Extension of VAT Exemption for Inward Processing and Temporary Admission Regimes under Turkish Customs Law (Law No. 7573)

Executive Summary

Law No. 7573, published in the Official Gazette dated 29 January 2026 (No. 33152), extends the application period of VAT exemption under Provisional Article 17 of the Turkish VAT Law (No. 3065) until 31 December 2030.

This amendment ensures that goods supplied for use in export-oriented production under inward processing and temporary admission regimes will continue to benefit from VAT exemption, preserving one of the most critical cost advantages within Türkiye’s export ecosystem.

Scope of the Amendment – Extension of Legal Validity

The amendment introduced by Article 5 of Law No. 7573 updates the validity period of the VAT exemption mechanism as follows:

• Previous deadline: 31 December 2025
• New deadline: 31 December 2030

The exemption continues to apply to goods delivered for use in the production of export goods under customs procedures such as inward processing and temporary admission.

This continuity is particularly important for long-term production planning, as it removes uncertainty around indirect tax exposure and allows companies to structure supply agreements and investment decisions with greater confidence.

Practical Impact – Cost Structure and Cash Flow Advantages

From an operational perspective, the extension of VAT exemption directly affects cost structures and financial planning.

Companies benefit from:

• Elimination of VAT on qualifying domestic purchases used in export production
• Reduced need for VAT financing and refund processes
• Improved working capital efficiency
• Greater predictability in pricing export contracts

For foreign companies supplying goods into Türkiye for processing and re-export, this creates a stable and predictable environment where indirect tax costs do not distort supply chain decisions.

Compliance Considerations – Conditional Nature of the Exemption

Despite its advantages, the VAT exemption remains strictly conditional upon compliance with customs regime requirements.

Key compliance points include:

• Fulfilment of export commitments within the prescribed period
• Proper use of imported or domestically supplied inputs under the relevant regime
• Accurate documentation and tracking of production and export processes

Failure to meet these conditions results in retroactive VAT assessment, including penalties and interest, effectively reversing the financial benefit of the exemption.

For this reason, companies must treat VAT exemption not as an automatic benefit but as a compliance-driven mechanism closely linked to customs obligations.

Risk Areas – Where Companies Typically Face Exposure

In practice, the main risk areas are not related to eligibility but to execution.

Common issues include:

• Delays in closing inward processing files
• Misalignment between declared and actual use of inputs
• Incomplete documentation of export commitments
• Failure to monitor authorization validity periods

These risks can accumulate over time and lead to significant retroactive tax exposure if not managed proactively.

For a broader understanding of how such compliance gaps can create cumulative financial and regulatory risk, see True compliance in customs.

Strategic Actions – How to Benefit from the Extension

From a professional customs advisory perspective, companies should take a structured approach to fully benefit from the extended VAT exemption period.

Recommended actions include:

• Reviewing existing inward processing and temporary admission authorisations
• Aligning supply chain structures with long-term exemption availability
• Strengthening internal tracking of input usage and export commitments
• Implementing regular compliance checks before authorization expiry

Foreign companies operating through Turkish entities or partners should also ensure that contractual structures reflect the continued availability of VAT exemption and clearly allocate compliance responsibilities.

Professional Assessment – Long-Term Stability with Execution Risk

From a senior customs consultancy standpoint, Law No. 7573 provides significant regulatory stability by extending a key incentive mechanism until 2030.

However, this stability does not eliminate risk; it shifts the focus from regulatory uncertainty to execution discipline.

The companies that will benefit most from this extension are those that:

• Integrate customs and tax compliance into their operational processes
• Monitor regime obligations continuously
• Treat VAT exemption as a managed compliance tool rather than a passive advantage

Conclusion – VAT Exemption Remains a Strategic Advantage

The extension of VAT exemption under Law No. 7573 reinforces Türkiye’s attractiveness as a production and export hub by ensuring that indirect tax costs do not undermine export competitiveness.

At the same time, the conditional nature of the exemption means that companies must maintain strict compliance with customs regimes to preserve this advantage.

Official Gazette Reference

The official legal text is only available in Turkish; however, the key regulatory framework and practical implications are fully explained above.

Related Legislation Document