VAT Exemption under the inward processing regime (IPR) has ended, leaving exporters in difficulty

With no extension granted for the regulation, exporters have become subject to a VAT burden on these purchases. Exporters state that this situation will create additional financial pressure on companies and may lead to an increased shift toward imports, and they are therefore calling for the reinstatement of the exemption.

“It Will Lead Companies to Turn to Imports”

Yalçın Ertan, Chairman of the Aegean Iron and Non-Ferrous Metals Exporters’ Association, stated:“The expiration of the VAT deferral–exemption system applied to domestically sourced inputs under the Inward Processing Regime (IPR) as of December 31, 2025, will not only cause serious cost and financing problems for exporting companies, but will also lead firms to turn to imports and weaken the domestic supply chain.”

Recalling that the Ministry of Trade introduced an amendment to the Inward Processing Regime Communiqué in 2025 to support domestic suppliers in the iron and steel sector requiring companies to source at least 25% of certain products domestically in order to import them Ertan stated:“While such an implementation aimed at supporting domestic production has been put into effect by our Ministry of Trade, the termination by our Ministry of Treasury and Finance of a practice that both supports local producers and helps reduce the current account deficit has pushed our companies into uncertainty at the beginning of the year.”

Yalçın Ertan concluded as follows:“The relevant temporary article of the Value Added Tax Law allows for the domestic procurement of inputs to be used in the production of goods to be exported under the Inward Processing Regime (IPR) without VAT. This mechanism plays a critical role in ensuring the sustainability of exports and in terms of capacity utilization in our sector, which fell to as low as 53% in 2023 and only reached around 61% last year.Ensuring the continuity of such mechanisms that support production and exports is of great importance for maintaining our competitiveness. Extending the duration of this important practice in the relevant legislation or making the VAT deferral exemption system permanent would be highly beneficial for both exporters and domestic producers.”