The Technopark VAT Exemption Does Not Apply to Every Sale: What Falls Outside

Companies in a technopark make two different mistakes on the VAT side. One group assumes the earnings exemption automatically covers VAT as well. The other applies the exemption correctly but does not account for what happens to the VAT they have incurred.

The second is more expensive, because it is silent.

Two separate exemptions

Let me be clear from the start: there are two separate exemptions in a technopark and their conditions are not identical.

The earnings exemption — on the corporate and income tax side. It removes income arising from software, design and R&D activity carried out in the zone from the tax base. I covered its scope in a separate article.

The VAT exemption — it means no value added tax is charged on the supply of certain software and services produced in technology development zones.

One looks at income, the other at supplies. A supply being VAT-free does not mean the income from it is automatically exempt — or the other way round.

The exemption attaches to the activity, not the company

As with the earnings exemption, what governs here is where it was produced.

The supply of software produced in the zone is treated as within the exemption; the supply of software developed outside the zone, bought in and resold, or subcontracted is not treated the same way.

This is the most common problem for companies that treat being registered in a technopark as “a licence to issue VAT-free invoices”. Being registered in the zone does not create the exemption on its own; what is supplied has to have been produced in the zone.

The real issue: input VAT

Here is the part companies notice late. In practice this exemption operates as one that does not carry a right of deduction.

What that means: you cannot deduct the VAT you incurred in connection with an exempt supply. That VAT stays as an expense or a cost element.

Its effect varies enormously from company to company:

• A light-structure software company — costs are mainly personnel. There is no VAT on wages, so input VAT is low anyway. Limited effect.
• A company making capital investments — servers, licences, hardware, office fit-out. The VAT on these items is high, and when it cannot be deducted it goes straight to cost. Large effect.

So the sentence “the VAT exemption is always an advantage” is not true. During a period of heavy investment, non-deductible input VAT can outweigh the relief the exemption provides.

Building a structure without doing that arithmetic produces a cost discovered later.

Managing VAT in mixed activity

If the company has both exempt and out-of-scope supplies — and most do — the input VAT has to be apportioned between the two.

The VAT on shared costs is allocated, and that allocation has to rest on a consistent, documentable basis. The same discipline as the cost allocation in the earnings exemption: which key you use matters, and so does using it consistently.

The two allocations also have to be reconcilable. A company using a revenue ratio on the income side and a different key on the VAT side has to explain both at once in an audit.

Services supplied alongside the software

This is the point that generates most argument in practice. Are training, installation, customisation, maintenance and support supplied together with a software product within the exemption?

The line is drawn according to whether the service forms an inseparable part of the software. Installation and commissioning can often be treated as part of the supply, while ongoing maintenance and support, a separate training programme or general consultancy are treated as separate services.

What is decisive is how the contract and the invoice are constructed. Invoicing everything as a single “software fee” does not remove the distinction — it simply opens the whole amount to challenge in one go.

My practical recommendation: show the items separately in the contract and as separate lines on the invoice. Have a reason for each item you consider in scope. An itemised invoice is always more defensible than an unitemised one.

In short

The VAT exemption in a technopark is separate from the earnings exemption and their conditions do not map onto each other. The exemption depends on what is supplied having been produced in the zone. The part most often missed is that input VAT cannot be deducted — which can narrow the advantage in companies making heavy capital investment.

In mixed activity, the VAT allocation has to be consistent with the allocation on the income side. You can use the VAT calculator for the arithmetic, and book a call for your own structure.

Sources

• Value Added Tax Law No. 3065, provisional article on technology development zones — Legislation Information System
• Law No. 4691 on Technology Development Zones — Legislation Information System
• VAT General Application Communiqué, sections on exemption applications — Turkish Revenue Administration
• Advance rulings on the subject — Turkish Revenue Administration ruling database

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This article reflects 2026 legislation and is provided for general information only; it is not legal or tax advice. The scope of the exemption and the right of deduction are shaped by communiqués — assess the current rules and your own supply structure before acting.