Reduced-rate VAT refunds for hotels: when a balance arises and how it is tracked

A hotel's overnight stay is taxed at the reduced 10% rate while many purchases carry 20%, so the VAT a hotel pays can exceed the VAT it charges. Under Article 29(2) of the VAT Law that excess normally carries forward; for reduced-rate supplies it can be refunded once the year's cumulative balance passes that year's limit. This is the reduced-rate VAT refund route for hotels in Türkiye.

A hotel can finish a strong season having charged VAT at 10% on every room night and paid 20% on much of what it bought. The difference sits on the return as carried-forward VAT, month after month, and the owner's question is always the same: is any of this money coming back? After reading this article you will know why the balance exists, what Article 29(2) allows, how the annual calculation and the limit work, and what your accountant needs in the file before anyone plans around a refund.

Why does a hotel carry VAT forward month after month?#

Because the room night is taxed at a reduced rate while many of the hotel's purchases are not, so the VAT paid on purchases can be larger than the VAT charged on sales. The overnight stay service (geceleme hizmeti) in hotels, motels, pensions, holiday villages and similar accommodation facilities is item 25 of list (II) of the Council of Ministers Decision 2007/13033 (Resmî Gazete 30 December 2007, No. 26742), and Article 1(1)(c) of that decision taxes list (II) at 10%. The current 10% figure, and the general rate of 20%, were set by Presidential Decision No. 7346 of 6 July 2023, in force from 10 July 2023, according to the Gelir İdaresi Başkanlığı's current VAT rates document (opens in a new tab) (2026).

Output VAT is therefore 10% of room revenue, while purchases that fall outside list (II) carry the general rate. The ratio of VAT paid to VAT charged is structurally higher than in a business selling at the general rate. For more detail on which rate applies to rooms, meals, all-inclusive and drinks, see VAT on hotel stays in Türkiye.

Seasonality moves the balance. Maintenance, pre-season stock and renovation land in quiet months, revenue lands in peak months, so the monthly figure swings even when the year is steady. The mechanism on the return is simple: VAT that cannot be deducted in a period is carried forward to later periods. It is not lost, and it is not cash.

Item 25 also covers the commission that a travel agency licensed by the Ministry of Culture and Tourism under Law No. 1618 passes on to the customer on the overnight-stay amount, so agency business does not change the rate on the room. A hotel cannot decide to draw down the carried-forward figure at will. The only route is the reduced-rate calculation described below, not a request to the administration.

What does Article 29 say, in plain words?#

VAT you cannot deduct is carried forward, not refunded; the single exception is supplies whose rate the President reduced, and there the part above a set limit can be refunded. Article 29(2) of VAT Law No. 3065 states the default: VAT that cannot be deducted in a period is carried forward to later periods and is not refunded.

The exception covers supplies whose rate the President reduced under Article 28. The overnight stay at 10% is such a supply, which is why a hotel has a route at all. For those supplies, the VAT that could not be deducted and exceeds a limit set by the President is refunded by offset against the taxpayer's tax and social security premium debts and certain other public debts.

Offset means the state cancels what it owes you against what you owe it. It is not a bank transfer, and it does not arrive on a date you choose. Whatever is not refunded by offset during the year is refunded in cash or by offset in the following year, provided it is claimed in that year. The claim is an act with a deadline, not an automatic step.

The procedure sits in Section III/B-3 of the VAT General Implementation Communiqué, which sets the calculation, the timing and the limit; the law article alone does not tell you how to file. The consolidated text on mevzuat.gov.tr (opens in a new tab) is the reference your accountant should work from (2026).

Which year is calculated, and what is the limit?#

The calculation runs month by month and cumulatively from January, the following year's claim is calculated for the whole year as at the end of December, and only the current year's limit is used. The VAT charged on the reduced-rate supplies is subtracted from the VAT borne on them, and the result is compared with the VAT carried forward on the return.

During the year, refunds are made by offset. The remaining amount is declared in any return for January to November of the following year, and the refund application is filed by the end of that year. Miss that window and the amount is not refunded; it stays in carried-forward VAT.

The limit is 130,700 TL for 2025 and 164,000 TL for 2026. The 2026 figure was added by the amendment in Resmî Gazete 31 December 2025, No. 33124 (5th repeat), in force 1 January 2026. Only the current year's limit is used: past years' limits stay in the carried-forward VAT, and the part below the limit is never refunded. The limit is re-set each year, so take the figure from the current communiqué, not from an article, including this one.

What do a renovation year and fixed assets do to the result?#

They change the size and the timing of the input VAT, not the rule: the calculation still runs on the VAT borne on the reduced-rate supplies, so attribution decides the answer. A renovation concentrates input VAT into a few months, so the cumulative figure jumps early in the year; the annual calculation as at December is what counts, not the peak month.

The base is the VAT borne on the reduced-rate supplies, not the whole carried-forward figure printed on the return. Someone has to decide which purchases belong to those supplies, and that decision must be written down. Investment spending, meaning assets a hotel buys and uses over several years, needs its own treatment under the communiqué. Do not fold it into the running-cost calculation without checking the current text with your adviser.

A large investment does not scale the limit. The limit is a fixed figure for the year, so a bigger project does not produce a proportionally bigger refund. A slow season lowers output VAT, which lifts the carried-forward balance, but it also lowers the VAT borne on reduced-rate supplies in the same months. The two move together, so a weak year is not automatically a refund year.

Keep the attribution method consistent from year to year. An undocumented split is the first thing a review will question.

A worked year with invented figures#

The arithmetic is short: subtract the VAT charged on reduced-rate supplies from the VAT borne on them, compare the result with the carried-forward VAT, then compare that with the year's limit. Every figure in this section is invented for illustration. It is not a benchmark, a typical result or a promise of any amount.

Step one: build the cumulative difference for the year. Step two: take the smaller of that difference and the VAT carried forward on the December return. Step three: subtract the year's limit from that smaller figure.

In the example the carried-forward VAT on the December return is 310,000 TL and the cumulative difference is 200,000 TL, so the ceiling is 200,000 TL. Against the 2026 limit of 164,000 TL, the amount that can be claimed is 36,000 TL. Because that figure is under 50,000 TL, the example falls into the tier paid without a tax inspection report, a guarantee or a YMM report.

What the example hides: which purchases were attributed to the reduced-rate supplies, whether any investment spending was included, and whether the offset covered the whole amount or part of it. Change one assumption, such as a renovation in the first quarter, and the monthly path changes while the method stays the same.

What must the hotel keep ready for the claim?#

The month-by-month calculation, the returns that show the carried-forward VAT, and the documents behind every figure that enters the calculation. The paperwork tier matters: cash or offset claims in the following year of up to 50,000 TL are paid without a tax inspection report, a guarantee or a YMM report; above that, expect one of them.

Confirm with your certified public accountant which of these your own file needs. The communiqué sets the procedure and it is amended. If your monthly records are not yet strong enough to support this, start from a monthly income and expense sheet a small hotel actually keeps.

What does this mean for cash planning, and what does it not mean?#

It means a real but slow and capped recovery of VAT the hotel has already paid; it does not mean the carried-forward balance turns into cash on a schedule you can rely on. It is not a subsidy or an incentive. It is the hotel's own input VAT coming back, minus everything below the year's limit. The limit is a floor, not a target: small balances never become cash and simply stay in carried-forward VAT.

The calendar is set by the communiqué: offset during the year, then the following year's declaration window and an application by the end of that year. Do not book a refund as income in next year's budget. Treat it as a cash item with a date range, and keep it out of the operating plan until it is offset or paid. When you build next year's budget month by month, leave this line as cash, not as revenue.

The reason the balance exists is the gap between the 10% on the room and the general rate on purchases. A pricing decision does not close that gap. Run the calculation inside the monthly finance routine, so the December figure is assembled from twelve known months rather than rebuilt in a hurry at year end.

What to do next#

Build the cumulative January-to-December table for the current year with your accountant, put the current communiqué's limit beside it, and check whether the figure clears it before anyone plans around a refund. The parts fit in that order: the rate gap creates the balance, Article 29(2) decides whether it can move, the annual calculation and the limit decide how much, and the documents decide whether the claim survives a review.