Rejection or Delay of a VAT Refund: Application, Offsetting, Interest and Lawsuit

The path to follow when a VAT refund is rejected or is left unresolved for a long time is determined by the legal basis of the refund and the nature of the act taken by the administration. Export, reduced-rate and withholding refunds are not subject to the same documents and time-limit regime. First, the period in which the right to a refund arose, whether the request was made on time and in the proper form, the date on which deficiencies were completed, and whether there is an express or implied rejection must be established.

This article focuses on collecting a VAT refund receivable that has arisen by law. Recovering tax that was paid twice by mistake or collected because of an unlawful assessment may rest on a different legal basis. This distinction matters in particular for when interest starts and for whether the correction and complaint route is available.

Which transactions give rise to a VAT refund right?

In the VAT system, the tax borne on purchases is, as a rule, deducted from the calculated tax. A carried-forward VAT balance does not by itself give rise to a right to a cash refund. A refund is limited to the transactions and conditions that the law permits. Articles 29/2 and 32 of Law No. 3065 and the withholding rules create different grounds for a refund.

Transactions within exports and full exemptions

VAT that has been borne because of export deliveries and the fully exempt transactions specified in the law, and that cannot be eliminated through deduction, may be the subject of a refund. That the exemption has occurred, the connection of the borne tax with the transaction, and the amount that cannot be eliminated through deduction must be shown together. That an invoice has been issued is not by itself proof that the export has actually taken place or that all of the borne tax can be taken into the refund calculation.

Consistency is sought among the export invoice, the customs exit data, the list of borne VAT, the deduction list and the calculation table. In the export of services, the same documents as for the export of goods cannot be requested; the nature of the service, the customer abroad and the conditions for benefiting from the service are examined under that exemption’s own provision.

Reduced-rate and withholding refunds

In transactions at a reduced rate, the refund calculation is built on the limit for the relevant year, the transaction periods and the separation of the borne tax. In withholding (tevkifat) refunds, the buyer’s withholding, the declaration and payment status, and the records of the seller requesting the refund are assessed together. Because of periodic changes in this area, an old list of documents should not be applied to every new request.

Using a single monetary threshold or list of documents without correctly determining the type of refund is a mistake. Cash and offset refunds, the sworn-in certified public accountant (YMM) report, the tax inspection report and security options must be checked separately in the relevant section of the VAT General Implementation Communiqué.

How is a refund request prepared and which time limits are followed?

Showing a refund amount in the return, submitting a standard refund request petition and submitting the required lists are different acts. Having an electronic list uploaded as a draft is also not the same as submitting it after approval. The application receipt, the time of submission and the completed attachments should be kept. The refund account in the accounting records is distinct from the legal request addressed to the administration.

For refunds under Article 32 of Law No. 3065, the requirement to request by the end of the second calendar year following the period in which the transaction occurred is important. For reduced-rate refunds, Article 29/2 and the following-year arrangement in the Communiqué apply. Which return the declaration is to be made in and when the petition and documents will be completed are not the same question. That a missing document can be submitted later does not mean that a request not made in time at all will in every case be saved.

For example, in a request concerning a fully exempt transaction in 2024, the second calendar year is 2026. This example only shows the time-limit logic in Article 32; it does not remove the other conditions specific to the type of refund. The same example calendar cannot be used directly for a reduced-rate transaction.

How is a deficiency letter distinguished from a final rejection?

A deficiency letter is often a preparatory act that asks for completion of the application. However, it is the consequence the letter produces, not its name, that is decisive. While information is requested in one part, the refund right may have been definitively rejected in another. A request being suspended for an indefinite period is also assessed by its concrete effects.

It is useful to answer each deficiency item separately, to match the submitted document with the earlier delivery date, and to give reasons for the requests that are contested. The administration has the power to examine records connected with the refund right. By contrast, constantly repeated requests for a document that has already been provided, additional conditions whose legal basis is not explained, or imposing unrelated third-party problems on the applicant may be subject to judicial review.

The taxpayer’s strong defense should not consist only of the sentence “all documents were provided.” It should be shown which document answers which request. The administration’s likely defense will be that the calculation of the borne tax could not be verified, that the genuineness of a transaction in the supply chain was not explained, or that the documents were not completed. The application file must resolve these concrete disputes.

Does an offset refund request close the tax debt automatically?

Submitting an offset petition does not mean in every case that the debt ended on that day. The debt for which offsetting is permitted, the date the application was completed, the security or report requirement and the special arrangement in the Communiqué are decisive. The difference between the date on which the offset request was submitted and the date on which it was entered in the accounts may give rise to a late-payment surcharge dispute.

The request must clearly show which part of which debt it is directed at. If part of the refund request is found appropriate, it may be requested that the offsetting of the uncontested part be concluded separately. If the administration is holding up the whole request, the reason should be asked for in writing. At the same time, statements that create the impression that the balance receivable and the right to interest are being waived when a partial payment or offset is accepted should be avoided.

If a payment order has been issued while the offset is awaited, that act is handled on its own and within its own time limit. The 15-day period provided for the action against a payment order in Article 58 of Law No. 6183 should not be allowed to run while waiting for the refund application to be concluded. That there is a connection between the refund dispute and the collection act does not make the two acts the same.

How are the security and report options assessed?

Under Article 36 of the VAT Law as amended by Law No. 7524, as of September 1, 2024, the fulfillment of refund requests according to the result of a tax inspection report is, in principle, provided for. The same provision gives the Ministry of Treasury and Finance the authority to determine different refund methods according to tax compliance and other statutory criteria. Decisions from earlier periods should therefore not be carried directly to current acts; it should be checked whether the method without inspection, with a YMM report, or with security is actually provided for the relevant request in the Communiqué.

If the type of refund allows it, the option of payment against security or refund with a YMM certification report may be used. These are not methods that remove inspection in every case. The type, amount, release condition and cost of the security, and the scope and delivery time of the YMM report, must be calculated together.

The administration’s act of referring the matter to inspection should not be presented as a rejection decision that has not yet been given. On the other hand, the ground of inspection does not by itself justify holding a completed application indefinitely. The time limits relating to tax inspection and the interest conditions under VUK 112/5 are separate regulations. The expiry of a period does not automatically fix the refund amount.

From which date does interest start on a delayed VAT refund?

VUK 112/5 contains a special interest regime for taxes that are to be refunded under tax laws. If the refund is not made within three months following the date on which the information and documents the taxpayer must complete have been completed, the deferral interest (tecil faizi) rate of the relevant period is applied from the end of the three-month period until the final date specified in the law. The final date in the text of the law is the notification of the correction slip to the taxpayer. Later payment and the implementation of a court decision must be assessed separately.

This calculation should not be confused with the start rules in VUK 112/4 for taxes collected in excess or without cause. It should be stated clearly that interest is requested in the refund request and which start date applies to which amount. If there are multiple periods or partial payments, a table by period and payment is prepared instead of a calculation on a single total.

The Council of State’s distinction between interest and interest on interest

In the decision of the 9th Chamber of the Council of State (Danıştay) dated November 19, 2024, E.2023/4546, K.2024/6404, the part concerning the deferral interest calculated by periods for the delay in export VAT refunds was upheld. By contrast, the decision was reversed insofar as statutory interest was also run on that interest amount. The decision shows that default interest on the principal of the refund and a request for interest on the calculated interest are different requests. It cannot be concluded that the same start date applies in every refund file.

How is an action filed in case of rejection or non-response?

The competent judicial authority for a final rejection act concerning a VAT refund is the tax court. Where there is no special provision, the general filing period is 30 days. The day of notification is not counted; the day on which electronic notification takes legal effect is determined separately. If there is a partial rejection, the subject of the action should be made clear as the rejected period and amount.

If the administration does not respond, the nature of the application under İYUK 10 is examined. Under the general rule, 30 days without a response results in an implied rejection. In the case of a non-final reply, the option of waiting and the four-month upper limit are also taken into account separately. The three-month period required for interest does not replace the calculation of the implied rejection that starts the filing period. It cannot be assumed that the filing period also waits indefinitely because the refund examination is ongoing.

An administrative application that meets the conditions under İYUK 11 is not the same as a letter merely asking for information or asking about the status of the file. The effect of stopping the period is determined according to the content of the application and the special regulations. A rejection act whose time limit has expired cannot, as a rule, be made open to a new action again by making repeated applications with the same content.

In the petition, alongside annulment of the act, the claim for payment of the refund receivable and of the interest, with its basis explained, should be made concrete. Filing an action against the refund rejection does not by itself oblige the administration to make a payment. The request for stay of execution is also reasoned on the basis of manifest unlawfulness and damage that is difficult to remedy; the actual effect of the decision depends on the structure of the act that is the subject of the action.

Which documents should the case file contain?

The refund file can be prepared in four sections: commercial documents showing the arising of the right; the borne-tax and deduction calculation; the application and deficiency correspondence; and the rejection, payment and interest records. Matters such as the difference between customs data and the invoice, duplicate borne tax, exchange rate differences and period shifts should be explained before the action.

As an example, if only the part of the refund relating to one supplier is in dispute, the other purchases and the uncontested calculation need to be separated. An objection to the administration’s rejection of the whole refund should be built not merely on the claim that the total amount is correct, but by showing which part is not affected and why. This is a hypothetical example; it does not promise an outcome in any particular file.

Can inclusion among taxpayers subject to inspection be the subject of a separate action?

The decision of the Plenary of the Tax Chambers of the Council of State (Vergi Dava Daireleri Kurulu) dated April 1, 2026, E.2025/26, K.2026/6, resolving an inconsistency, assessed inclusion in this scope as an act that produces legal consequences and whose merits must be examined. However, the Plenary did not accept the approach that the practice is entirely without a statutory basis. The court must examine whether the reasons the administration relied on actually occurred in the specific case. The decision does not resolve whether an administrative application is required before filing an action. For this reason, the decision cannot be read as meaning automatic refund or annulment of every classification.

Related articles: Does Applying to the Tax Office Stop the Filing Period? İYUK 11 and the Correction Request; Stay of Execution in Tax Cases: Conditions, Evidence and Objection; Refund of Overpaid or Undue Tax: Application, Interest and Route to Court; Allegation of Using Fake Invoices: VAT Deduction, Tax Penalty and Proof.

Conclusion

The loss of rights in a VAT refund often arises not from the existence of the refund right but from uncertainty in the application and time-limit records. The type of refund, the completed documents, the offset target, the rejection act and the interest period should be tied together in the same file. Following the filing period, the examination period and the start of interest separately ensures that both the refund receivable and the financial consequences of the delay are correctly claimed.

Frequently Asked Questions

Can the whole carried-forward VAT be refunded?

No. Carried-forward tax is not by itself a right to a refund. The transaction for which the law provides a refund, and the amount borne on that transaction that cannot be eliminated through deduction, must be determined. Related explanation

If a deficiency letter arrives, must an action be filed immediately?

It is examined whether the letter contains a final rejection. A letter merely asking for supplementary documents and an act that ends the request are not the same; the real effect of the letter is decisive. Related explanation

Can a payment order be ignored while an offset request is pending?

No. A payment order is a separate collection act. While examining as of which date the offset application affects the debt, the filing period specific to the payment order must be protected separately. Related explanation

If a VAT refund is delayed, is interest charged from the date of application?

Not in every case. Under VUK 112/5, the date on which the necessary information and documents were completed, and the three-month period following it, matter. The interest regime for excess or undue collection is different. Related explanation

Sources

1. Value Added Tax Law No. 3065, in particular Articles 9, 11, 29, 32 and 36. Official legislation: Source text
2. VAT General Implementation Communiqué; Sections II, III and IV specific to the types of refund. GİB legislation record: Source text
3. Tax Procedure Law No. 213, in particular Articles 112/4–5, 120 and 140. Source text
4. Administrative Procedure Law No. 2577, Articles 7, 8, 10, 11, 27 and 28. Source text
5. Council of State (Danıştay) 9th Chamber, November 19, 2024, E.2023/4546, K.2024/6404; delayed VAT refund and the distinction regarding interest on interest. Source text
6. GİB, explanations on Submitting VAT Refund Request Lists. Source text
7. Council of State Plenary of the Tax Chambers (Danıştay VDDK), April 1, 2026, E.2025/26, K.2026/6; decision text, publication of the Antalya Chamber of Sworn-In Certified Public Accountants: Source text