article lays out the texts that govern the no-show fee invoice question in Türkiye, the three readings accountants argue over, and the practical steps that make your position defensible. After reading, you will be able to classify each charge before the accountant asks.

No-show, late cancellation, non-refundable rate: what is the difference?#

The three look identical on the ledger and differ in what the guest actually bought. A no-show is a reservation the guest did not use; a late cancellation is a reservation ended outside the free window; a non-refundable rate is a price the guest accepted in exchange for giving up the refund.

A no-show means the hotel held the room for the night and the guest did not come. The service was made available but not used, which makes this the hardest of the three to classify. A late cancellation means the guest ended the contract after the deadline the policy set, so the charge is the consequence the guest accepted when booking. A non-refundable rate means the guest bought a cheaper reservation on condition that it cannot be cancelled, so the money sits closest to an ordinary room price: the discount was the consideration for the waiver.

Keep the three apart in the reservation system. If they all close under one code, the accountant cannot tell which argument applies and will treat them all the same way. The label on the folio is not the tax answer, but it is the first thing an inspector or an adviser reads.

This article starts after the operational decision. Whether to charge, release the room or reinstate the booking is a separate question, covered in when to charge, release or reinstate a no-show.

Why does the answer depend on what the money is?#

Because both taxes attach to a service, not to a bank transfer. Money paid for a service is price, money paid for a broken promise is compensation, and money held against a future service is a deposit.

Price is the consideration for a supply. VAT follows it, and for accommodation the accommodation tax follows it too. Compensation (tazminat) restores a loss caused by a breach; there is no supply behind it, so neither VAT nor accommodation tax arises on the supply itself. A deposit (kapora, advance) is money held before the service. It becomes price when the service is performed and is returned when it is not, unless the contract converts it.

The contract label helps but does not decide. What the parties agreed the money is for decides, and a clause that calls a charge a deposit while the practice treats it as a fee gives two answers. A charge fixed in advance, applied to every guest and equal to the room rate reads like a price. A charge that follows the hotel's actual loss reads like compensation. One hotel can have all three on the same night: a non-refundable booking, a no-show and a group cancellation.

Does a no-show fee carry VAT?#

There is no settled answer for hotels. Article 10 of the VAT Law (Law No. 3065) puts the taxable event at performance of the service, per the consolidated text on mevzuat.gov.tr (opens in a new tab), so a charge for a service nobody received does not obviously fit, and the argument turns on whether the charge is compensation or a price.

One reading treats the charge as compensation: no service was performed, so the payment sits outside VAT, the argument being that a payment for a contract the guest walked away from has no delivery or service behind it. A second reading treats it as price: the hotel made the room available for the whole night and could not resell it, so a reservation service was supplied and the charge is what the guest pays for it. A third reading treats money taken at booking as an advance, which becomes price or compensation depending on what the contract says happens when the guest does not arrive.

The non-refundable rate sits closest to the price reading. The guest chose a cheaper, non-cancellable reservation, and the money is the price of that reservation rather than damages for breaking it. What moves a case between the readings: whether the charge is a fixed amount or follows the hotel's actual loss, whether the room was resold, and whether the policy describes the charge as a fee for the reservation or as compensation.

Article 10 also matters in the other direction. If you issue an invoice before the service, VAT arises when the document is issued, limited to the amount shown on it, so the document itself can create the liability. This is the quiet trap in the no-show fee invoice VAT question in Türkiye: the desk decides the tax outcome as often as the law does.

Does accommodation tax arise when nobody stayed?#

Not on the text. Under Article 34 of Law No. 6802 the taxable event is the provision of the service, and the Accommodation Tax General Communiqué says explicitly that when the price is collected does not affect it, per the Revenue Administration's communiqué in the Resmî Gazete (opens in a new tab) (14 December 2022, No. 32043).

The communiqué rules out three things as triggers: collecting the price before the service, collecting it after, and not collecting it at all. It also says that issuing an invoice or a similar document before the service does not trigger the tax, which separates accommodation tax from the VAT rule on early documents. The contrast that proves the point: free stays given to the operator, relatives or staff, and stays given as promotions or gifts, do trigger the tax, while staff sleeping in quarters reserved for their own use do not. The law taxes the service, not the payment.

For a stay spanning more than one monthly period, the tax falls in the period of the check-out day if that date was known before the service; otherwise it is deemed to occur on the last day of each period for the days served in it. For agency sales, no tax arises when the room is sold to or by the agency; it arises when the service is provided to the guest. That matters when an agency cancels a block before any guest arrives. If the reservation was never checked in and the room was resold, the service was not provided to the first guest, and the accommodation tax has nothing to attach to.

How the tax appears on documents guests actually receive is covered in accommodation tax lines on hotel invoices.

What happens if you issue an invoice anyway?#

You owe the VAT you show. Article 8(2) of the VAT Law makes anyone who shows VAT on a document pay it, even where there is no taxable transaction or no right to show VAT on that document, per the consolidated VAT Law text (opens in a new tab).

The rule is deliberate. An invoice is a document the buyer relies on, so the person who issued it carries the tax rather than the person who read it. There is a refund route: VAT calculated wrongly or in excess and paid to the Treasury can be returned under the Ministry's procedures, provided the returns for the transaction are corrected and the seller gives the excess back to the buyer. That is a process with steps, not an automatic correction.

The buyer's side matters too. A company guest that deducts VAT on what is in substance a compensation payment may have to reverse the deduction, which turns one unclear document into two problems; see how the company guest books the accommodation tax it is charged. The same logic applies to the accommodation tax line: a tax shown on a document is a tax declared and paid, whatever the underlying event was.

Practical rule: do not issue a VAT invoice for money you are treating as compensation. If the guest needs a document for its own books, ask the accountant which document, before you issue it. Issuing a document to be safe is the opposite of safe. It converts an uncertain position into a certain liability.

How should the cancellation policy be worded?#

Write the character of the money into the policy, not only its amount. A clause that says what the charge is for gives your accountant, and if it comes to it the tax office, something to read.

Name the charge consistently: reservation fee, cancellation fee, compensation for the unoccupied room, or non-refundable rate. Pick one term per case and use it everywhere. Say what the charge is calculated on: a fixed number of nights, a percentage of the reservation, or the hotel's actual loss. A charge that tracks the loss supports the compensation reading. Say what happens to money already paid: converted into a fee, held as credit for a future stay, or refunded, because the three outcomes have different tax consequences.

Keep the booking flow, the confirmation email and the signed contract saying the same thing. A policy that calls the same charge a deposit in one place and a fee in another gives the reader two answers and invites the worse one. Check that the front office applies the clause as written: a policy that promises a refund but a practice that keeps the money is a documentation problem before it is a tax problem. The broader drafting discipline is covered in writing clear and consistent cancellation terms.

When should you ask the tax office for a ruling?#

When the amount at stake, or the repetition, makes the uncertainty more expensive than the answer. A ruling (özelge) addresses your facts and gives you a position you can point to.

Triggers worth watching: a visible share of revenue from no-shows and late cancellations, group and agency contracts with large cancellation clauses, non-refundable rates sold at volume, or a past assessment on the same question. Send the facts, not a theory: the reservation contract and cancellation policy, one sample reservation with its dates, what the charge was calculated on, which documents you issued, and which returns you filed. Ask about one scenario at a time, because a question that mixes a no-show, a late cancellation and a non-refundable rate will get an answer that fits none of them.

A ruling takes time. Until it arrives, choose a treatment, apply it to every charge of that kind, and write down the reasoning next to the policy clause. Consistency is the practical defence: the same kind of charge treated the same way every month is a position; the same charge treated three ways is an error. This article describes the texts and the arguments. Your own case, including rates and amounts, belongs with your accountant or tax adviser.

What to do next#

Choose one treatment for each of the three cases, write it beside the policy clause it comes from, and apply it to every charge of that kind until a ruling or your adviser changes it. The texts settle the easy part, which is that both taxes follow the service; everything after that is a question about what your money is, and that question is answered by your contract and your documents before it is answered by the tax office.